Trade surveillance
A new era of accountability in Asia’s capital markets
Ben Parker
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Chief Executive Officer & Founder
July 29, 2025
Asia’s capital markets have grown significantly over the past decade and are now home to around 55% of the world’s listed companies, with a combined market capitalisation of $34 trillion USD. The subsequent surge in liquidity and trading activity creates more opportunities for institutional and retail investors. But, as trade volumes rise, so too does the risk of market abuse.
Growth must be tempered by a commitment to fair and equitable trading, promoted through strong regulatory foundations, robust enforcement, and close cooperation between regulators, law enforcement, and the private sector.
Supervisors across the region have demonstrated their desire to stamp out manipulative trading in recent months. In this article, we break down the key stories and share our thoughts on what this means for Asia’s market participants.
In what was called the agency’s biggest enforcement action against a major firm in over a decade, Japan’s Financial Services Agency (JFSA) sanctioned Nomura Securities in May 2025 for market manipulation involving government bond futures. The firm, a primary dealer in Japanese Government Bonds (JGBs), used non-genuine orders to manipulate prices, and the JFSA found that these actions were the result of a broader failure in the firm’s compliance framework.
While the JFSA only issued an administrative action requiring Nomura to review its compliance culture (rather than a monetary fine), this action is significant for a number of reasons:
Japan’s market abuse enforcement is escalating. This marks a turning point in the JFSA’s enforcement posture. Historically, monetary penalties have been the standard tool. This action suggests the regulator is now willing to impose reputational and operational consequences, including business improvement orders. This broader approach may indicate a shift toward structural reforms of how the JFSA holds firms accountable for deficiencies in their surveillance operations.
Compliance infrastructure can no longer be an afterthought. Nomura’s failings were traced back to inadequate surveillance systems and a lack of oversight of trading activity. This mirrors a recurring theme we’ve seen in other jurisdictions: firms that fail to invest in robust trade surveillance are increasingly exposed not just to market abuse incidents, but to the regulatory consequences that follow.
In March 2025, Hong Kong’s Securities and Futures Commission (SFC) imposed a HK$108 million (approximately US$14 million) fine on China Galaxy International Securities for failures relating to client facilitation activities.
This is one of the largest fines ever issued by the SFC, and it demonstrates the regulator’s seriousness about maintaining market integrity in the Special Administrative Region.
The SFC found that CGIS failed to adequately supervise suspicious trading activities, had insufficient internal controls around client order management, and did not properly manage the risks associated with handling complex financial instruments.
Heightened scrutiny of brokers’ supervisory responsibilities. The SFC’s action underscores the growing expectation that intermediaries must have sophisticated surveillance systems capable of detecting and preventing market abuse, particularly those firms operating in complex markets or offering a wide range of services to clients.
Record-setting penalty signals stronger deterrence. The sheer scale of the fine sends a clear message to the industry that the SFC will act decisively against regulatory failings, and should prompt firms to re-evaluate their compliance frameworks, especially if they operate in jurisdictions with close ties to Hong Kong’s markets.
South Korea’s Financial Supervisory Service (FSS) announced in March 2025 its intentions to develop an AI-powered market surveillance system specifically designed to detect complex forms of market manipulation, including spoofing and layering.
Responding to an increase in the sophistication of trading strategies designed to manipulate markets, the FSS has turned to technology. The planned system will leverage machine learning algorithms to analyse large trading data sets in real-time, flag suspicious patterns, and adapt to evolving manipulation techniques.
Regulators are embracing AI. This initiative positions South Korea alongside other major regulators exploring AI-driven surveillance. The FSS’s move may set a precedent for other Asian markets, where the pace of regulatory technology adoption has, until recently, trailed behind that of western counterparts.
Firms must keep pace with regulatory innovation. As regulators themselves adopt more advanced surveillance tools, market participants are expected to demonstrate a comparable level of technological sophistication in their own compliance systems. Firms that rely on outdated, rule-based monitoring may find themselves under increased regulatory scrutiny for a lack of adequate systems and controls.
In March 2025, the Securities and Exchange Board of India (SEBI) took enforcement action against a network of individuals and entities involved in front-running trades ahead of large institutional orders. The case, involving trades linked to a major mutual fund, highlighted the sophisticated methods used by offenders and the critical role of data analytics in identifying hidden patterns of abuse.
SEBI’s investigation relied heavily on trade surveillance tools to map trading patterns across accounts and uncover connections between the front-runners and the source of order flow information.
Front-running remains a key enforcement priority in India. This was SEBI’s second major front-running case in a year, signalling a sustained focus on addressing abusive trading linked to institutional order flow. It is also a clear sign to front-running offenders that SEBI’s enforcement is increasingly capable of detecting complex and concealed trading strategies.
Enhanced analytics are playing a pivotal role. SEBI’s ability to detect a multi-layered scheme speaks to its growing reliance on advanced data analytics, which was reflected in comments from the regulator’s chairwoman, Tuhin Kanta Pandey, about the organisation’s increasing use of AI to support the regulator’s surveillance and enforcement activities. Firms operating in Indian markets should consider whether their own surveillance capabilities are sufficiently advanced to detect and prevent similar activities before the regulator identifies them first.
In early 2025, the Australian Securities and Investments Commission (ASIC) issued updated guidance on insider trading obligations, clarifying expectations for how listed entities manage and disclose material information. The guidance emphasised the need for robust internal controls and timely communication to prevent the misuse of non-public information.
Proactive disclosure and surveillance are critical. ASIC’s updated guidance highlights the importance of firms not only having policies in place, but also actively monitoring for potential breaches. It signals the regulator’s intent to hold firms accountable for both the existence and effectiveness of their compliance controls.
Australia is aligning with global standards. ASIC’s updated guidance reflects broader global trends in insider trading regulation, with an emphasis on proactive risk management and the use of technology to support compliance. Firms with operations spanning multiple jurisdictions should take note and ensure their surveillance systems can accommodate these evolving requirements.
Across Asia, the message from regulators is clear: market integrity is non-negotiable, and the tools available to enforce it are becoming more powerful by the day. From Japan’s landmark action against Nomura to South Korea’s AI-driven surveillance ambitions, the regulatory landscape is shifting in favour of more proactive, technology-enabled enforcement.
For firms operating in these markets, the implications are significant. The days of relying on basic, rule-based compliance systems are numbered. To stay ahead of regulatory expectations, firms need to invest in advanced surveillance technologies, cultivate a culture of compliance, and maintain the agility to adapt to a rapidly evolving regulatory environment.
If you’d like to discuss your regulatory requirements in further detail, feel free to book a consultation or get in touch using our website.
