History
The SMARTS products began life in the research labs of the University of Sydney at a time when the Australian securities market became one of the first in the world to automate and integrate six separate regional stock exchanges into one national trading platform. The trading data emanating from this platform was more detailed than had ever previously been available and allowed the team to begin to explore matters like insider trading and market manipulation to provide the first reliable empirical estimates of the incidence of these matters across markets. Deploying the disciplines of data management, data mining and data visualisation, the academics worked to integrate high quality research with an important industry need.
Two of the key conclusions of the early research were that in an environment of fully automated markets, surveillance would also have to be fully automated, and that a technical solution was feasible. In the market environment of today this conclusion sounds obvious, but at a time when market surveillance was about watching individual traders and their actions on a trading floor, the idea was anything but readily embraced by the industry.
Still in a largely academic setting, the founders of SMARTS Group sought to learn more about industry requirements, and started to seek projects targeted at market surveillance. The first version of SMARTS was built not only to solve a known problem, but also as a highly adaptable research tool targeted at mining the data to systematically identify normal and abnormal trading behaviour. In this respect market design changes such as changes in regulation or technology represent an important area of study for surveillance personnel. Whereas most surveillance departments would not think of these changes as being part of their mandate, the academic approach demonstrated that changes which had an adverse impact on the liquidity of the market, or a sector therefore, should be highlighted, because any reduction in liquidity in a market or sector of the market opens the market or the sector up to a higher likelihood of manipulation.
This approach of thinking beyond what is conventional has prevailed in the SMARTS technology today, supplemented by the collective experience of more than 30 national exchanges and regulators all over the world. The flexibility of a research toolset combined with state of the art exception monitoring and visualisations have proved the key to a successful market surveillance approach. It allows the system to adapt effectively to new challenges, and to be used in pre or post-trade analysis or enforcement actions as well as in real-time detection of irregularities.
Aside from the business functionality, SMARTS Group technology has been constantly improved to address operational uptime requirements of customers to the 100% level for core infrastructure, and to cope with the exponential growth of transaction data as automated markets proved a massive success triggering automated trading, with high volume low latency requirements.
In July 2010 NASDAQ OMX acquired SMARTS Group. At this point the company had grown along with its customer base and the customer requirements, with approximately 130 staff across its two businesses, SMARTS Broker Compliance Pty Ltd and SMARTS Market Surveillance Pty Ltd . Having achieved market leadership and the status of platform of choice for many of the leading securities markets in the world, our relationship with NASDAQ OMX will undoubtedly facilitate further growth and further improvements to our products in the continued pursuit of the company’s mission to ensure best possible levels of market integrity and fairness as well as orderly operations, to the ultimate benefit of market participants and investors.