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SPARK Matrix Security & Risk ManagementSPARK Matrix : Trade Surveillanceand Monitoring, 2021Market Insights, Competitive Evaluation, and Vendor RankingsNovember 2021Copyright 2021 Quadrant Knowledge Solutions Private Limited
SPARK Matrix : Trade Surveillance andMonitoring, 2021Table of ContentsExecutive Overview . 3Key Research Findings . 3Market Overview and Technology Trends . 5Competitive Landscape and Analysis . 12Key Competitive Factors and Technology Differentiators . 16SPARK Matrix : Strategic Performance Assessment and Ranking . 19Vendor Profiles . 22Research Methodologies . 48Copyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com2
SPARK Matrix : Trade Surveillance andMonitoring, 2021Executive OverviewThis research service includes a detailed analysis of global trade surveillance andmonitoring market dynamics, major trends, vendor landscape, and competitivepositioning analysis. The study provides competition analysis and ranking of theleading trade surveillance and monitoring vendors in the form of SPARK Matrix. Thisresearch provides strategic information for technology vendors to better understandthe market supporting their growth strategies and for users to evaluate differentvendors capabilities, competitive differentiation, and its market position.Key Research FindingsFollowings are the key research findings:Technology TrendsTrade Surveillance and Monitoring vendors are increasingly embracing sophisticatedtechnology innovations powered by advanced technologies, including artificialintelligence (AI), machine learning (ML), robotics process automation (RPA), naturallanguage processing (NLP), and advanced behavioral analytics to minimize falsepositives, automate tasks & workflows, enhance regulatory compliance, and riskmanagement, and improve overall operational efficiency of trade.Key Market Drivers and Trends: Financial crime and compliance vendors are increasingly leveragingautomation, machine learning, and AI in automating repetitive tasks andmanual processes to improve process efficiency, resource utilization, andproductivity. Automation and AI can significantly improve organizations’efficiencies in detecting and mitigating risks. Financial crime and compliance management platforms are leveragingautomation and AI to provide data-driven insights and integrate data frommultiple sources to drive actionable intelligence in detecting, analyzing,investigating, and resolving a large volume of alerts and cases. It may alsoassist analysts in selecting the appropriate analytics models to be usedspecifically for various use cases. By automating manual, repetitive tasks invarious investigation processes and providing data-driven insights, it cansignificantly improve analyst's productivity to triage a large volume of alerts. Driven by the continued complexities of the regulatory environment,organizations are expected to continue to face challenges in meeting the everincreasing compliance requirements. Therefore, financial organizations areCopyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com3
SPARK Matrix : Trade Surveillance andMonitoring, 2021currently replacing their legacy technologies and evaluating advanced tradesurveillance and market compliance solutions to implement proactivesurveillance strategies and improve their compliance infrastructure. The sudden lockdown imposed due to the COVID-19 outbreak led togovernments around the globe cutting their growth targets, which severelyimpacted the stock market, leading to high price volatility and reduced tradingactivities. Moreover, the shift to the remote work environment due to thepandemic has led to a rise in market abuse and undetected compliance risk.As a result, the trade surveillance and monitoring vendors are integrating theirplatforms with financial markets data and infrastructure providers to helpcompanies to cope up with changing market dynamics, new compliance risksand save them from financial losses and penalties imposed by regulatorybodies. The primary drivers for the adoption of trade surveillance and monitoringsolution include innovation around advanced analytics, automation, andcognitive technologies for effective proactive surveillance; productenhancements by leading vendors to provide holistic surveillancetechnologies are improving market penetration against in-house builtsolutions, growing adoption of the cloud-based solution; ever-increasingpressure from global regulatory agencies.Competition Dynamics & Trends:NICE Actimize, Altair Panopticon, BAE Systems, LSEG, LIST, Eventus Systems,Nasdaq, Intellect Design Arena, Bloomberg L.P., and MCO (MyComplianceOffice) areamongst the top performers and technology leaders in the 2021 SPARK Matrixanalysis of the global trade surveillance and monitoring market. These companiesprovide comprehensive functional capabilities and customer value proposition toprovide a holistic solution for proactive surveillance and regulatory compliance.The study includes analysis of other major vendors, including ACA, OneTick(OneMarketData), Quantexa, and SteelEye.Copyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com4
