The era of surveillance: Driving change through innovation

• The world of trade surveillance is undergoing a significant transformation. 
• What was once a rules-based exercise for regulatory purposes has evolved into a dynamic, data-driven discipline that can shape how businesses operate.
• Firms are now using surveillance as an opportunity to run their business better, in addition to avoiding regulatory scrutiny and penalties

A recent LSEG webinar explored the convergence of data, technology and culture in Surveillance and Compliance, offering key insights into how firms and their compliance and surveillance professionals can capitalise on this transformation. 

Surveillance and compliance roles are evolving to become strategic advisors for risk management. They are becoming integral to how firms understand markets, manage data, and control risk. Highlighted by global market research conducted by LSEG in 2024, almost half of FX firms cited trade surveillance and market abuse as key focus areas to manage or mitigate risk.

Compliance is no longer siloed at the end of decision-making chains but is embedded across functions, with professionals across the business - not just compliance officers - now needing to take increasing responsibility for surveillance and risk.

During the webinar an audience poll asked whether compliance teams now have a stronger voice in corporate decision-making. The majority of participants responded either "yes" or "almost there", indicating a growing cultural shift in how organisations perceive compliance - where it was once viewed as a potential barrier to business, it is now thought of as a business enabler. 

Liam Smith, Chief Operating Officer, LSE plc and Digital & Securities Markets, commented on the changing role of compliance, “I've certainly seen a transformation in the function and I don't see any evidence that that's slowing down.”

“More and more we look to control and analyse the datasets ourselves, and we've seen a transformation in what our function can deliver.” 

Mature firms are using robust compliance frameworks to fuel growth and reduce regulatory exposure—turning risk into opportunity and compliance into a competitive advantage.

The surveillance landscape is being influenced by three key drivers:

1. Exploding data volumes 

Market volumes, message rates, and consequent transaction reports have steadily increased over a number of years and reached record highs in 2025. A good example of this market evolution is in FX – where average daily turnover increased from $1.5 to $7.5 trillion between 1998 and 2022.

2. Evolving regulations  

While frameworks like EU MAR (Market Abuse Regulation) and UK MAR have remained consistent, regulators are tightening expectations around how firms apply them - especially in areas like data governance, model calibration and operational resilience.

3. Complex market structures 

Firms are under pressure to implement cross-asset, cross-market surveillance systems. This challenge requires advanced analytics and harmonised data sources, including public and proprietary datasets.

Data granularity, time sequencing and asset linkage are critical to robust and trustworthy surveillance. 

While surveillance frameworks have matured, data governance within those systems is often still lacking. Many firms are now adopting best practices from other regulated functions, such as transaction reporting, to ensure data completeness, quality and traceability. When polled  about key issues faced with regard to trade surveillance, an overwhelming majority of webinar participants cited cross-market/cross-asset alerting as their biggest challenge.    

LSEG is making advances in this area on behalf of the surveillance community by combining its trusted regulatory transaction and exchange data to provide a more holistic, cross-asset market view.

Collection of data is only one aspect of good surveillance: that data then needs to be analysed and acted upon in order for a business to fully protect itself. 

Carroll Barry-Walsh, Lawyer and Founder of Barry-Walsh Associates, said, “Surveillance is part of knowing what is going on in your firm and understanding your own risks and being able to ensure that if you know what's going on in your firm on the basis of good quality data, then you can take steps to improve what you do.”

On that basis, it’s also important for firms to be aware of the data they are not collecting – and to have good understanding of any blind spots and be prepared to adjust their policy if necessary.

Another challenge highlighted during the webinar was the significant and persistent issue of false positives surveillance tools inevitably produce. While technology can help identify suspicious patterns, it can also overwhelm teams with noise.

A tactical solution is for firms is to use datasets such as the ‘RTS 22 Transaction Reporting’ that are specifically designed for market abuse detection by regulators, calibrate alerts to include extreme behaviours and to dedicate more resources to thematic investigations based on business intelligence, rather than just on rule-based alerts. This three-fold strategy can improve operational efficiency while retaining investigative depth.

As AI and natural language processing advance, firms are able to go beyond detection to prevention.

There is a strong case for real-time behavioural correction, since the sooner an issue is detected, the faster a firm can act and send a clear message to its teams.

As an example, some firms are already deploying AI to educate employees during chat conversations where there is a chance that misconduct could occur. 

This ability to influence behaviour in real time represents the next evolution of surveillance: from reactive to proactive. Tom Goodman, Financial Crime Analytics Director at Ernst & Young LLP, explained that firms are exploring the use of AI in real-time chat conversations to nudge users and make them aware of potential risks based on the direction of the conversation. Tom also highlighted how this technology can guide users back towards appropriate conduct and therefore provide an opportunity for surveillance to evolve beyond detection moving forward.

A key theme of the webinar was the need to link trade surveillance with communication surveillance. Their integration is becoming increasingly important in investigations and regulatory reviews.

Communications often reveal intent, which is not recognised by trade data alone. However, rather than firms adopting a policy of “collect all data because we can”, it’s important for firms to adopt risk-based, targeted collection which can be supported by tools that allow rapid correlation when needed. 

LSEG’s partnership with Global Relay (a leading, innovative provider of solutions in digital communications compliance and recordkeeping) aims to solve precisely this fragmentation challenge by offering firms the Compliance Archive - an open, scalable solution to unify communications surveillance data across multiple sources.

Vincenzo Dimase, Global Director of Customer Strategy and Execution at LSEG said, “Having one container or solution can help not only to detect issues that can otherwise remain hidden but also help you to respond faster to a request from a regulator or to an investigation.”

Vincenzo Dimase noted three key variables: “There is a new era starting for surveillance and Compliance roles. Second, there is a change component that highlights how relevant it is to keep surveillance workflows and solutions updated with evolving market conditions and market practices. And this is very closely linked to the third element – innovation and the disruptive role of technology.” 

In short, surveillance is no longer a back-office burden. It’s a front-line discipline shaping risk management and organisational culture, and if done well, can give firms a significant competitive edge.

Firms that embrace this new era- by investing in data, adopting agile technologies, and fostering a culture of shared responsibility - will not only meet regulatory expectations but can also demonstrate leadership in trust, transparency, and resilience.

Disclaimer: The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organisation or its member firms.