04 May 2018

Asian exchanges catch the AI market surveillance wave

South Korea's main bourse operator is the latest to join the wave of Asian exchanges implementing AI surveillance.

The Korea Exchange (KRX) has launched the full implementation of its artificial intelligence (AI) market oversight system as part of its effort to tackle trading abuses and abnormalities. 

Seoul
After 18 months of development and tests, the KRX started operating the system named EXIGHT, combining "Exchange" and "Sights." The system traces and analyses trading patterns based on 54 market variables, compared with the previous methodology that employed two to three factors, leading to faster and precise identification, according to KRX official Kim Kang-cheol, who said "It used to take five days to secure data for suspicious transactions, but it will be reduced to less than one hour. The usual two-month process, from figuring out unfair trading to reporting the incidents to relevant institutions, is also expected to be shortened to around 40 days."

Hong Kong
Last month the Hong Kong Exchanges and Clearing Limited (HKEX) became the first exchange customer in Asia to deploy Nasdaq SMARTS, using machine learning and participant relationship discovery across its equity market. Algorithms predict which actions analysts are likely to take based upon their handling of historical activity as well as discovering new relationships within the data. “As a market operator, we have always strived to be at the forefront of embracing and applying emerging technologies that will strengthen the integrity of our markets,” said Garbo Cheung, Managing Director and Head of Market Surveillance and Monitoring, HKEX.

Tokyo
In March, the Japan Exchange Regulation (JPX-R), an independent self-regulatory body for the Japanese securities markets, implemented AI technologies to assist with market surveillance operations and the detection of misconduct, such as market manipulation, on the Tokyo Stock Exchange (TSE). JPX-R is using technology provider NEC’s advanced analytics RAPID machine learning software to manages knowledge that was previously used in operations by surveillance personnel to evaluate irregularities in trade activity.