TRAD SURVEILLANCE
MARKET MANIPULATION DETECTION
Regulatory Alignment & Compliance Value
MARKET MANIPULATION DETECTION
Market manipulation (spoofing, wash trading, insider trading, pump & dump schemes, etc.) poses serious threats to brokerages and market integrity. H3M’s KROTON analytics platform is designed for SEC- and CIRO-regulated brokerages to spot these schemes using AI-driven surveillance. Its modules – Suspect Miner, Link Miner, and RUMI – work
Market manipulation (spoofing, wash trading, insider trading, pump & dump schemes, etc.) poses serious threats to brokerages and market integrity. H3M’s KROTON analytics platform is designed for SEC- and CIRO-regulated brokerages to spot these schemes using AI-driven surveillance. Its modules – Suspect Miner, Link Miner, and RUMI – work together to flag anomalous trading and collusion in real time. By combining machine learning with network analysis and external intelligence, KROTON delivers daily alerts and auditable signals of manipulation. In the AkInvest case study below, our solution successfully identified coordinated manipulations in stock trading.
Common Manipulative Tactics
Regulatory Alignment & Compliance Value
MARKET MANIPULATION DETECTION
- Spoofing: Placing fake orders with no intent to execute, misleading other traders about supply/demand. The price is artificially moved, then the order is canceled (e.g. raising a bid to lure buyers).
- Wash Trading: Repeatedly buying and selling the same asset (often through “ghost” accounts) to create false volume and liquidi
- Spoofing: Placing fake orders with no intent to execute, misleading other traders about supply/demand. The price is artificially moved, then the order is canceled (e.g. raising a bid to lure buyers).
- Wash Trading: Repeatedly buying and selling the same asset (often through “ghost” accounts) to create false volume and liquidity. This creates the illusion of market activity.
- Insider Trading: Trading on material non-public information. Unusually timed trades or sudden large positions just before announcements often indicate this.
- Pump & Dump (and Short & Distort): Coordinated efforts to inflate a stock via false hype (“pump”), then sell at a profit, or spread negative rumors (“dump”) to buy low. Such schemes rely on rapid, synchronized trades and often leave tell-tale patterns in order flow.
- Other Schemes: This includes churning (excessive trading in a client’s account), layering (placing & canceling layered orders), and trading in banned securities. Each tactic distorts prices or volumes, making detection critical for compliance
Regulatory Alignment & Compliance Value
Regulatory Alignment & Compliance Value
Regulatory Alignment & Compliance Value
H3M built KROTON for regulated broker-dealers. It aligns with SEC, CIRO (and IIROC) requirements for market surveillance and best execution oversight. The platform’s daily alerts fit into standard compliance workflows, ensuring suspicious trades are reviewed promptly every day. With full audit trails – including data lineage and model r
H3M built KROTON for regulated broker-dealers. It aligns with SEC, CIRO (and IIROC) requirements for market surveillance and best execution oversight. The platform’s daily alerts fit into standard compliance workflows, ensuring suspicious trades are reviewed promptly every day. With full audit trails – including data lineage and model rationale for each alert – firms can easily document their surveillance efforts for regulators. KROTON’s network-based detection also addresses regulators’ focus on collusion and systemic abuse: instead of isolated alarms, it reveals the broader behavior of trading groups. In sum, KROTON helps compliance officers demonstrate proactive, evidence-based monitoring of market manipulation.
- CIRO & SEC Compliance: Built to meet Canadian and U.S. market conduct rules for brokerages.
- Daily Automated Alerts: Continuous surveillance with configurable thresholds produces actionable leads each day.
- Audit-Ready Output: Every flag comes with data and rationale, supporting regulator inquiries and internal reviews.