Spending on technology for market surveillance will increase to $1.4 billion by 2021 as institutions battle with regulatory pressures and the prospect of fines.
A report authored by consultancy firm Opimas predicted the surge in spending which was estimated to be around $1.1 billion in 2017.
It suggests spending will increase as organisations try to replace the traditional people-intensive surveillance approach with automated solutions that deploy varying degrees of artificial intelligence, machine learning and behavioural analytics.
“Solutions that dramatically reduce the number of false alerts and automate trade reconstruction obligations, too often handled manually, will enable firms to improve the quality of their surveillance with fewer boots on the ground,” the report said.
A reduction in headcount across firms will start to be visible in 2019 as the adoption of these technologies gathers pace, although the reduction is expected to be particularly steep at tier one institutions.
Opimas warned there will be continued pressure from regulators regarding market manipulation in coming years, but it’s unlikely the industry will see headline-grabbing fines in the hundreds of millions or billions of dollars.
Instead, the report suggests regulators globally will look at a broader range of players with more fines but at smaller levels, although pressure on firms to address market manipulation will not retreat.