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Necessary Controls to Risk-Manage Cross-Border Trading Practices within FX

Necessary Controls to Risk-Manage Cross-Border Trading Practices within FX

On January 27, 2022, the Hong Kong Securities and Futures Commission (SFC) and the Australian Securities and Investments Commission (ASIC) jointly released a circular that detailed their observations following a collaborative thematic review into the governance arrangements and internal controls within the FX business of selected SFC and ASIC licensed firms.

The review covered a number of areas which included supervision, risk management, last look practices, mark-up disclosures and post-trade surveillance, taking into consideration local regulatory requirements and other industry guidelines such as the FX Global Code. In a similar vein to that taken by the UK Financial Conduct Authority in Market Watch 68, it was noted that both investors and participants have access or provide different means of access to pools of liquidity which can be executed across a variety of channels, both electronic and voice. It was stressed in the SFC and ASIC findings that participants should establish effective supervision, controls and exception handling procedures across the entire trade life-cycle to detect irregular and suspicious activity.  This requires having the right mix of technology to transform trading data into identifiable risks, and enables a flexible transformation layer that not only speaks the language of each trading platform, but also easily translates to a common language necessary for effective behaviour detection, trade reconstruction and anomaly detection.

ViP: Our Validus platform is extremely flexible to handle the challenges and nuances that exist across the buy- and sell-side format for FX, whether it be client order management, market making, liquidity provision or hedging across FX venues or OTC. It can operate in real time and/or T+1 and scales to handle billions of messages a day in real time. We offer more than 200 configurable, adaptable procedures that cover transaction monitoring and trade surveillance needs, provide a fully developed Python integration for customization and handle cross-market surveillance natively. Our automation functionality and machine-learning capabilities are critical in escalating only the most actionable alerts and minimizing the amount of false positives, and our statistics capabilities create bespoke analytics for anomaly detection.


About Eventus Systems

Eventus Systems is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventus.com.