A report by Kapronasia and Nasdaq outlines the changes that have happened in China’s capital markets in the past few decades, including the recent opening of the Shenzhen-Hong Kong Connect, inclusion in the MSCI and the increased openness of the bond market. Trade Surveillance in China: Addressing New Challenges emphasises the importance of surveillance to cope with the increasing volume and speed of China's capital markets, underlining that an holistic approach will be necessary for detecting fraudulent activity in an increasingly complex, cross-channel and cross-platform environment. It picks out the following areas of focus:

• Analysing data: addressing the “inundation of data: is one of the biggest challenges for market participants and methods to filter out the relevant data will be important in order for trade surveillance to be effective, says the report.
• Monitoring unstructured data for intent: the report explains that current trade surveillance techniques are able to suspicious trade by analysing historical data – but it will become necessary to monitor communications, such as phone calls or messaging apps, that are external to trading systems, to track when there is intentional insider trading – and the individuals responsible.
• More focus on case management & scenario building: regulators will have to take a broader view of trading behaviour and patterns in different scenarios as trading techniques become more complex, with the possibility, for example, of illicit trading relating from to inside information from several different scenarios.
• Complex event process (CEP) technology: The report says that CEP is an essential tool for high-frequency or programme trading and also for trade surveillance and is even more critical with unstructured data which may come from multiple different channels.
• Better forecasting: analysis of big data and advanced scenario analysis will enable regulators to be more accurate in forecasting or spotting fraudulent conduct.

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CTMfile take: This report gives an overview of the changes happening in China's financial markets, which should be interesting for CFOs and corporate treasurers operating in the country. The holistic approach to surveillance also gives some insights into the challenges for regulators of analysing huge quantities of data and detecting fraud in increasingly complex markets.