TRADE SURVEILLANCE

Review Trade Patterns with Confidence

Analyze client activity to identify key manipulative patterns.
Spot manipulative trading patterns quickly
Reduce reliance on spreadsheets and manual checks
Get alerts tailored to your firm’s activity
Simplify compliance reviews with clear reports

Relevant rules

Addresses SEC Rule 15c3-5, a main requirement of which requires broker-dealers to analyze patterns of its clients order and execution activity on a post-trade basis in order to monitor for potential market manipulation, also applicable to detection of potential suspicious activities as required by AML rules.

Common deficiencies

No system or particular reports to surveil certain manipulative activity (e.g. spoofing, layering, wash trades)
Lack of customizable settings to hone in on potential manipulative activity.

Knowtice’s prevention plan

We have identified the primary market manipulation patterns commonplace in regulator reviews.
This tool monitors and documents reviews of such trade patterns on a post-trade basis
This tool is most suitable for broker-dealers with retail order flow
This tool can be utilized by new or veteran broker dealers with relatively limited yet frequent-enough equity transactions whereby a systematic review is required.
Examples of market manipulation patterns that our Trade Surveillance tool screens for:
Examples:

Wash Sale

Trades where the same party simultaneously buys and sells a security, artificially inflating trading volume.
Examples:

Cross Trade

Trades executed between accounts with different owners where both sides are represented by the same broker-dealer, potentially impacting market volume.
Examples:

Layering/Spoofing

Placing and quickly canceling orders to create misleading impressions of market demand or supply.
Examples:

Reject Review

Alert triggered by frequent trade rejections or order entry issues that may indicate problematic activity.
Examples:

Ramping

Rapid trading activity causing significant price movement within a short timeframe, material for low-priced securities activity.
Examples:

Marking the Open/Close

Potentially manipulative trades intended to artificially influence the security’s opening or closing price.
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Real findings. Real fines

Recent fines of broker-dealers highlight the necessity of utilizing technological solutions to systematically monitor client trading activity.
Broker-Dealers Fine
Date
May 2025
Broker-Dealer
BTG Pactual US Capital
Fine Amount
$400,000
Failure to establish and implement AML processes that could detect suspicious transactions.
Fine Amount
$2,250,000
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Date
May 2025
Broker-Dealer
Barclays Capital Inc.

Failure to establish and maintain a supervisory system reasonably designed to monitor for potential layering and spoofing.

Fine Amount
$80,000
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Date
April 2025
Broker-Dealer
TP ICAP Global Markets Americas

Failure to establish and maintain a supervisory system reasonably designed to monitor for potential layering, spoofing, marking-the-close.

Fine Amount
$50,000
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Date
September 2024
Broker-Dealer
Colorado Financial Service Corporation

Reports not reasonably designed to detect and report suspicious transactions, including potentially manipulative activity such as prearranged trading.

Fine Amount
$3,000,000
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Date
August 2024
Broker-Dealer
BofA Securities, Inc. + Merrill Lynch, Pierce, Fenner & Smith, Inc.

Reports not reasonably designed to detect and report suspicious transactions, including potentially manipulative activity such as wash trading and prearranged trading.

Fine Amount
$165,000
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Date
January 2024
Broker-Dealer
SpeedTrader, Inc.

Failure to enforce a supervisory system reasonably designed to achieve compliance with rules prohibiting potentially manipulative trading.

Fine Amount
$512,500
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Date
January 2024
Broker-Dealer
Goldman Sachs & Co.

Failure to enforce a supervisory system reasonably designed to identify potentially manipulative trading activity, such that of warrants, rights, units, and certain OTC equity securities.

Fine Amount
$6,000,000
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Date
September 2024
Broker-Dealer
TD Securities (USA) LLC

Instances of spoofing in U.S. Treasury securities through a former trader who worked on, and later became the head of, its U.S. Treasury trading desk.

Fine Amount
$75,000
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Date
December 2023
Broker-Dealer
Elevation, LLC

Failure to maintain surveillance to monitor for any type of fraudulent trading, such as spoofing, layering, and wash trades.

Fine Amount
$200,000
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Date
October 2023
Broker-Dealer
BGC Financial, L.P.

Failure to maintain a surveillance supervisory system to monitor for potential spoofing or layering.

Fine Amount
$24 million
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Date
October 2023
Broker-Dealer
BofA Securities, Inc.

Engaging in more than 700 instances of spoofing through two former traders in U.S. Treasury secondary markets and related supervisory failures.

Fine Amount
$3 million
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Date
September 2023
Broker-Dealer
Electronic Transaction Clearing, Inc

Failure to reasonably surveil for certain forms of manipulation such as marking the open or close, prearranged trading, and wash sales.

Fine Amount
$975,000
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Date
January 2023
Broker-Dealer
Wedbush Securities Inc.

Failure to take any steps to detect and prevent customers from engaging in potentially manipulative trading, or to implement any type of supervisory reviews for potentially manipulative trading.

Fine Amount
$450,000
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Date
September 2022
Broker-Dealer
MM Global Securities, Inc.

Failure to establish a compliance program reasonably designed to detect suspicious activity, including manipulative trading, such as wash trades, matched orders, spoofing, or layering.

Fine Amount
$250,000
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Date
August 2022
Broker-Dealer
ViewTrade Securities, Inc.

Surveillance reports were not reasonably designed to detect suspicious or potentially manipulative transactions.

Fine Amount
$775,000
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Date
January 2022
Broker-Dealer
Sagetrader, LLC

Failure to conduct any supervisory reviews for potentially manipulative trading, such as layering, spoofing, wash trades, or marking the close or open.

Fine Amount
$350,000
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Date
January 2022
Broker-Dealer
E*TRADE Securities LLC

Failure to detect potentially manipulative trading activity, including wash trades, prearranged trades and marking-the-close.

Use our Trade Surveillance tool to prevent costly fines!

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