Korea Exchange introduces real-time cross-market surveillance system

Source: Korea Exchange

The Market Oversight Commission of Korea Exchange (KRX) launched the cross-market surveillance system on December 1, 2005 which will make it easier, faster and more accurate to discover unfair trading activities across the two different markets.

The system which took six months to develop from May to November 2005, is designed to monitor both cash and futures markets simultaneously including the Stock Market and KOSDAQ Market and ferret out unfair trading activities such as price manipulation linking stocks, and futures and options.

Effects of Cross-Market Surveillance

  • Real-Time Watch: more effective prevention of unfair trading activities. Under the existing system, trading irregularities are discovered one day after they occurred: focused on post-trade monitoring
  • Automated Analysis of Abnormal Trade: The new system is designed to instantly check stock and futures price movements through graphics and identify the causes.
  • Faster Assessment of Unfair Trade: one week to one month (existing system) to one hour, one day (new system)

Particularly, KRX has developed the world's first cross-market monitoring database that automatically identifies if a trader trades in both stock and futures markets, which is expected to dramatically improve market surveillance efficiency.

Under the existing system, it was difficult to establish if a trader is involved in both markets because market users open separate accounts for stock and futures markets.

Cross-Market Monitoring Database: jointly developed with the Securities and Finance Research Institute of Seoul National University.

The Commission plans to deal with cross-market unfair trading activities more strictly and efficiently, and set the global standards for cross-market surveillance by constantly upgrading the system.

Currently, exchanges depend on manual work for part of their investigation into cross-market unfair trading activities to analyze if a trader is involved in both markets.

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