SPARK Matrix : Trade Surveillance andMonitoring, 2021Market Overview and Technology TrendsQuadrant Knowledge Solutions defines Trade Surveillance and Monitoring as:“Trade Surveillance and Monitoring solutions identify and prevent abusive tradingpractices by monitoring market manipulation, fraud and illicit trading behaviour. Tradesurveillance and monitoring solutions should cover all asset classes and geographiesto identify threat from any trading transaction. It protects organization fromreputational risk and losses from penalty and fraud while ensuring regulatorycompliance.”Trade surveillance and monitoring solutions offer capabilities for pre-trade, post-trade,& market surveillance, along with identifying market abuse practices and tradeviolations. Trade surveillance activities include a complete analysis of the order book,investigation of complete audit trails of orders and trades, and analysis of cross-marketcross-asset trades. It helps in mitigating illegal trade practices, safeguardingorganizations from losses from frauds and penalties, enhancing consumer trust andensuring regulatory compliance.Financial markets have been experiencing a major evolution since the last decade.Banks and financial organizations have experienced failures and enormous losses byrogue traders, owing which regulations and trade surveillance is on a surge. Tradingregulations, such as Reg BI, MAR, MiFID II, Dodd-Frank, Code of Conduct, along withguidelines from regulatory agencies, including CFTC, SEC, FINRA and ESMA, as wellas other national regulations in various regions are increasing to detect tradingactivities that sabotage public confidence in the markets. The rising thrust on financialmarkets to comply with these regulations is the primary driving force for robust andaccurate trade monitoring systems.As expectations by regulators for trade surveillance is increasing, financialorganizations are relentlessly attempting to eradicate breaches of policies leading tounlawful trading activities. In recent times, trading practices globally is adhering to abroader range of global regulations, embracing cross-asset class and cross-markettrade surveillance measures for identifying market abuse, behavioral patterns, andnon-compliant activities. Trade surveillance and monitoring solutions identify tradingrule violations or unlawful trading practices in the trading landscape. With the benefitsof transparency, efficacy, and oversight in capital markets, trade surveillance andmonitoring solutions are getting increasingly popular amongst both buy-side andsellside firms in the trading market. Trade surveillance and monitoring solutions focuson restraining market manipulation and market abuse, which causes reputationaldamage to firms. Regulators emphasize to enhance market transparency and boostinvestor's confidence through these solutions. The solution focusses on both pre-tradesurveillance and post-trade surveillance. Pre-trade surveillance helps to authenticateCopyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com5
SPARK Matrix : Trade Surveillance andMonitoring, 2021trade instructions, assuring trading thresholds are never breached and block tradesbeing performed on restricted instruments. Whereas post-trade surveillance can trackfor front-running, suitability, best-execution, and regulatory transaction reporting.Trade surveillance & monitoring solutions offer comprehensive market surveillance,including cross-market, equity market and OTC traded derivates surveillance; andidentifies market abuse practices and trade violations, such as wash trades, portfoliopumping, insider trading, rogue trading, and others. A robust trade surveillancesolution should offer capabilities for accessing complete historical & real-time data,big data analytics and extensive business rule engine, efficient workflow managementthrough customizable dashboards and robust reporting capability. Furthermore, tradesurveillance focuses on detecting anomalies in trading activities, behavioral patternanalysis and streamlines case management. Trade surveillance & monitoring solutionsmonitor trading activities and generate alerts based on suspicious transactions,thereby enhancing agility and efficacy of financial institutions.Following are the key capabilities of a Trade Surveillance and Monitoring solution: Real-Time Data Integration: A trade surveillance & monitoring solutionenables data integration from a variety of sources. It offers optimum integrationof in-house data and external trading data. It supports both