Review of a prime broker’s trade surveillance infrastructure, systems and controls

The Firm had recently enhanced its Trade Surveillance capabilities and requested advice on its arrangements and the extent to which they were in line with regulatory standards and market practice.

We met with the Firm’s Compliance and Front Office functions and performed a review of the surveillance systems and alerts processes. In view of the fact that the technology was vendor supplied, we assessed the parameters for insider dealing and market manipulation that had been determined by the Firm as being appropriate calibration for its business model and considered how these had been incorporated into the alerts mechanisms.

In addition to determining whether the Firm’s systems were calibrated in a manner that was appropriate when considering its market abuse risk profile and the risks inherent across the different asset classes traded, we reviewed the relationship between the alerts process and governance arrangements as well as the Firm’s policies and procedures.

We supported the Firm in enhancing some elements of its framework, particularly in relation to its treatment of asset classes outside the equity environment. We further advised the Firm on mechanisms to strengthen its alerts management and escalation arrangements.