Regulatory enforcements make it clear – firms relying on inadequate trade surveillance systems face significant legal and financial risks. According to Smarsh and 1LoD’s 2024 Trade Surveillance Report, 78% of financial institutions now turn to external vendors for trade surveillance software. Recent enforcement actions underscore why:
- TD Securities was fined by SEC, FINRA and DOJ for $28.5 million in September 2024 for failing to monitor market abuse with its in-house system. As part of its remediation, the firm adopted a third-party solution to enhance its surveillance capabilities.
- E-Trade and BofA Securities faced similar fines from FINRA for inadequate trade surveillance, further reinforcing the industry’s movement toward proven external solutions.
With regulatory pressures intensifying, surveillance compliance is becoming more complex. While building an in-house market surveillance solution might seem like a logical step for a firm with your engineering expertise, the hidden costs, resource strain, and compliance risks often outweigh the perceived benefits.
Before committing valuable resources, it’s worth considering the challenges of an in-house approach. We have talked to firms to understand the most common objections to third-party solutions—and their ultimately shift toward purpose-built market surveillance technology.
Internal Technical Expertise
💬 You may think: “We have a strong in-house engineering team that can develop and maintain a custom solution.”
🔍 Reality Check: Even the best algorithmic engineers lack the specialized skills in compliance, data aggregation, and behavioral anomaly detection required for effective trade surveillance, leading to coverage gaps. Ongoing platform maintenance, driven by policy changes or new business needs, consumes internal resources, leaving little time for innovation on core business. Additionally, without a broader user community, your team misses valuable industry best practices to enhance the market integrity solution.
✅ Proven, High-Impact Results:
- Backed by a team of dozens of specialized R&D engineers exclusively focused on trade surveillance, Solidus Labs delivers cutting-edge solutions that evolve with market demands, ensuring firms stay ahead of regulatory changes and emerging threats.
- Bespoke professional support – Unlike many other trade surveillance vendors, Solidus Labs’ elite team of experts work closely with your firm to ensure smooth integration, address specific needs, and provide ongoing optimization—so your team can focus on alpha-generating, not troubleshooting.
Cost Considerations
💬 You may think: “Vendor solutions come with high licensing fees, integration costs, and ongoing maintenance expenses. We believe building in-house will be more cost-effective in the long run.”
🔍 Reality Check: The perceived long-term savings of an in-house build rarely materialize, as hidden costs—ongoing maintenance, regulatory updates, and compliance testing—quickly erode initial projections. While firms may have internal expertise, they quickly find out they need external talent to fill gaps, especially as key personnel leave and new requirements emerge. Additionally, many overlook the need to adapt to future asset classes and trading methods, further driving up costs over time.
✅ How Solidus Helps Reduce Total Cost of Ownership (TCO):
- Reduce up to 65% data costs – Our proprietary architecture minimizes reliance on tick-by-tick market data, saving you tens of thousands dollars in data cost—especially in data-limited environments where extensive market data is impractical or expensive.
- Save hundreds of thousands in consulting fees with our first-of-its-kind Model Testing, allowing you to fine-tune detection algos, optimize alerts, run what-if scenarios, and back-test with historical data in minutes, without writing any code
- Speed up investigation workflow by 10x with all risk signals synthesized into a single pane of glass with intuitive next steps. Our AI-driven technology, refined through Solidus' market expertise, cuts false positives by up to 90%, delivering smarter risk monitoring with cost-effective technology.
Customization & Control
💬 You may think: “Our firm has unique compliance needs, asset classes, and workflows that an off-the-shelf solution may not fully support. We require tailored functionality to meet specific risk and compliance requirements. With our internal technology team, we can adapt the software as needed, including adjustments for regulatory changes.”
🔍 Reality Check: Developing a unified, normalized view of all trade data streams in-house is highly complex. Limited resources and expertise often result in inefficiencies, reliance on legacy methods, and surveillance gaps. Full control also means full accountability—you must be prepared to demonstrate to regulators how your software meets all compliance obligations.
✅ Introducing HALO – Solidus’ Customizable Trade Surveillance for Complex Compliance Needs:
- Unmatched coverage across all assets and their derivatives, even in fragmented markets like OTC Securities and U.S. Treasuries. Our advanced technology analyzes trading behavior and patterns, leveraging cost-efficient data sources for seamless, precise surveillance across any product, venue, or asset.