structured andunstructured data across trade, market, written & voice communications, thirdparties, and various other sources. The solution should integrate historicaltransaction data and manage large datasets from multiple sources, storeessential data in-memory, and survey across asset classes and geographies.A trade surveillance and monitoring solution provides real-time decisioningand detection of trading patterns across asset classes and markets. Cross-Asset, Cross-Market Surveillance: A trade surveillance & monitoringsolution provides robust and consistent surveillance coverage acrossnumerous trading venues, markets, asset classes, and jurisdictions. It meetsregulatory mandates, handles risk, and drives trading efficiencies in anymarket across the globe, prevents sophisticated trade abuse, helps maximizerevenue, and safeguards reputational damage across the multi-venue andmulti-asset classes. Advanced Analytics: A trade monitoring solution uses advanced analytics todetect anomalous behavior, enable risk-based discovery, support cross-assetclass & cross-market surveillance, facilitate effective trade reconstruction, andsuch others. Some of the advanced analytics tools used by trade surveillance& monitoring solutions are predictive analytics, sentiment analytics, big dataanalytics, real-time streaming analytics, behavioral analytics, entity & networkanalytics, and such others.Copyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com6
SPARK Matrix : Trade Surveillance andMonitoring, 2021 Trade Regulatory Compliance: Numerous global and country-specificcompliance frameworks, including Reg BI, MAR, MiFID II, Dodd-Frank, Codeof Conduct, and such others, are pushing financial institutions to have a robustsurveillance system in place to meet market abuse guidelines. Tradesurveillance & monitoring solution offers the capability to effectively meetglobal trade regulations and avoid hefty fines. A trade surveillance solutionmonitors a broad range of products (cross-asset class & cross-market) toidentify non-compliant activities/behavior. Dynamic Workflow Engine: Trade surveillance models need to be dynamicto keep abreast with the changing trading landscape. They need to bereviewed and improved continuously. A trade surveillance and monitoringsolution offers a dynamic workflow engine for improved integration, agility, andresponsiveness in trade surveillance activities. Investigation & Case Management: A trade surveillance & monitoringsolution offers robust and fully integrated configurable case managementcapability. The solution leverages advanced analytics for in-depth investigationof alerts and trading scenarios. It provides a centralized interface to seamlesslycapture alerts and data, modify trade surveillance operations, and carry outinvestigations through advanced analytics and automation. The interface alsoallows the user to perform other activities like enabling defined complianceworkflows, maintaining a comprehensive audit trail investigation anddocumentation, managing alert processing and escalation, effectivelydetecting false positives, and efficiently managing regulatory risk across thetrading domain. Abuse Detection: A trade monitoring solution uses advanced analytics todetect anomalous behavior, enable risk-based discovery, support cross-assetclass & cross-market surveillance, and facilitate effective trade reconstruction.The solution uses advanced analytics tools such as predictive analytics,sentiment analytics, big data analytics, real-time streaming analytics,behavioral analytics, entity & network analytics, and such others. In addition,some vendors offer machine learning-powered abuse detection to enableenhanced real-time fraud detection. Leading vendors are also offering selflearning ML models to keep up with the changing market and trade dynamics.Copyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com7
SPARK Matrix : Trade Surveillance andMonitoring, 2021Figure: A Framework for Holistic Trade Surveillance and Monitoring SolutionCopyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com8
SPARK Matrix : Trade Surveillance andMonitoring, 2021Growing Importance of a Holistic Surveillance Solution withIntegrated Markets and Communications SurveillanceElectronic communication is a significant part of the trading activity comprising ofemail, instant messenger, text, and voice. Electronic communication surveillanceuncovers malicious trading behavior, such as insider trading, rogue trading, and othersuch behavior. Electronic communication monitoring is critical for mitigating conduct,financial, and reputational risks. Therefore, leading vendors continue to incorporateand improve e-communication surveillance capabilities leveraging contextualanalytics, behavioral analytics, and advanced predictive analytics.Although most buy-side and sell-side firms maintain