Using Data Science to Tackle FX Compliance

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Two years after its introduction in 2017 the FX Global Code (FXGC) has become a defining characteristic of the FX market, and with the amount of data that flows through banks on a daily basis it’s no wonder suspicious behaviour can occasionally fly under the radar.

Tech companies are using data science to monitor trading activities in the world’s biggest market. Currently, the solutions that seem to get the most attention are the ones that help with FXGC compliance, providing the most complete picture of trading activities globally. That means monitoring the activities of both trading algos AND human traders.

We spoke with Ideal Prediction, which has developed Scope, a service which automatically monitors order and trade activity, evidencing that humans and algorithms adhere to governance and risk controls. It specifically highlights potential issues like last look, spoofing, flashing, layering, order violations, limit breaches, and P&L flags.

John Crouch, Founder and CEO of Ideal Prediction commented, "Although we originally developed our service to address the difficulty a bank faced in monitoring its numerous algorithms, we are quickly adding tools to monitor the behaviour of human traders. If data can be captured, our service will be able to report on it."

It is clear that this is a rapidly evolving space, which will bridge multiple financial products, not just FX. And, as technology improves, it is likely that the demands of regulators will also rise to the higher standard of what becomes possible. No one can sit out this technology shift.

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