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ASIC ups its market surveillance

The Australian Securities and Investment Commission (ASIC) is looking to make significant changes to the ICT underpinning its white collar crime fighting abilities in response to faster trading speeds and high trading volumes.

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The financial services regulator is looking to replace or upgrade its existing market surveillance system which ASIC uses to detect data anomalies and irregularities indicating possible insider trading and/or market manipulation.

In documents on the new system, ASIC said it wanted to improve capability for market supervision, keep pace with recent changes in market surveillance technologies and techniques, and provide the ability to respond to future challenges.

"Innovation has reduced latency, algorithmic and High Frequency Trading activity has reduced trade size, and non-transparent trading venues have dispersed liquidity away from traditional trading venues," the documents on the new system read.

"The combination of...faster trade speeds, increased trade volumes, and dispersed liquidity... has in turn, made it more difficult to detect and investigate market misconduct. ASIC's surveillance capability will need to be enhanced to account for these structural market changes."

According to ASIC, the future surveillance systems will be capable of monitoring increased trade and order book activity; addressing faster trade speeds and trade data synchronisation issues as well as keep on top of new market operators, products and participants.

The system will also allow SIC to better keep on top of new regulations, emerging patterns and trading behaviours, futures and derivative markets, and increasing connectedness between markets.

"The market surveillance system will... gather data from many different sources in particular trading data from exchange operators, use the data to alert ASIC in real time of any anomalistic or potentially illegal activity, store the data securely, access the data when needed and then analyse the data and provide various flexible reports" the documents read.

"ASIC does not assume this technology will replicate systems and capabilities developed for other larger overseas markets. ASIC aims to ensure its future market surveillance systems will offer appropriate functionality to provide confidence in the integrity of the Australian market."

In September, ASIC released revised ePayments Code designed to offer consumers better protection when conducting business online. The new Code follows a [[xref: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep218.pdf/$file/rep218.pdf| review of the previous Electronic Funds Transfer Code of Conduct (EFT Code) (PDF) and will regulate consumer electronic payments including automatic teller machines (ATM), EFTPOS, debt and credit card transactions including contactless transactions, online payments, internet banking and BPAY.

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