separate communicationmonitoring systems; these systems provide greater efficacy and depth of coverage ofdata from omnichannel sources when integrated with trade monitoring systems.Integrated communication and trade surveillance results in better and quickerinvestigations by bringing together trade, written, voice, and video communicationsdata. However, a standalone solution for communication and market surveillance addsto significant operational inefficiency with manual operations for data collection,correlation, visualization, investigation, and analysis. Therefore, an increasing numberof trade surveillance and monitoring vendors are striving to offer holistic tradesurveillance and monitoring solution with integrated communication surveillancecapability. This holistic solution brings together market, communication, and othersurveillance data in a single place and performs AI-powered analytics to offerintegrated visualization and provide intelligent alerts with minimum false positives.Trade Regulations And Compliance Requirements Are BecomingIncreasingly ComplexShifting trade patterns and increasing regulations have intensified the complianceburden on capital firms, hedge funds, and conventional asset managers. Historically,only sell-side firms used trade surveillance solutions. However, buy-side firms areincreasingly focusing on adopting advanced trade surveillance and monitoringsolutions in recent times with several revised regulations in financial instruments,such as Reg BI, MiFID II, MAR, and Dodd-Frank. Furthermore, guidelines fromregulatory agencies, such as CFTC, SEC, FINRA in the US and ESMA, FCA & otherregulators in the European economies are further driving the adoption of tradesurveillance solutions by the financial institutions. While compliance with the traderegulations helps in protection from trading risks, safeguarding reputation, restoringthe investors’ trust, and sustaining the business, non-compliance means a higherrisk of market abuse, huge penalties, negative publicity, and disadvantages.Adoption Of Cloud-Based Trade Surveillance Deployment IsExpected To Grow SignificantlyCopyright 2021 Quadrant Knowledge Solutions Private LimitedFor Citation, info@quadrant-solutions.com9
SPARK Matrix : Trade Surveillance andMonitoring, 2021Most of the large enterprise companies from various industries are moving towards acloud-first strategy for the deployment of enterprise software and business systems.However, cloud-based solutions are still in the emerging stage as most of the largebanking organizations still prefer on-prem deployment. Growing complexities of globaland regional regulations, data security, and privacy issues also continue to impact theadoption of cloud-first strategies by large financial service organizations. However,driven by the advancements in security technologies and the growing confidence incloud-based platforms, the scenario is gradually shifting. Global financial serviceorganizations are increasingly gaining confidence in cloud security and are movingtowards cloud-based deployments.Cloud-based deployment offers a significant advantage in terms of scalability andcost-effectiveness. Additionally, cloud vendors ensure that user organizations alwayshave access to the latest version of the solution with regular updates, maintenance,and support services. Further, small, and mid-sized businesses often lack resourcesin deploying cutting-edge technologies and are associated with the same sets ofoperational challenges as large organizations. Thereby, SMB organizations usuallyprefer cloud-based deployments to cut their operational costs and fulfill all theirunmet needs with a low monthly/yearly charge.Increasing Demand For Intraday Liquidity Management AndReal-Time ReportingIntraday liquidity monitoring and management is increasingly becoming crucial inrecent market behavior. As a result, firms may be required to shift from submissivelymeasuring ebbs to managing and maximizing intraday liquidity usage. Financialorganizations should adopt intraday liquidity management, real-time reporting, andrisk management solutions to fulfill payment and settlement obligations in a timelymanner and enable seamless payment functioning and settlement processes.Managing liquidity offers benefits such as ensuring accurate intraday forecastingwith real-time data points, the early outset of analytics activities using real-time data,constant monitoring of net cumulative cash flow across the day, capturing real-timedata connected to all sources, and boosting overall operational efficiency.Increasing Demand For 360-Degree Trade SurveillanceDriven by complex regulatory compliances and increasing instances of trademalpractices, vendors are offering holistic trade surveillance & monitoring solutionswith 360-degree surveillance. These solutions monitor & analyze transactions,communications, and behavioral patterns to provide enhanced & comprehensiveinvestigation. The 360-degree approach to trade surveillance & monitoring improvestrue positives, decreases efforts needed to process false positives, and betteridentify patterns for trade surveillance. Demand for robust trade surveillancesolutions that gather data from myriad channels such as trade and order data, socialnetworking sites data, voice communications, and behavioral data is increasingCopyright 2021 Quadrant Knowledge Solutions Private Limited 10For Citation, info@quadrant-solutions.com
