SteelEye has launched a trade surveillance tool designed to combat cross-product market manipulation.
Cross-Product Detection leverages algorithms to analyse trading activity across multiple instruments and identify cross-product manipulation patterns apparent in suspicious correlations between trades in different instruments. Cross-product manipulation occurs when orders or trades are placed in one financial instrument to illicitly impact the price of another.
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 defences 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.”
Over the last decade, several enforcement cases related to cross-product manipulation have been filed in the US and UK.
In 2020, US market regulators the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) fined JP Morgan more than US$920 million in penalties and disgorgements for manipulative trading, or spoofing, in the US Treasuries, US Treasuries futures, and commodity markets, between 2009 and 2016.
One global bank was hit with a US$35 million penalty after the SEC determined 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.
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