Japan Exchange Regulation Introduces AI in its Surveillance Operations to Detect Anomalies

Japan Exchange RegulationJapan Exchange Regulation (JPX-R) and Tokyo Stock Exchange, Inc. (TSE) has announced the use of Artificial Intelligence (AI) in market surveillance operations to detect misconduct and market manipulation. The AI system has been integrated to the market surveillance operations and has been made live. Nowadays large businesses and governments are banking on AI to streamline their operations and to detect any variance that affects the business operations.

As per JPX-R release, “the Artificial Intelligence systems are designed to conduct preliminary surveillance to identify suspicious transactions.”

Both the entity will deploy two AI technologies, those are NEC Corporation’s “NEC Advanced Analytics – RAPID machine learning and Hitachi, Ltd.’s “Hitachi AI Technology/H”. The technologies have been supplied with pre-installed existing data of operations used by surveillance personnel to detect and evaluate irregularities in trading activities. 

The surveillance operations structure of the TSE markets includes monitoring and preventing unfair trade practices. The system detects the initial broad range of orders that are most likely to be involved in unfair trading based on certain criteria. The surveillance personnel than investigates and analyzes the trading situation around those orders and based on the preliminary investigation, surveillance personnel decides on the quantum of unfair trading before moving further with the investigations.

The AI systems will enable the group to improve the overall quality of surveillance and get up with the preliminary investigations more quickly and give more time in focusing on serious cases of irregularities. The group started on its research to check whether AI technology could help them with any day-to-day operations. Later the group contracted NEC Corp and Hitachi Ltd. for its surveillance operations, as it can detect suspicious transactions with high accuracy.