IIROC staff use a leading-edge technology system known as the Surveillance Technology Enhancement Platform (STEP), which offers a unique consolidated view of equity trading on all marketplaces that helps to detect unusual activity. STEP gives IIROC better tools, including real-time capability, to monitor and analyze trading activity and identify possible violations of UMIR rules such as:
· trading on material non-public information (known as insider trading);
· dealer trading staff taking a position ahead of a client order
(know as frontrunning); and
· potential manipulative trading activity designed to entice others
to act on false information (such as by spreading rumours).
While monitoring equities trading, IIROC’s team of surveillance experts track company news, stock charts, chat room activity and other sources to identify potential insider trading violations. These activities can help staff detect the results of leaked information in advance of major announcements including mergers, acquisitions and earnings statements.
When an indication of anomalous trading is detected, STEP generates an alert which staff can assess before further analyzing activity where warranted. Alerts identify trading patterns related to many factors, including unusual movements in the price, volume and size of trades. If a rule breach is detected, IIROC can take action which may include further investigation or reversing the trade. IIROC can also intervene in the market and vary the price on erroneous trades which are deemed to be “unreasonable.”
When unusual price or volume activity is detected, surveillance staff may contact the issuer to see if it has information to explain the price moves. In cases where market activity has been influenced by rumours or other information, IIROC may ask the company to issue a clarifying statement to the public. If trading is occurring which is a potential violation of the securities trading rules, the matter will be referred to the Trading Review & Analysis team. If monitoring efforts or preliminary investigations detect evidence of possible insider trading activity, a violation of provincial securities acts, the details are referred on to the appropriate provincial regulator. IIROC records all calls to and from Market Surveillance team telephone lines.