Overview of Surveillance System

of Bangladesh Securities and

Exchange Commission

Md. Saifur Rahman

Executive Director
Bangladesh Securities and Exchange Commission
Definition of Market Surveillance

 It is a detective work of finding trading

patterns that gives one or a group of
actors benefits in improper ways and

 It is also a “craftsmanship” to see why or

why not a pattern is suspicious.
Objectives of Market Surveillance

 To ensure fair trading;

 To ensure proper compliance of securities
laws, rules and regulations;
 Retain confidence of investors and
 To uphold transparency in securities
trading.
Surveillance Functions of BSEC

 Has on-line and off-line market surveillance

system;

 On-line surveillance through InstantWatch Market

Surveillance System;

 Off-line surveillance through post trading data

analysis and examination of collected documents;

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Surveillance Functions of BSEC
 To ensure fair and transparent securities trading;
 To keep constant vigilance on the surveillance
activities of stock exchanges;
 To monitor the trading activities by stock
brokers, stock dealers and authorized
representatives;

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Surveillance Functions of BSEC
 To monitor the trading activities of investors;

 Referral of possible market abuse cases (including

market manipulation, insider trading) to SRI Department
and stock exchanges for conducting investigation;

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Surveillance Functions of BSEC

 To conduct investigation into alerts

generated in InstantWatch Market
Surveillance System;

 Referral to Enforcement Department, if any

violations of securities related laws found.
Institution Subject to BSEC’s Market
Surveillance

 Issuer Companies
 Stock Exchanges
 Stock-brokers and stock-dealers of stock exchanges
 Merchant Banks
 Institutional Investors
 Individual investors
 Directors/Sponsors/Sponsor directors of listed companies
 Foreign investors
 CDBL
 Depository Participants (DP)
Market Abuse
Market abuse may for example arise when
trading participants:

 have used information which is not publicly available;

 have distorted the price-setting mechanism of

financial instruments and

 have disseminated false or misleading information.

Market Abuse
Market abuse can be divided into two
aspects:

 Insider trading and

 Market manipulation.
Insider Trading

Buy, Sale or Transfer of Securities based

on undisclosed price sensitive information
Market Manipulation

 A deliberate attempt to interfere with the free

and fair operation of the market and,

 create artificial, false or misleading

appearances with respect to the price of, or
market for, a financial instrument.
Surveillance System of BSEC

 Before December 17, 2012, BSEC used

Surveillance System of Dhaka Stock
Exchange Ltd. and Chittagong Stock
Exchange Ltd.

 From December 17, 2012, BSEC has been

using its own state of the art surveillance
system.
New Surveillance System of BSEC

‘InstantWatch Market’ - new surveillance

system of BSEC which is procured under
“Improvement of Capital Markets Governance
Project” financed by Government of Bangladesh
and Asian Development Bank and

International Securities Consultancy Ltd., Hong

Kong has provided the consultancy service.
“InstantWatch Market”

 A leading, independent European System for

securities market surveillance;
 Used for the detection of insider trading, market
manipulation and other market abuse and
 Can monitor trading on both DSE & CSE
simultaneously and at individual BO level.
Key Features of InstantWatch Market

 It analyses a flow of financial transactions

(such as trades, orders and news from stock
exchanges) and issues required alerts;
 It helps to detect possible market
manipulation and insider trading at early
stage by using alerts, investigation and
reporting tools and
 Track, prioritise, manage and log suspicious
activities.
Alert Types in InstantWatch Market:

 Price deviations;

 Turnover deviations;

 Short selling;

 Position limit;

 Circular movement;

 Wash sales;
Alert Types in InstantWatch Market:
 Trade concentration;

 Marking the Close;

 Front running;

 Insider trading;

 Spoofing and

 Late withdrawal, etc

Handling of Alerts

Surveillance officers handle alerts using the

following tools of the system:

 Instrument Monitor
 Reports
Instrument Monitor
Three components of Instrument Monitor:

 Monitor – graphs and details about the trading

day

 Order replay – Step through order events

 Instrument info – Short info about the

instrument
Reports of InstantWatch Market

 Intra Day Price

 Intraday Turnover
 Order Report
 Simple Trade Report
 Turnover Report
 Account Report
Reports of InstantWatch Market

 Position Exposure Limit

 Top Ten Brokers
 Trade Concentration
 Trade Concentration of Traded
Quantity
 Trade Report
Daily Work Flow

Alert

Investigation

Market monitor, order replayer

Dismiss Continue investigation, Legal actions

Start an analysis, pinpoint

Documentation
Benefits of Using InstantWatch Market

 Provides clues of possible market

manipulation, insider trading and other
market abuses;

 Helps to detect market abuse at initial

stage;

 It has been possible to investigate into

specific cases/incidents;
Benefits of Using InstantWatch Market
 The database and reporting system helps a lot
in investigation process;

 Market intermediaries are becoming more

aware about unfair trading practices;

 The practice of short-selling of securities has

been reduced, since the system automatically
detects short-selling of securities.
Thank You