Trade surveillance, market surveillance, trade supervision and market supervision refer, broadly speaking, to the systems and procedures aimed at detecting, and in some cases also at preventing, market abuse, disorderly trading conditions and breaches in trading venues' rules.
Although these four terms are often used interchangeably (specially trade surveillance and market surveillance), it is also common to see their usage varying in accordance to the entity that performs such activity, in the following manner:
- Financial market authorities perform market supervision;
- Trading venue operators perform market surveillance;
- Brokers and buy-side firms perform trade surveillance.
The obligation to perform trade surveillance
In response to the 2008/2009 financial crisis, the occurrence of flash crashes and the growth in high frequency trading (HFT) and related market manipulation practices, the Dodd-Frank Act (2010) in the US and, specially, the Market Abuse Regulation (2014) and MIFID II (2014) in the EU came to impose, among many other things, stricter trade surveillance requirements.
For more information on trade surveillance, please check:
- Surveilling for breaches in trading venues' rules.
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