SPARK Matrix : Trade Surveillance andMonitoring, 2021rapidly. 360-degree surveillance offers analytical insights into data captured in realtime from market activity, sentiments, and trading behavior at multiple touchpointsin the client lifecycle.Migration From Reactive Surveillance To An Integrated ModelCombining Investigative, Reactive, And Proactive SurveillanceWhile most organizations are currently using a reactive approach to tradesurveillance with post-trade controls, there is increasing traction for proactivesystems. With a proactive approach, firms can identify new profiles and riskindicators before market abuse occurs. The proactive system leverages advanceddata mining techniques and unsupervised machine learning. Organizations areleaning towards an integrated model, with capabilities for investigative, reactive, andproactive surveillance. Merging real-time data and proactive surveillance withadvanced analytics will identify suspicious behavior patterns of individual andcollective tendencies prior to incidence.Copyright 2021 Quadrant Knowledge Solutions Private Limited 11For Citation, info@quadrant-solutions.com
SPARK Matrix : Trade Surveillance andMonitoring, 2021Competitive Landscape and AnalysisQuadrant Knowledge Solutions conducted an in-depth analysis of trade surveillanceand monitoring vendors by evaluating their products, market presence, and customervalue proposition. The evaluation is based on primary research with expert interviews,analysis of use cases, and Quadrant's internal analysis of the overall market. This studyincludes an analysis of key vendors, including Abel Noser Solutions, ACA, AltairPanopticon, b-next, BAE Systems, Bloomberg L.P., Eventus Systems, FeaturesAnalytics, GMEX Group, Intellect Design Arena, LIST, LSEG (London Stock Actimize,OneTick(OneMarketData), Quantexa, S3, Scila, SteelEye, Trillium Surveyor.NICE Actimize, BAE Systems, Altair, LSEG, LIST, Eventus Systems, Nasdaq, IntellectDesign Arena, Bloomberg L.P, and MCO are the top performers and technologyleaders in the global trade surveillance and monitoring market. These companiesprovide a sophisticated and comprehensive trade surveillance technology platform toaddress a variety of trade surveillance use cases.NICE Actimize offers a holistic trade compliance platform titled Surveil-X thatanalyzes and correlates all trade-related data, detects all forms of risky behavior, andensures regulatory compliance. The platform also offers comprehensive surveillancefor all the regulatory requirements and can connect to, ingest, and analyze data fromnumerous real-time data sources, including all forms of communications.BAE Systems offers a platform titled NetReveal, which protects from financial crimeand provides risk management and fraud detection and prevention across banking,financial markets, and insurance domains. Its advanced analytics engine provideseffective detection of anomalous behavior and is instrumental in positive/negativedetection and false positive reduction.Altair offers a streaming analytics platform titled Panopticon that enables traders tobuild, modify, and deploy customized trading surveillance applications based on theirbusiness-specific requirements. They can connect to virtually any data source,including big data sources, SQL and NoSQL databases, and message queues. Theplatform also allows users to develop complex programs and design visual userinterfaces that provide insights to make fully informed decisions based on massiveamounts of data.LSEG provides a multi-asset, multi-market, out-of-the-box robust surveillance platformtitled Millennium Surveillance that offers powerful analytical tools to analyze andreport suspicious behavior for improving the efficiency of market abuse investigations.It is scalable, flexible, highly adaptable to rules, and enables swift compliance withCopyright 2021 Quadrant Knowledge Solutions Private Limited 12For Citation, info@quadrant-solutions.com
