ASIC to implement monitoring system for equities and derivatives trades

Integrated market surveillance system will manage former ASX responsibilities

The Australian Securities and Investment Commission (ASIC) is to procure an integrated market surveillance system (IMSS) aimed at monitoring equities and derivatives markets to identify aberrant trading activities.

The new system is being established ahead of the scheduled 2010 handing over of monitoring duties from the Australian Stock Exchange (ASX) to ASIC.

According to ASIC documents, the new IMSS will initially be externally hosted for a period of two years with two option periods each of six months duration.

The IMSS will detect, on a real-time basis, unusual price or volume movements in the equities market operated by the ASX, and other aberrant trading activities suggestive of market misconduct, including market manipulation and insider trading, according to the documents.

Once the system has detected any suspected aberrant trading activities, it will automatically flag the activities in real time to ASIC surveillance analysts to examine the conduct.

The IMSS will also provide access to market data through standard and customised parameter driven reports and queries.

Another key requirement is that the IMSS is easily transitioned to ASIC or a third party of ASIC's selection at any time.

The IMSS will initially operate in a stand-alone manner, however ASIC said that the monitoring and supervision of markets would eventually involve several integrated processes.

“The IMSS will play a pivotal role in supporting these processes, but it will be necessary to have other systems in place to support all of the business functions…,” the documents read. “However, to support the streamlining of business processes to improve their efficiency and effectiveness, it is desirable that the solution that is selected demonstrates the capacity to integrate with ASIC's other systems.”

ASIC said it anticipated an average of 400 system alerts per business day, or 104,000 per year. It also expects an average of 2.5 million trades per day.

The IMSS is scheduled to be up and running by 1 July 2010.

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