Scila proposes methods for surveillance of algorithmic trading


Being one of the leading providers of trade surveillance software to trading venues, regulators and market participants, Scila closely follows regulatory development around the world. Scila not only updates its software according to regulatory development, Scila also analyses, and sometimes, comment on specific regulation that is about to become reality for Scila's customers.

So far some of the proposed suggestions for monitoring High Frequency Trading and Algorithmic Trading has concerned us. Scila's Executive Chairman, Mr Lars-Ivar Sellberg, has written a paper on alternative solutions. Solutions that we find much more appealing than the alternatives that we have seen so far. Attached is Mr Sellbergs paper "Surveillance of Algorithmic Trading"

As various types of algorithmic trading makes up an increasing part of the trading volume on stock exchanges and other execution venues, it is generally acknowledged that these algorithms provide valuable liquidity that would otherwise not be available. At the same time concerns are being raised that algorithmic trading does have negative aspects besides its positive effects.

While the reactions from regulators and legislative bodies have been slow in coming, it has now virtually exploded in a plethora of suggested and implemented counter measures to these perceived negative effects of algorithmic trading. The problems with a majority of these countermeasures are that while they often provide at least a partial solution to the problem, the side effects are poisonous enough to kill the patient, i.e. the market. 

The purpose of this paper is to suggest a variant of the suggested “Notification of algorithms” that would provide most of the benefits of this method, while drastically reducing the excessive cost associated with the original method. 

For more information

Lars-Ivar Sellberg

Executive Chairman

Phone +46 733 47 87 10

About Scila AB  Scila provides trading surveillance products built on many years of experience from both market surveillance and systems design. Scila Surveillance uses modern technology to give the customer a seamless route from detection of market abuse to presentable evidence. Scila delivers the future in modern market surveillance technology by offering trading venues, regulators and market participants the most competitive solution available. Scila’s sales and marketing partner Cinnober Financial Technology owns a minority stake in Scila AB and there is an exclusive sales agreement between the two companies. For additional information about Scila AB, please visit www.scila.se

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Confidence is one of the most important assets of any market place, market participant, or regulator. Without confidence in the market, investors will choose other alternatives for their investments.Scila provides surveillance tools built on many years of experience from both market surveillance and systems design. The products use the latest technology to offer the customer a seamless route from detection to presentable evidence.At the same time, you benefit from the vast amount of useful order and trading data that can be derived from your Scila solution. Whether you use Scila Surveillance, Scila Compliance, or Scila Regulator you add confidence to your part of the market.

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While the reactions from regulators and legislative bodies have been slow in coming, it has now virtually exploded in a plethora of suggested and implemented counter measures to these perceived negative effects of algorithmic trading.
Lars-Ivar Sellberg, Executive Chairman, Scila
The problems with a majority of the proposed countermeasures for
Lars-Ivar Sellberg, Executive Chairman, Scila
By defining and monitoring boundary conditions for trading algorithms it is possible to design an effective detection mechanism for misbehaving algorithms.
Lars-Ivar Sellberg, Executive Chairman