- Contextualized insights into trading activity, with intuitive visualizations of key elements like price movements, spreads, and cross-venue correlations. With all risk signals consolidated, HALO eliminates data silos, streamlines investigations, and delivers a unified source of truth with a clear, auditable view of trading activity.
- AI-powered Case Management streamlines investigations with actionable insights and reduces manual workloads. The Client Analytics Panel provides real-time intelligence on alerts, trading velocity, and asset pairs in natural language, while HALO’s automated workflows minimize resolution times, cut false positives, and enable better decision-making in complex environments.
- HALO’s Model Testing allows compliance teams to easily adapt detection parameters to evolving risks while maintaining operational efficiency. Teams can simulate scenarios, back-test changes using self-retrieved historical data, and generate audit trails for regulatory transparency—all within a fully customizable, user-controlled environment.
Integration with Existing Systems
💬 You may think: “Our existing OMS, EMS, and trading platforms may not integrate well with a vendor’s solution. We also want to avoid vendor lock-in.”
🔍 Reality Check: True interoperability is difficult to achieve with an in-house system, especially as new trading platforms emerge and regulations evolve.
✅ Seamless Compatibility:
- HALO is built for fast, hassle-free deployment, seamlessly integrating with all FIX drop copies and FIX log formats.
- Our flexible architecture ensures instant compatibility with your existing infrastructure, eliminating complex onboarding and extensive data mapping.
- Whether through real-time FIX drop copy feeds or historical log ingestion, HALO delivers immediate surveillance coverage—detecting manipulation from day one
- Our solution can act as a complementary layer that enhances, rather than replaces, your existing infrastructure. However, clients who utilize our full suite benefit significantly from having all their data and compliance workflows integrated into one unified platform.
Regulatory & Compliance Confidence
💬 You may think: “Our compliance team understands our regulatory obligations best, so we should build a tailored system internally.”
🔍 Reality Check: The ever-evolving regulatory landscape, combined with the well-known compliance talent shortage, presents significant challenges for maintaining in-house trade surveillance. As rules change and business needs scale, dedicated resources are required, often stretching teams thin. This strain makes it difficult to effectively update and manage surveillance tools, leaving firms vulnerable to compliance gaps.
✅ Industry Best Practices with Crowdsourced Input:
- Tap into cutting-edge detection algorithms trained on Solidus' $16+ trillion in daily monitored value and 400+ million events to safeguard your business from overlooked threats.
- Benefit from continuous improvements to HALO’s detection algorithms, drawing insights from our network of 50+ financial institutions. This ensures the platform remains adaptive and comprehensive, aligned with industry best practices and ready for any compliance challenge.
Security & Data Privacy
💬 You may think: “Our firm is better off keeping sensitive trade and surveillance data in-house to mitigate cybersecurity and regulatory risks.”
🔍 Reality Check: In-house systems often lack the robust security controls and continuous monitoring provided by specialized vendors, leaving firms vulnerable to evolving cyber threats.
✅ Enterprise-Grade Security & Compliance:
Solidus Labs designs, implements, and maintains security controls that align with industry best practices, standards, and regulations, including:
- SOC 2 Type 2
- ISO 27001
- Critical Security Controls (CIS) V8
- NIST Cybersecurity Framework (CSF)
- GDPR
- Data Privacy Framework (DPF)
The Bottom Line
Your firm’s competitive edge lies in outpacing rivals with cutting-edge trading algorithms and execution strategies. Expanding into new opportunities requires regulatory confidence—without diverting engineering talent from core business functions. Regulatory compliance demands specialized expertise, particularly in complex areas like cross-product manipulation involving derivatives and underlying assets. Developing these solutions in-house can strain resources, delay time-to-market, and shift focus from alpha-generating innovations.
In recent years, we have seen several firms that initially pursued in-house trade surveillance solutions ultimately returned to Solidus Labs due to gaps in surveillance capabilities, scalability issues, and the risk of non-compliance with regulatory obligations. To safeguard market integrity and meet escalating compliance demands, institutions must transition to a robust, future-proof platform like Solidus Labs.
A purpose-built solution like Solidus Labs’ trade surveillance platform provides immediate compliance readiness, seamless integration, and scalability—so your team can focus on what matters most: delivering alpha. Clients leveraging Solidus Labs experience elevated detection accuracy, 10X faster compliance resolutions, and significant ROI within the first year.
Contact us today for a tailored demo and learn how our cutting-edge detection technology can protect your firm and future-proof your compliance strategy.
