Surveillance

Function and operations

Surveillance plays a vital role in ensuring market confidence by providing continuous, real-time monitoring of trading activity in the equities and derivatives markets of ASX.

Prices and volumes of stocks continually rise and fall. Surveillance detects any trading that falls outside of the normal pattern of changing prices and volumes. In particular, Surveillance monitors for:

Structure

The Surveillance section comprises a Surveillance Manager and a number of Surveillance Analysts and Market Analysts.  Surveillance Analysts and Market Analysts have specialist experience in trading practices and market behaviour.

The role of Market Analysts is to monitor the market, in real time, for unusual price movements and trading behaviours.  When unusual and unexplained price movements are identified these matters are referred to the Issuers unit. When unusual and unexplained trading patterns are identified these matters are referred to Surveillance Analysts for further investigation. The role of Surveillance Analyst is to make enquiries of Market Participants, analyse trading patterns and where market manipulation is suspected refer the matter to ASIC and the Investigations unit.

Approach to supervision

The Surveillance section utilises a range of electronic monitoring and investigative tools including SMARTS (Securities Market Automated Research Trading and Surveillance), a computer system which monitors all real-time trading information and highlights any unusual price or volume movements, the IRESS market information system and an ASX market replay facility. A number of computer databases provide analysts with both background and current information, linking the market activity under investigation and the people it involves.

Market analysts also keep in touch with a range of Market Participants to help their understanding of the changing forces that drive market activity.

Surveillance staff visit broking firms on a regular basis providing demonstrations on the work done by the function and discussing current issues. This ensures that brokers are aware of the existence, activities and effectiveness of Surveillance and analysts are aware of current market practices.

Most enquiries initiated within Surveillance turn out to be explainable. However, an enquiry or other indications of unusual or irregular trading which cannot be explained, may indicate the possibility of market abuse. In this situation, a referral is made to one or more of the following:

  • ASIC for further investigation and possible civil or criminal proceedings.
  • ASX Markets Supervision Investigations function to examine any potential breaches of the ASX Market Rules by brokers.
  • ASX Markets Supervision Issuers Unit to examine any potential breaches of the continuous disclosure requirements.

Market replay

The Market Replay allows Surveillance analysts to review a period of trading in a stock step by step. Each bid or offer is identified with a particular stockbroker identifier, adviser and/or client . Surveillance can obtain from brokers details of their clients trading in a particular stock and can attach the client’s name to each transaction they enter. It is therefore possible to analyse, in full detail, the activities of a particular person trading in a particular stock.

Trading Rule breaches

Trading is monitored to ensure that stockbrokers comply with the ASX Market Rules, which are designed to ensure that trading is fair to all Participants and an orderly market operates.  Sufficiently serious breaches are referred to Investigations for potential disciplinary action.