Market surveillance & fraud detection

OVERVIEW
We help you tame it

  • MAR and REMIT outlaw two types of market abuse: Insider Dealing and Market Manipulation.
  • MAR covers Financial Instruments as defined in MiFID I and II.
  • REMIT covers ‘Wholesale Energy Products’ (WEPs), meaning electricity, natural gas, and LNG. Where a WEP is also a MiFID Financial Instrument, MAR takes precedence over REMIT in defining surveillance requirements.

  • Spot energy (ex REMIT) and commodity instruments are captured by MAR if their price influences that of Financial Instruments, i.e. by serving as a price-reference for derivatives, or being part of a benchmark index.
  • MiFID II adds additional surveillance obligations on market participants.
  • In conclusion, it is virtually impossible to find an instrument falling outside of MAR, REMIT and the MiFIDs!

Covered scenarios

Pump & Dump
Trash & Cash

Trader publishes information to the market known to be significant, i.e. will cause a response from other market participants in terms of investments decisions, and market prices will chane, but the information is actually false. Trade profits from these decisions at the expense of the duped market participants.

Cross market manipulation

Undertaking trading or entering orders to trade in one or many trading venues or markets with a view to improperly influencing the price of the same and/or related financial instrument in the same or other trading venues or markets (i.e. trading on one trading venue or market to improperly position the price of a financial instrument in another trading venue or market).

Phantom orders

Entering of orders on a trading venue which are publicly visible, but withdrawn before execution, thus giving the misleading impression that there is buy/sell side interest in a particular instrumenxt.

Marking the close

Placing orders and/or trading deliberately at or very near to the official closing time of the market, with the effect of misleading investors who act on the basis of closing prices, or whose position’s valiue is a function of closing prices.

Capacity manipulation

A market participant decides to change at short notice his scheduled production, storage or transportation capacity declared available to the market, without the true economic justification and with the intention to shift the market price of capacity to levels advantageous to himself.

Wash trades

A wash trade is a fictitious leading to no change in “beneficial ownership”. Its primary purpose is to create the illusion of trading activity or investor interest at certain price levels and times.

Insider dealing

Orders are placed and/or trades executed prior to the release of market-sensitive news which only the trader has prior access to. The trader deals at favourable prices, making profits at the expense of other market participants ignorant of the information, who would otherwise have changed their price and trading decisions.

Market cornering

In energy and commodities, a market “corner” is normally attempted by deliberately buying large quantities of physical commodity and withdrawing them from the market so that legitimate or “must-have” end users of the commodity are forced to pay very high prices. The attempted corner normally takes the form of using all available instruments – spots, forwards and derivatives.
CONCLUSIO
Effective trader surveillance isn’t
just about meeting compliance requirements.
It can also deliver a real boost to your business:

  • Get real time insights into culture & behaviours
  • Better understand true risks taken by traders & consequently
    better assess true risk /adjusted returns

  • Get insights into client behaviours & account
    profitability
  • Don’t lose valuable data: keep track
    of your decisions to get training data sets for
    machine learning to optimise costs of control