This blog post originally appeared on TabbFORUM.
Spending on market surveillance solutions covering pan-European equities and derivatives markets is set to grow by at least eight percent in 2012, increasing from €105M in 2011 to €126M by 2014, according to recent research from TABB Group.
Rebecca Healey, a senior analyst with TABB Group, sets the scene nicely in her recent report: “The finance industry now has a stark choice. It must demonstrate a corporate group responsibility and fully engage with the legislative process to restore faith in the markets, or accept the investable disparagement of the industry and the regulatory strait jacket in which it will undoubtedly be cast.” It is clear that the Commission and ESMA have a strong ambition and will do extensive and industry-wide changes if they see them as necessary, which the resent ESMA Guidelines already demonstrate.
With the formation of the ESMA-Pol Standing Committee, the Commission is making a clear statement that it is serious with the ambition to track down and prosecute cross-market and cross-jurisdiction market abuse cases. Looking at FSA penalties over the last few years, we see that both the actual amounts are increasing and the focus is broadening to include cross-border regulation, which is demonstrated in Healy’s report.
The above makes it clear that there is a real business case for surveillance solutions, not least to avoid penalties and reputational damage, but also to be able to clearly demonstrate and broadcast that corporate responsibility and integrity is high on the agenda with regard to customers, regulators and owners.
For the forward-thinking firm, there are quite a few opportunities in this increased cross-market, cross-asset class and linked product focus.
Surveillance and supervision systems can now increase their scope and capacity to span across a firm’s full trading activity and should include functions such as social media and become fully integrated into corporate risk analysis functions. These systems will then provide the opportunity to competitively present decision makers with peer behavior reports and pricing reports, allowing firms to better understand their regulatory risk as well as to explore new products and adjust their pricing models for existing products, to remain as competitive as possible.
Compliance and surveillance is now becoming a big opportunity to get ahead of the competition and perhaps even more importantly in today’s climate, also a way to demonstrate a company’s full commitment to corporate responsibly and engagement in the evolving regulatory landscape.
While you’re here…