If you want to follow MAR Article 16 and related draft EMSA TRS to their full extent and not just detect but prevent market abuse and attempted market abuse, you need to get under the skin of your firm’s conduct and try and understand the reason behind orders and trades. You need to understand how the firm and your clients trade the markets, and you need to focus on the individuals. It is, after all, a person who makes that initial decision that may lead to market abuse.
The latest cutting-edge technology is described as trait prediction engines, giving access to accurate and ethical prognoses of psycho-demographic variables at the level of the individual.
Through this technology, organizations will now be able to develop natural language processing and predictive machine-learning models to transform digital footprints into personality and behavioral analysis.
An example of this is the excellent work of The Psychometric Centre at the University of Cambridge.
In plain English we now have the tools that accurately measures an individual’s psychometric profile (for an example what this is view https://www.discprofile.com/what-is-disc/overview/) by analyzing an individual’s email and online footprints.
Imagine your compliance organization has the tools to review online communication, emails, and public Twitter and Facebook information. It then builds a psychometric profile coupled with predictive machine learning in order to perform behavioral analysis of its staff.
This analysis is then coupled with your conflicts of interest, personal dealing, deal management and control room solutions as well as your market abuse surveillance solutions focused on firm and client trading.
It would strengthen your risk ranking of accounts, traders and staff that may have access to sensitive information or be in a conflicts of interest situation, and therefore move your compliance function away from searching for a needle in a haystack type principle trawling through big data hoping to find patterns to a much more focused and targeted searching. You would enable your firm to actively prevent market abuse before it happens and truly mitigate MAR Article 16.