Buy Vs Build | Market Surveillance

Buy Vs Build | Market Surveillance


April 26, 2021

Most financial services firms have qualified internal technology resources and market knowledge and as a result they have a genuine choice between licensing products from independent software vendors (ISV) to advance their business or develop their own technology solutions.

Technology can be a valuable differentiator in our industry and the resulting intellectual property can have value all on its own. As a result, internal software build may be a viable choice but it can have its own drawbacks. Assessing whether the firm will be able to support ongoing IT and analyst resources to document and maintain the application is critical. Comparing the costs of taking on a large build solution when measured against licensing software from a proven vendor can show a wide gap when there are market ready solutions available.

For market and trade surveillance, a primary consideration should be that market surveillance is not an IT function, it is a business function that requires business direction to be successful. Market surveillance applications in financial services firms detect potential market abuse in highly intricate trading environments, possibly actioned by sophisticated traders who are trying to hide their activities. When building such a system the people leading this effort need to understand the nuances of the markets that they are trading in and the links across different liquidity pools and products. Examining the ways in which highly skilled and experienced traders could look to evade any controls, procedures and oversight that the financial services firm have put into place alos needs to be addressed.

Most vendors of trade surveillance software build alert systems focussed on multiple territories and their regulators specifications and legal wording of market abuse. They utilize configurations on which they know are the key focus of regulators. This insight and experience are invariably hard to locate and utilize when leveraging internal resources in a firm that has taken the build decision. Internal builds can easily fall into the trap of focussing on practices of market abuse that regulators have encountered in the past, rather than being able to build software and configurations capable of identifying current, trending and constantly evolving types of abusive trading patterns and practices.

Financial services professionals also believe that to build an in-house market surveillance solution, this requires more effort and additional allocation of potentially already stretched IT resources or the expense and difficulty of hiring further headcount in the IT and technology division of their business, and takes longer than buying a solution. It also exposes a firm to the risk of IT staff moving on and key knowledge regarding the solution being lost and being transferred potentially to a key competitor.

Mature and proven suppliers of trade surveillance technology provide the industry with standard tools that avoids internal development concerns, fulfils mandatory regulatory requirements via standardised implementations and provides a proven base for more advanced calibration and customisation of the market surveillance solution. KRM22’s commitment to being a responsible vendor for market surveillance is unparalleled and we look forwrda to exploring how we can help solve our current customers new challenges and our new customers with a proven solution.

For more information on KRM22’s market surveillance products, please contact Dan Langley at