TheFinancial Services
Authorityhas said it is confident that its
anti-fraud monitoring system will cope with an expected rise in
fraudulent trading as economic uncertainty mounts.
The FSA warned this week of a heightened risk of trading abuse
in its
Financial Risk Outlook for 2008.
"Increasing financial pressures on firms, employees and
consumers could increase the motivation of some to commit financial
crime, including market abuse and fraud," it said.
The warning came in the wake of
Société Générale's £3.5bn loss at the hands of a rogue trader,
Jerome Kerviel.
Dario Cristini, manager of the transaction monitoring unit at
the FSA, said the organisation had planned for increasing volumes
of trade and was confident its fraud monitoring system could cope
with more illegal trades. "The system has headroom to cope," he
said.
The FSA upgraded its Surveillance and Automated Business
Reporting Engine (Sabre) to
Sabre II in June this year to provide it with real-time alerts
to potential financial abuses.
Sabre uses Sun Ultrasparc 4+ servers running SAS Enterprise
Intelligence Platform, AMD Opteron servers running Progress
Software's Apama for Alerting, and Oracle and KX Systems' KDB+
relational databases.
The FSA's Sabre system will face further pressure following
advances in trading technology that have pushed up trading volumes
at traditional exchanges and underpinned the creation of new
exchanges.
Bob McDowall, analyst at TowerGroup, said volumes traded had
increased but that the average size of trades had declined, making
unusual events harder for Sabre to spot.
"The surveillance system clearly has more challenges in a less
benign environment with greater volatility," McDowall said.
Lee Hodgkinson, CEO at trading exchange
Virt-x, said the FSA
and other regulators across Europe would struggle to keep
technology abreast of a growing market.
"Technology will increase volumes and venues and that will be a
challenge for regulators, who will have to invest in technology to
be able to carry out their regulatory responsibilities in line with
the industry," Hodgkinson said.