Trading Technologies Makes Surveillance Play with Neurensic Acquisition

Neurensic, founded in 2015, uses artificial intelligence (AI) techniques to analyze trading patterns for potential compliance violations in near-real-time. The team will join Trading Technologies, a vendor that specializes in electronic derivatives trading.

Trading Technologies has acquired a “handful” of key personnel along with the company’s technology, intellectual property, and elements that comprise its “functional parts,” chief executive officer Rick Lane told journalists in a press conference held on October 10. The terms of the deal were not disclosed, and Lane declined to disclose which parts of Neurensic would not be joining Trading Technologies.

The deal, which closed on Friday, October 6, forms the first step in a new expansion for Trading Technologies, which will now seek to build a surveillance capability through its TT platform over the coming months.

“For our roadmap, this is really the first step in the launch of a proper surveillance offering from TT,” Lane said. “Over time, we expect that this technology will enhance trade analysis throughout the lifecycle, including not just compliance reporting, but algorithmic testing and algorithmic approval workflows, which are becoming more and more pressing with respect to compliance changes in Mifid II,” the revised Markets in Financial Instruments Directive.

Compliance is seen as one of the key areas of the trading process where AI and machine learning can make the most impact. Examples of its use range from pattern analysis and fraud detection across multiple markets, through to fine-tuning systems that alert surveillance officers to potential violations.

The acquisition of Neurensic by Trading Technologies is the latest attempt by established financial firms to integrate AI and machine learning into surveillance processes. In July, Nasdaq announced that it had acquired Sybenetix, a UK-based company that uses behavioral analysis and machine learning for buy-side-focused surveillance. The exchange group also later announced that it had successfully incorporated machine learning into market surveillance on its Nordic markets.

Other examples of firms making inroads into compliance with machine learning include IBM Watson, which has set out its stall in compliance as being ripe for the influence of cognitive computing. Digital Reasoning has also partnered with bulge-bracket banks, including Goldman Sachs and UBS, which are using its machine-learning technology for surveillance purposes.

“Our view is that AI represents the definitive game-changer for the fintech sector in this century,” said Michael Kraines, chief financial officer of Trading Technologies, in the press conference. “We believe we’re in the very early innings of what AI is going to be able to do for our clients, and trade surveillance is just scratching the surface of what’s to come.”