SEC eyes software to spot fraudulent stock trades

In an effort to establish a fair and transparent market, the Securities and Exchange Commission will acquire state-of-the-art surveillance and risk management software designed to easily detect fraud, manipulation and abusive practices in stock trading.

The system, dubbed as the Advanced Warning and Control System (AWACS), is necessary for the SEC to effectively perform its oversight functions on the Philippine Stock Exchange as a self-regulatory organization exercising its duties and obligations of maintaining an orderly and fair market.

AWACS will enable the SEC to have quick access to historical information and reports, and will warn for unusual market activities.

It will scrutinize orders from the time they are placed until they are cancelled or traded. It enables storage of information in the folders for cases worthy of further investigation.

According to the SEC, the Asian Development Bank has already agreed to pay the cost of the software license and the use of the necessary servers directly to the software developer, SDG Software Technologies, a company based in India.

The license grants the SEC the right to use for a period of 24 months the software and the servers that will be connected to two client-terminals, which will be located at the corporate regulator’s Market Regulation Department and the Compliance and Enforcement Department, respectively.

The funds will come from the share of the SEC in the technical assistance component of the ADB-approved $150-million loan for the development of the non-bank financial sector.

The decision to procure an existing surveillance system, rather than developing one, was made after the ADB consultants had conducted an intensive study and consultation with the SEC, the PSE, and certain segments of the Philippine information technology sector and of available surveillance software in the regional and world markets.

The formulation and construction of AWACS resulted from the recognition that today’s competitive financial markets lack an efficient price discovery mechanism, and thus, are susceptible to manipulative practices.

The SEC said the ADB’s approval of the purchase shows the multilateral agency’s full commitment to support continuing reforms being introduced and implemented by the securities watchdog.

Since its reorganization in December 2000, the SEC has been undertaking capability-building programs to acquire the capacity to foster open, competitive and financially sound markets, partly possible through the technical assistance facility from the ADB.