Global exchange group Nasdaq OMX has agreed to purchase market surveillance firm SMARTS Group and plans to use the acquisition to keep in tune with recent regulatory initiatives to improve monitoring of trading activity.
Under the agreement, Nasdaq OMX will purchase all of the shares of Australia-based SMARTS Group Holdings in a transaction that is expected to be finalised in Q3 this year. Financial terms of the deal were not disclosed.
According to Anna Ewing, chief information officer at Nasdaq OMX, the purchase will help bolster the group's commercial technology offering.
“Market integrity is becoming a core concern globally and we believe we can benefit from SMARTS' experience in this area from a product development perspective and for our own market, especially when looking at cross-market surveillance,” Ewing told theTRADEnews.com.
Issues surrounding market integrity and surveillance have recently gained more prominence in both the US and Europe. In the US, the lack of a co-ordinated approach between exchanges when dealing with erroneous trades is widely cited as a contributing factor to the massive slide in US stock prices on 6 May. In Europe, fragmentation of liquidity across multiple trading venues has raised doubts over the ability of regulators and exchanges to maintain a fair and orderly market.
“The velocity of change in terms of market reform and exchange competition has meant there is a lot of change driven by regulators and put the surveillance capabilities of exchanges back into the spotlight,” said Ewing.
Nasdaq OMX already has ties with SMARTS in around 20 of the 70 markets it supplies technology to globally. Ewing notes that as well as developing the existing products SMARTS provides to these trading venues, the acquisition will also be used to expand broker surveillance solutions.
The London Stock Exchange has also recently started to rollout the surveillance tools it acquired as part of its acquisition of Sri Lanka-based technology company MillenniumIT. Nasdaq OMX's acquisition leaves software giant Progress Apama and London-based RedKite Financial Markets as among the only independent surveillance companies.