Market Surveillance

The growing importance of data mining in financial markets

Data, data, data. The most trending word in financial analyses these days, with big data as the Holy Grail. With the ever increasing importance of electronic trading and increasing speed in trading, the amount of available data is going through the roof. Traditional analyses are not sufficient anymore. Surveillance and compliance officers need intuitive tools to streamline the masses of raw data presented to them. Another trending word, though used in too many different ways, presents the solution to this: data mining.

What is data mining?

Data mining is “the process of using a computer to examine large amounts of information about customers, in order to discover things about them that are not easily seen or noticed.” This definition of the Longman Dictionary leaves much open for debate. Let us go into greater detail. To clarify the term, data mining is the identification of patterns in large data sets, by a computer, using a variety of methods. We will not discuss these methods, but further explain the application of data mining in the financial markets, more specifically in market abuse surveillance. The ultimate purpose of data mining is to, automatically, analyse large amounts of data and to discover patterns that are otherwise extremely complex to discover. The rise of the term big data goes hand in hand with the rise of the term data mining. Big data is an overall term for any set of data that has three characteristics, according to Garner: “Big data is high-volume, high-velocity and high-variety information assets that demand cost-effective, innovative forms of information processing for enhanced insight and decision making.”

Financial market monitoring and surveillance systems

Electronic trading has produced vast quantities of financial data, ready for all kinds of analyses. TradeWatcher analyses over 500 million trades on a daily basis, and over 1 million Order Book Changes per minute. The development of financial market monitoring and surveillance systems with high analytical capabilities are making a grand entrance in the financial world. Regulators, markets, brokers and traders need to capture fraud as it is essential to guarantee and preserve an efficient and functioning financial market. The TradeWatcher solution offers you intuitive tools to spot any behaviour that could result in fraud. By identifying unusual trading patterns, as the financial market streams you select are analysed thoroughly, you are in control of your reporting or compliance obligations. Data mining or data analyses are the essence of the TradeWatcher tool, but other features further simplify the duties of surveillance officers.

By visualising the unusual patterns that emerge from the analyses, heat mapping assists the compliance officers in identifying suspicious behaviour and the imminent threat of market abuse. Clear visualisations are key to a swift handling of suspicious trades as it helps the user to quickly see what is happening.

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TradeWatcher© solution

TradeWatcher© is a user-friendly market surveillance platform to monitor financial markets to detect and report market abuse and manipulation. Use the TradeWatcher© platform to efficiently comply with the ESMA Guidelines and national and international legislation. By using the many different Watchers we offer, you can identify malicious trading patterns, potential market manipulation or insider trading. As an independent organisation with a strong track record in the financial world, we know how to deliver you a flexible, efficient and secure web based monitoring tool.