'Trade Surveillance 2.0'

An in-depth study of methodologies and tools

Martin Flisek
Senior Manager, Data Transformation & Analytics, PwC Schweiz

The development of Prometheus, the new trade surveillance software from SIX Exchange Regulation (SER), has opened up a new chapter in trade surveillance. By incorporating innovative technological developments and bringing together a broad data basis, efficiency and effectiveness have been increased and a holistic surveillance approach has been implemented in practice.

The Smart Transformation approach, which combines artificial intelligence and intelligent automation, was chosen as the basis for the project. Intelligent automation (IA) transforms and improves trade surveillance through management, orchestration and automation of business processes. Artificial intelligence (AI) uses computers and machines to mimic the problem-solving and decision-making abilities of the human brain. By combining AI and IA, automation of particularly complex business tasks becomes a reality. PwC project experience shows that only much simpler automation tasks can be performed through only using AI (without IA), which underscores the benefits of Smart Transformation (AI with IA). Significant benefits are achieved with the transformation and use of both of these Smart Transformation components.

  • On the one hand, the use of artificial intelligence to analyse numerous data elements reduces the high number of false positives, i.e. fewer irrelevant cases are processed by staff, resulting in a reduction in workload and an increase in the quality of cases reported to the regulator.
  • On the other hand, automating workflows means less time and staff resources are required to carry out manual tasks; this leads directly to improved work quality and a reduction in costs.

Get to know Prometheus 

Our co-developed trade surveillance software identifies patterns of insider trading and market manipulation. You can read more about how our software proves how AI-based trade monitoring works.

Learn more


‘Trade Surveillance 2.0’ – the regulatory requirements are defined

SER, as the surveillance authority for the trading venues SIX Swiss Exchange Ltd, SIX Digital Exchange Ltd and SIX Repo Ltd within the meaning of Art. 24 and Art. 32 of the Financial Market Infrastructure Ordinance (FinMIO), is responsible for the supervision of trading pursuant to Art. 31 of the Financial Market Infrastructure Act (FinMIA). In the event of a confirmed suspicion of insider trading, market manipulation, price manipulation, other violations of the law or other irregularities, FINMA is sent an investigation report (Art. 31 (2) FinMIA). If the violations of the law relate to criminal offences, SER also informs the competent prosecuting authority (Art. 31 (2) FinMIA). In the event of a confirmed suspicion of insider trading or price manipulation, Surveillance & Enforcement provides the Office of the Attorney General of Switzerland with an investigation report.

The disclosure of the beneficial owner of a trade transaction (pursuant to Art. 39 FinMIA) has significantly expanded the available data basis for SER and substantially improved the associated possibilities. In addition to the trade-related data, personal data are now also available, which is what makes a more in-depth analysis meaningful in the first place.

“Innovation as the basic DNA led to the decision to develop a completely new platform.”

The solutions available on the market no longer met SER’s requirements for modern and forward-looking trade surveillance. Innovation as the basic DNA led to the decision to develop a completely new platform. SER’s aim was to develop a surveillance system that not only met regulatory requirements but was also designed to meet SER’s needs and desires. 

Smart Transformation creates an effective symbiosis for trade surveillance

SER and our Data Transformation & Analytics experts have developed an integrated solution together with and for the benefit of stock exchanges and regulators in trade surveillance. A four-step process (see Figure 1) includes the necessary transformation components to make trade surveillance more effective and efficient through intelligent automation and artificial intelligence.

Data procurement: all relevant data are procured.

Data conversion and merging: data are transformed and merged into coherent, reliable and automated data tables.

Alert logic: an AI-driven alert engine is developed to increase effectiveness – generating more true positives for the user to review and investigate.

Business processing: two IA business process tools are developed – a process-based business case management tool that enables interaction with the SER organisation’s processes, and a front-end application for visualising, analysing and generating interpretable results.

Big data enables more precise predictions

Creating a big data environment allows SER to include disparate data sources in its analyses and obtain the associated computing power for processing. The efficiency and effectiveness of the new system to be developed should be much better than for the application used previously and therefore significantly enhance the quality of the alerts issued. To achieve this aim, SER has consistently relied on innovative technologies such as machine learning and artificial intelligence.

Transparent insights and analysis capabilities

The dossier management tool enables analysts to investigate and document any conspicuous activities on the part of specific traders in more detail. In the event of suspicion, a new alert is automatically generated and assigned to the responsible analyst. Based on the relevant key figures, the analyst determines whether the alert needs to be investigated more closely or whether it is a false alarm. If a detailed analysis is required, the analyst will conduct further research, investigate the relevant trading activities using the front-end application and document all findings in the dossier management tool to produce an investigation report.

The analyses for preparing the investigation reports can be carried out in the front-end tool. This visual analytics application presents all the necessary data in processed form. The system provides an overview of all alerts, the processed data (also downloadable as an Excel file) and various insights into beneficial owners as well as the spread.

Examples of functions

View order book with Limit, Market, SwissAtMId, EBBO and Plus orders

Search and filter orders from authorized persons, brokers, traders and algorithm traders.

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Below is a list of the various components/functionalities in the front-end tool:

  • beneficial owners overview
  • alarm overview
  • candlestick overview
  • transaction distribution
  • order book / playback
  • order book table
  • securities table
  • pre-trade order table
  • market overview module

Key takeaways from ‘Trade Surveillance 2.0’

Companies are forced to constantly reinvent their methods and procedures in order to keep up with the latest developments or, in the best-case scenario, to stay ahead of the game so that they can effectively detect insider trading and uncover new types of abuse in addition to the types of market manipulation which are already known. Trade surveillance requires tools and processes which are specifically designed to ensure operational efficiency and effectiveness. To meet these requirements, you need the right experts as well as the right solution and approach. With the Smart Transformation solution developed by SIX and PwC, we can help you shape the future of trade surveillance.

Our Prometheus application is not a static product that has been developed to completion and will then remain at the same level. Prometheus is an application that will be constantly developed in a process of continuous improvement to meet new and changing requirements. 

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Meet Prometheus 

Would you like to learn how Prometheus and a monitoring system based on artificial intelligence and big data can also be used to check your stock exchange or the transactions in your company better and more effectively? Send us your email address so that we can contact you.

https://pages.pwc.ch/core-contact-page?form_id=7014L000000PpmAQAS&embed=true

Contact us

Matthias Leybold

Matthias Leybold

Partner Cloud & Digital, PwC Switzerland

Tel: +41 58 792 13 96

Gianfranco Mautone

Gianfranco Mautone

Partner and Forensic Services and Financial Crime Leader, PwC Switzerland

Tel: +41 58 792 17 60

Christian   Blakely

Christian Blakely

Head of Machine Learning and AI, PwC Switzerland

Tel: +41 58 792 22 81

Martin Flisek

Martin Flisek

Digital Transformation Expert, Advisory, PwC Switzerland

Tel: +41 58 792 4490