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Sterling Trader Offers Nasdaq OMX Surveillance Solution to Buy-Side Customers

A service bureau offering its infrastructure and DMA platforms to broker-dealers offers surveillance technology to monitor order traffic.

Sterling Trader, the technology arm of Chicago-based Sterling Trader Execution Services Inc., will utilize Nasdaq OMX’s SMARTS broker surveillance software to monitor buy-side order flow coming through broker dealers that utilize its infrastructure.

The deal is a sign that brokers offering direct market access trading technology to their buy-side customers are concerned about malicious behavior.

[For more innovative trading technology, read Where is the Innovation in Trading Technology?]

“The SMARTS system is a sophisticated piece of software that does analysis of order traffic that comes from the broker-dealers who use our infrastructure to present orders to the marketplace,” said Stephen A. Sierzulski, CEO of Sterling Trader, in an interview.

Sterling Trader’s clients are using its technical infrastructure (front–end platform, network, direct access to the exchanges and other brokers), for order routing, according to Sierzulski in a follow-up reply to emailed questions. "The broker-dealer, who is the client of Nasdaq SMARTS and the client of Sterling’s at the same time, gives Sterling a permission to supply SMARTS system with trading messages, so SMARTS can do the surveillance analysis," explained the CEO.

SMARTS' software consolidates complex information across market venues into a snapshot visualization. Information is analyzed, including filtering of trade-by-trade and quote by quote at the firm, account and trader levels for unusual trading patterns.

“The opportunity to address the growing surveillance and compliance needs of the buy-side industry is a significant area of growth for the SMARTS business,” comments VP of market technology at NASDAQ QMX Paul McKeown in the release.

Over 40 national exchanges and regulators and more than 70 market participants across 55 markets operate SMARTS.

Zarna Patel is a staff writer for InformationWeek's Financial Services brands, which include Bank Systems & Technology, Insurance & Technology and Wall Street & Technology. She received her B.A. in English and journalism from Rutgers University College of Arts and Sciences in ... View Full Bio

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7/15/2013 | 5:30:22 PM
re: Sterling Trader Offers Nasdaq OMX Surveillance Solution to Buy-Side Customers
This is an example of how broker dealers and vendors are stepping up their pre-trade surveillance of customer orders in response to regulations like the SEC's Market Access Rule. Buy side orders that go through broker-algos or through DMA platforms will be monitored by the surveillance software.
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