MAR 10 years on: The evolution of trade surveillance

In this blog, the eflow team takes a look at how MAR has evolved over the last decade and where that leaves the compliance teams responsible for preventing market abuse on a day-to-day basis.  

1. Strong trade surveillance foundations are expected – but still aren’t perfect

Regulators expect firms to have robust baseline surveillance capabilities in place as a bare minimum, including comprehensive risk assessments, solid data governance, clearly documented procedures, and demonstrable audit trails.  

However, while these requirements are increasingly viewed as a non-negotiable, some firms still struggle to meet regulator expectations, with weak risk assessments, poor documentation, inconsistent processes, and governance gaps flagged as the most common failings.

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2. Moving from implementation to effectiveness

Regulators are increasingly focused on evidence over intent. ‘Regulatory explainability’ is a key phrase being used around the world, and firms must be able to demonstrate how their trade surveillance processes are working, not just what they are.  

In practical terms, firms should be able to demonstrate system effectiveness, conduct regular testing, and avoid over-reliance on vendors for decision-making. Continuous validation and firm-level accountability are critical, and regulators expect firms to be able to clearly demonstrate how they are meeting these obligations.

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3. Risk is constantly evolving

The pace of regulatory change shows no signs of slowing down, and firms must adapt their strategies to account for emerging risks such as 24/7 trading, crypto assets, and prediction markets.

In practical terms, this means firms are expected to continuously update their risk frameworks and ensure that the configuration of their trade surveillance system caters for the unique characteristics of different asset classes – a ‘one size fits all’ approach is unlikely to be fit for purpose and certainly won’t satisfy regulatory scrutiny.

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4. AI evolves from ‘noise’ to regulatory reality

There is no doubt that the use of AI in trade surveillance has evolved from a trendy buzzword 18 months ago, to a practical tool that some firms are already leveraging to reduce false positives, enhance contextual analysis, and streamline alert triage.  

However, questions around explainability, governance, and human oversight remain and these must be considered by firms that are adopting AI into their strategy. Critically, compliance teams and firms themselves remain accountable for the regulatory decisions they make – enforcement action and financial penalties will be levied against individuals and firms, not the technology that they use on a day-to-day basis.

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5. Technology is a human enabler, not a cost-cutting device

Advances in the application of AI and process automation are enabling firms to implement more sophisticated surveillance frameworks without having to build large compliance teams. However, firms are warned against viewing technological progress as a way of simply cutting costs; instead, it should be seen as a driver of efficiency that enables compliance teams to triage alerts more efficiently, investigate genuine risk more thoroughly, and ultimately work smarter.  

Despite automation, the expertise and judgement of skilled analysts remain essential components of a strong governance strategy. Firms should see the use of AI as a way of augmenting human judgement, not replacing it altogether. A ‘human in the loop’ approach is still vital in terms of risk management.  

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A time of profound change, but the fundamentals still apply

There can be no doubt that trade surveillance is evolving at a rapid pace, driven by the significant advances in AI and the emergence of new, and often increasingly complex, trading activity. Firms are expected to adapt to these changes by using the latest technology to improve operational efficiency, strengthen regulatory processes, and identify risk more quickly.

Importantly, though, this does not mean discarding the underlying foundations of robust governance. In fact, without these ‘guard rails’, the implementation of the latest technological advances will be akin to the metaphor of building a house on foundations of sand.  

It is the firms that invest in strong foundations, commit to continuous improvement, and use technology intelligently that will gain a competitive advantage.