ASIC’s Report 741 offers a broad survey about the conduct risks in Australian wholesale fixed income markets. Although ASIC based the review on findings from nine significant dealers, it is relevant to all participants in Australian fixed income markets.
Key conduct risks in fixed income markets
The report first identifies the key conduct risks across dealers’ sales, trading, repo and bond syndication activities. Where dealers had treasury desks, ASIC reviewed their treasury’s activities as large buy-side customers due to the additional conflicts of interest.
Misleading or deceptive conduct
Conflicts of interest
The review then assesses how each dealer managed these risks across different areas of their business.
Managing conduct risk
Sales and trading
Monitoring and surveillance
Training, supervision and governance
TradingHub's view as a 3rd party trade surveillance SaaS provider:
TradingHub's MAST product provides comprehensive trade surveillance of all asset classes, including fixed income instruments such as bonds, repos and various derivatives such as interest rate and credit default swaps. It employs a fundamentally novel approach to surveilling fixed income trading. Rather than viewing them as individual trades, it interprets them as expressions of interest rate or credit risk. This enables MAST to understand how a trader positioned themselves along an underlying interest rate or credit curve, and ultimately whether a trader intended to manipulate these curves. This lets it detect instances where a trader used correlated securities to perpetrate cross-product abuse.
MAST then leverages self-calibrating models to detect true instances of abuse. It models the dynamics of each instrument to estimate the degree to which a trader's activity could realistically influence an asset's market price. This underpins MAST's ability to identify genuine attempts at market manipulation and rate each alert by severity. Market impact modelling reinforces MAST's ability to accurately detect several abuse types, including:
These metrics and others such as Insider Trading and Wash Trading all benefit from MAST's risk-based approach to detect cross-product abuse in all asset classes. In addition, MAST offers Calculation as a Service (CaaS) as a full suite reporting tool which enables you to customise metrics or create entirely new ones to fit your precise surveillance needs. You can also run reports to identify stand-alone indicators of abuse such as high volumes of trades or high profit or loss.
We have compiled a matrix detailing the benefits of our coverage alongside the key concerns raised by the ASIC report. Access the report here.
For more information on our approach, please view our series on fixed income coverage: