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A watchful eye

When investors consider where to place their money, the safety and professionalism of the marketplace in question is vital. Knowing this, the Oslo Børs takes every precaution to ensure that investors and companies are able to undertake their business in an environment that is transparent and fair – done on a level playing field – using the most modern technology and highest level of professional expertise.

In the early nineties, Oslo Børs risked being labelled as an insiders’ market. But for the past decade, the exchange has built up one of the most professional surveillance operations in Europe. The Supreme Court of Norway has handled two insider trading cases recently and will handle the country’s first price manipulation case early 2009.

The Financial Supervisory Authority of Norway (Kredittilsynet), the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) as well as the court system work actively to handle potential security crime violations. Most cases have been detected by Oslo Børs’ market surveillance. In this way, the exchange has contributed to exposing suspected breach of the rules in the market. Today, Oslo Børs is well regulated and can withstand any comparison with its international peers, with whom Oslo cooperates closely.

International Cooperation
Both Oslo Børs and the London Stock Exchange Group (LSEG) are among the exchanges that use the internationally recognized market surveillance system SMARTS to ensure the quality of their markets. Oslo Børs recently signed a letter of intent with LSEG to establish a strategic partnership, including provision of new trading systems. An agreement between Oslo Børs and LSEG would also include enhanced collaboration on market surveillance through use of the same surveillance system.

Oslo is miles away from its future London partner, as well as other international financial centres. Distance and cultural differences can influence investors’ confidence and old rumors can live for decades. To bridge this distance, Oslo Børs has been proactive in its approach, interfering if there are market irregularities, publishing statements to market participants, and explaining the reason for its interference. The active approach protects market participants from breach of rules, and minimizes the effects of illegal activity. The exchange has inspired confidence in its market surveillance because it takes swift and necessary action and because it has a transparent regime to explain this complex role of balancing the interests of market participants.

Intelligent Use of Technology
Oslo Børs’ surveillance team is a mix of experienced professionals with legal and financial background. The team has focused on a strong cooperation with its IT department given that the exchange – and in particular its surveillance function – are increasingly dependent upon complex and advanced IT infrastructure and software solutions.

An important part of creating a well regulated market with strong investor confidence is to recognize the importance of a system portfolio that supports all the main functions in the regulatory workflow. Oslo Børs has prioritized this for several years and achieved international recognition for its advanced use of a real-time surveillance system. The exchange continuously maintains its portfolio of systems and has over the past years delivered systems and operational services to all eight exchanges in the Nordic and Baltic regions.

Alert Factory
The SMARTS’ Alert Factory provides a full range of knowledge based services and has led to a valuable cooperation with the Nordic and Baltic exchanges that has created a state of the art portfolio. Several of the criminal cases brought to court over the last years started with alerts. This proves that the investment taken by the exchange in regulatory systems, combined with its competent team of analysts, has given results.

“Investments in advanced systems and highly skilled staff have moved the exchange forward in terms of regulation and maintaining a fair and orderly market,” according to Thomas Borchgrevink, head of trading surveillance at Oslo Børs. “As a result of the investments in systems, combined with our strategy of being an active exchange, the exchange has come far in its objective to run a professional market with a level of confidence comparable with the best and largest markets in the world.”

“The increased focus on market surveillance has paid off,” he added. “Since the turn of the century, Oslo Børs has attracted 35 international brokerage firms to be part of the marketplace. International investors are active in the market with around one-third of invested capital and around 70% of total trading. International participation is a strong sign of investor confidence.”

Thomas Borchgrevink, head of trading surveillance at Oslo Børs.
© Stavanger Aftenblad/Kenneth Bjerga

The SMARTS Market Integrity Platform comprises a suite of interconnected applications which provides the tools required to:

Monitor markets: Process extremely high and sustained volumes of trading activity.

Generate benchmarks: Continually determine what is ‘normal’ for any market at any time, so ‘abnormal’ events above defined thresholds can then be used to trigger alerts.

Generate alerts: Analyze trades in real-time to detect anomalies which may be suggestive of insider trading, market abuse or other irregular issues needing further attention.

Facilitate analysis: Graphically show trading activity in a wide range of visualizations, depending on the type of activity involved.

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