BST Awards 2019: Best buy-side market surveillance tool/platform—Nasdaq

For the third time in four years—and second year in a row—Nasdaq has been voted as having the best market surveillance platform.

Underpinning its nomination was the Nasdaq Buy-Side Compliance platform, which is designed to help asset managers and hedge funds comply with global regulatory requirements such as the Markets Abuse Regulation (MAR), Mifid II, Senior Managers Regime, and Securities and Exchange Commission (SEC) mandates. It builds models to represent the activities of portfolio managers and funds. From there, it can identify unusual patterns of behavior and alert the appropriate compliance professional or team to suspicious or abnormal trading activities. By analyzing patterns, it’s more effective than a rules-based program, and as a result, false-positive rates are reduced, thus freeing up compliance teams to focus on actual issues.

Nasdaq is one of the top exchanges using artificial intelligence (AI) for surveillance purposes, but it’s expanding its presence in the space. At the beginning of November, Nasdaq announced the launch of its new AI-powered market surveillance tools for finding patterns of abusive behavior. Underpinning the new technology are subsets of machine learning (ML): deep learning, for analyzing extremely complex relationships and understanding hidden insights within massive datasets; transfer learning, which involves training new models based on older ones to allow scale and save time; and human-in-the-loop learning, which requires human interaction to weed out noise from signal, especially where it’s not cut and dried.

“The problem in surveillance is one where you’re trying to find needles in the haystack,” Tony Sio, head of marketplace regulatory technology at Nasdaq, told WatersTechnology at the time of the announcement. “There are billions of messages coming in every day. There are patterns and the patterns look different or change over time, and you’re just trying to find those behaviors.”