SD-10.7 — Trade Surveillance & Market-Abuse Monitoring

Business Domain: BD-10 Investment Compliance & Guideline Monitoring (Middle office) · Applies: BOTH

Purpose

Monitors the firm’s own trading for market abuse — insider dealing, market manipulation, spoofing, layering, front-running and the misuse of material non-public information. Where the rest of BD-10 checks the portfolio against rules about what it holds, SD-10.7 watches how the firm trades for abusive patterns. It is a behavioural, pattern-detection capability — a distinct discipline and technology class from the rule-versus-position checking of SD-10.1 — and it exists because a firm that trades can, deliberately or not, abuse the market, and the regulator (through the Market Abuse Regulation and its equivalents) requires the firm to surveil for it. It is not the conduct monitoring of individual employees’ personal-account trading, which is firm-wide conduct compliance, BD-14’s.

Service Operations

• Surveil for insider dealing — detect trading that coincides with the firm’s holding of material non-public information.
• Surveil for market manipulation — detect manipulative patterns: spoofing, layering, wash trades, marking the close, momentum ignition.
• Surveil for front-running and allocation abuse — detect trading ahead of clients and abusive allocation across accounts.
• Investigate surveillance alerts — triage and investigate the alerts the surveillance models raise, and clear or escalate them.
• File suspicious-transaction reports — where an investigation confirms suspicion, produce the suspicious-transaction-and-order report the regulator requires.
• Meet issuer-side obligations — where the firm manages a listed vehicle and is itself an issuer under the abuse regime, support the associated insider-list and disclosure obligations.

Inputs and outputs

• Inputs: the firm’s order and execution records from BD-06; the MNPI and insider-list data from SD-10.4; market data; communications data where surveilled.
• Outputs: surveillance alerts, investigation outcomes and suspicious-transaction reports — consumed by SD-10.8 (breach handling), BD-14 SD-14.2 (the corporate conduct-compliance function), BD-16 SD-16.3 (the regulatory filing), and the regulator.

Entities

• Consumes: PB-03 Order, PB-05 Allocation, E-05 Transaction, E-02 Instrument / Asset, E-01 Legal Entity; the SD-10.4 MNPI and insider-list data.
• Owns: none — surveillance runs over the trading record other domains own and produces alerts and reports.
• Open question: whether a Surveillance Alert entity is warranted — a recorded, triaged, dispositioned alert with its investigation trail.

Standards

• The EU Market Abuse Regulation — insider dealing, market manipulation, suspicious-transaction-and-order reports, insider lists — and equivalent regimes elsewhere.
• The FCA’s market-conduct expectations (Market Watch on surveillance-system effectiveness).
• The specialist trade-surveillance vendor toolset as a completeness cross-check.

Open extensions

• A Surveillance Alert entity.
• The surveillance-scenario sub-model — the abuse typologies and the models that detect them.
• The boundary with BD-16 SD-16.3’s regulatory filing.