SPARK Matrix : Trade Surveillance andMonitoring, 2021regulatory changes on any trading platform. The platform supports real-time andoffline analysis features, with simple market replay and robust reporting capabilities.LIST provides a multi-compliance solution titled LookOut for trade and marketsurveillance, regulatory reporting, and business analysis. The solution has beenspecially designed for both buy-side and sell-side investment firms and tradingvenues. The solution complies with European Trading regulations and those of NorthAmerica, Canada, and APAC, including MAD/MAR, MiFID/MiFIR, SFTR, and more.LookOut’s module titled FX Global Code extends its data-centric surveillance systemsupport to the foreign exchange domain.Eventus Systems offers a multi-asset class trade surveillance solution titled Validusthat combines surveillance, market risk, algo monitoring, and AML/transactionmonitoring to increase the efficiency of regulatory operations. This solution is offeredfor traditional and digital assets with comprehensive capabilities, including OOTBintegrations to suit organization-specific requirements.Nasdaq, through its trade surveillance solutions suite, offers a flagship SaaS-hostedsolution titled Nasdaq Trade Surveillance that provides holistic surveillance with anindustry benchmark for real-time and T 1 transactions, cross-market, cross-assetclasses to detect, investigate, and mitigate market abuse.Intellect Design Arena, through its flagship brokerage solution CaptialAlpha, amulti-exchange, multi-asset, multi-channel, multi-currency, multilingual integratedplatform, offers contextual and real-time trading supported by online market rates andnews, comprehensive AI-based analytics, and research. CapitalAlpha provides holisticsurveillance across levels and asset classes, including exchange-traded anddistributed, trade surveillance with the market and compliance monitors for retail andinstitutional investors, and adjustment capability of risk rules, risk limits, exposurerules, and margin rules depending on the investor trading pattern and exposures.Capital Alpha also provides real-time pre- and post-trade risk management.Bloomberg L.P., through its integrated compliance and surveillance solution offeringtitled Bloomberg Vault, enables organizations to capture, control, archive,reconstruct, and analyze their e-communication, trade, and voice data across theentire trading life cycle in real-time or historical basis. The premium enterprise offeringprovides control owners with governance tools and resources to oversee users,groups, and policies.MCO (MyComplianceOffice) offers compliance management software that enablescompanies around the world to reduce their risk of misconduct. MCO’s tradesurveillance software provides an automated solution to monitor investment activitiesacross an organization. The solution is an integrated platform that enablesorganizations to run a wide variety of monitoring rules on trades, positions, accounts,Copyright 2021 Quadrant Knowledge Solutions Private Limited 13For Citation, info@quadrant-solutions.com
SPARK Matrix : Trade Surveillance andMonitoring, 2021funds, portfolios, clients, and households across a range of financial products forvarious compliance topics such as market manipulation, insider trading, and productsuitability where the data is made available.Abel Noser Solutions offers three TCA (Transaction Cost Analysis) products for pretrade, real-time, and post-trade titled Trade Compass, Trade Pulse, and TradeZoom, respectively. The product suite provides organizations with the information topredict trading costs before trade, analytics to immediately access results of real-timetrading to manage and react to trading costs and evaluate trading performance posttrade by evaluating time-specific data including historic data to understand tradingcosts.ACA’s abuse surveillance solution ComplianceAlpha (formerly Decryptex) offersautomated, in-depth trade surveillance to help organizations identify Items of Interest(IOI) and non-compliant trading and investment activity.b-next’s capital markets compliance (CMC) suite protects organizations from thethreat of market abuse, thus preventing reputational damage. The module titled CMC:Market Abuse is a powerful automated surveillance module that monitors attemptedmarket abuse and market manipulation. The module titled CMC: Insider Compliancemonitors proprietary, customer, and staff trading, allowing the compliance team to getan extensive view of all trading activities of the organization.Features Analytics offers an AI-driven Trade Surveillance solution titled eyeDES thatdetects and explains any market abuse across asset classes, which significantlyreduces false positives by issuing only high-quality alerts and reduces the risk ofpenalties by detecting all known scenarios as well as emerging patterns. The solutionis configurable to detect c
SPARK Matrix : Trade Surveillance and Monitoring, 2021 Executive Overview . Some of the advanced analytics tools used by trade surveillance & monitoring solutions are predictive analytics, sentiment analytics, big data analytics, real-time streaming analytics, behavi
