SteelEye has launched Cross-Product Detection for trade surveillance, a new feature aimed at safeguarding financial institutions against the growing threat of cross-product market manipulation.
The integrated surveillance provider is aiming to tackle the growing cross-product manipulation threat with the latest innovation.
What is cross-product manipulation
Cross-product manipulation occurs when bad actors place orders or trades in one financial instrument to illicitly impact the price of another, either on the same trading platform or a separate one.
For example, a trader could place a large trade order for an equity to positively impact the price of a related derivative contract.
The practice often leaves subtle footprints that are difficult for firms to detect, presenting a growing challenge to compliance departments tasked with identifying wrongdoers.
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Regulatory authorities are growing increasingly wary of cross-product market manipulation. Over the last decade, several enforcement cases related to cross-product manipulation have been filed in the US and UK.
SteelEye noted that one global bank was forced to pay a $35 million penalty after the US Securities and Exchange Commission found that one of the bank’s traders illicitly took advantage of the close correlation between US Treasury securities and US Treasury futures contracts by engaging in cross-product manipulation.
“Cross-product surveillance is no longer a ‘nice-to-have’”
SteelEye’s Cross-Product Detection uses sophisticated algorithms to analyze trading activity across multiple instruments and proactively identify cross-product manipulation patterns. Upon being flagged, the system generates a potential market abuse alert, enabling swift action to protect market integrity. This means compliance teams can determine if an alert is a true concern or a legitimate market activity influenced by cross-product dynamics.
Matt Storey, Chief Product Officer at SteelEye, said: “With financial markets growing increasingly interconnected and wrongdoers deploying ever more sophisticated manipulation tactics, firms must ensure their defenses are as robust as ever. In this context, cross-product surveillance is no longer a ‘nice-to-have’ – it’s an essential tool for protecting market integrity. Watchdogs will remain laser-focused on this issue, and firms that fail to adapt run the risk of intense regulatory scrutiny and hefty penalties.”
SteelEye features advanced algorithms and intelligent alerts to proactively detect market manipulation and compliance breaches. Its holistic data model combines communications, trades, orders, news, and market data to provide intelligent insights and deep analytics.
Founded in 2017, SteelEye has offices in the UK, North America, Portugal, and India.
SteelEye enters APAC region with Singapore office
SteelEye recently expanded into the Asia-Pacific (APAC) region with a new incorporation in Singapore in a move aimed at enhancing collaboration with clients and regulatory authorities in the area.
The decision aligns with increased enforcement activities from the Monetary Authority of Singapore (MAS), which has recently fined four banks and an insurer for violations related to money laundering and market misconduct, as highlighted in SteelEye’s 2024 Annual Fine Tracker.
SteelEye has garnered trust from over 150 financial firms worldwide, thanks to its integrated platform that features top-tier solutions for trade and communications surveillance. The company’s innovative technology stack, powered by artificial intelligence (AI) and machine learning (ML), aids financial institutions in minimizing false positives, optimizing time, and accurately identifying risks. Additionally, SteelEye’s CoPilot for communications offers a virtual, AI-driven compliance assistant that streamlines the surveillance alert review process, enhancing efficiency and expediting resolutions.
SteelEye launched AI-based Compliance CoPilot
SteelEye recently unveiled its novel Compliance CoPilot tool aimed at propelling the efficacy of compliance officers in managing alerts. The solution harnesses the prowess of advanced Large Language Models (LLMs) to expedite the Communication Surveillance Alert Review process significantly.
The recent trend of global regulators imposing fines on investment entities for inadequate monitoring of employee business communications has underscored the need for robust surveillance mechanisms. SteelEye’s Compliance CoPilot rises to the occasion by empowering surveillance teams to pinpoint and swiftly respond to risk-ranked alerts pertaining to rule violations.
At the heart of Compliance CoPilot is its ability to automate the alert review process, sifting through a colossal amount of communications data with a level of efficiency that outpaces human capabilities. Upon detecting suspicious activity in emails, meetings, attachments, chats, or phone communications, the tool conducts an assessment and provides a Risk Score, Suggested Resolution Category, and Resolution Commentary. This automation is poised to curtail the time compliance officers devote to understanding and reviewing alerts.
Moreover, the Compliance CoPilot is designed to evolve through feedback from compliance users. Users have the leeway to either accept or amend the recommendations, which in turn refines the system’s accuracy for future alerts. According to SteelEye’s Annual Compliance Health Check Report 2023, a striking 76% of firms acknowledged a surge in compliance costs over the past year. The Compliance CoPilot, by automating myriad aspects of compliance, stands as a promising solution to pare down these costs, enhance analyst efficiency, and bolster the overall scalability of the compliance function.
SteelEye recently partnered with OEMS provider Enfusion to offer joint clients a seamless experience, with trade and order data from Enfusion’s investment management solutions flowing automatically into SteelEye’s integrated compliance platform. The integration of SteelEye with Enfusion reduces the friction and complexity of implementing trade-based compliance systems for surveillance, reporting, and best execution.
