Modern trade surveillance in the UK

In the UK’s fast-moving financial environment, market surveillance is no longer a back-office obligation - it’s a critical, front-line defence against regulatory risk. As regulatory scrutiny intensifies under the Financial Conduct Authority (FCA), legacy systems that rely on fragmented data, static rules, and disconnected workflows are increasingly unfit for purpose.

Whether it’s monitoring for market abuse under MAR, ensuring accountability under the Senior Managers and Certification Regime (SMCR), or meeting T+1 settlement reporting obligations, UK firms are under pressure to upgrade their surveillance infrastructure. And yet, many compliance teams still struggle to explain exactly how alerts are generated, or worse, how trade or communication data flows through the system at all.

This article demystifies the architecture of a modern surveillance system, step by step, from initial data ingestion to final alert escalation. For UK compliance, risk, and technology teams looking to evaluate or evolve their surveillance stack, understanding this flow is the first step toward a future-ready compliance function.

Stage 1: Ingesting structured and unstructured data in the UK context

Surveillance begins with data - a lot of it. However, in the UK, data ingestion is particularly challenging due to fragmented post-Brexit regulatory alignment, hybrid working arrangements, the complexity of legacy systems, and the use of various communication tools.

What needs to be captured?

To meet UK MAR and SMCR expectations, firms must ingest and monitor a combination of:

• Trade data – from Order Management Systems (OMS), Execution Management Systems (EMS), trading platforms
• Voice and telephony – including fixed lines, mobile calls, and voicemails
• Chat and messaging – from Microsoft Teams, Bloomberg, Slack, WhatsApp and others
• Email and written comms – structured and unstructured
• Market data – for context in surveillance models

Critically, these data types must be unified, even though they often come from different systems, file types, and vendors. The FCA has flagged the risk of missing surveillance red flags due to unmonitored channels or delayed ingestion, as outlined in Market Watch 81 and earlier reviews of transaction reporting quality.

For UK firms that operate cross-border, additional complications include dual submissions (UK vs EU MiFID) and the need to synchronise transaction and communication timelines across jurisdictions. Surveillance systems must be built to handle this complexity in real-time, not days later when the window for escalation has likely passed.

In addition to Market Watch 81, the FCA’s Discussion Paper 24/2 reinforces expectations regarding the modernisation of data infrastructure and the adoption of digital regulatory reporting standards. Firms are increasingly expected to implement systems that can ingest and normalise diverse data sets in real time, with full traceability and audit trails - not just for MAR, but also in preparation for EMIR Refit and ongoing post-Brexit divergence.

Stage 2: Normalisation, enrichment, and parameter setting

Once the data is ingested, it must be made usable. This is where many legacy systems fall short: trade, voice, and chat data are often stored in silos, incompatible formats, or lack the contextual information needed for meaningful analysis.

Normalisation: Speaking a common language

Normalisation transforms different data inputs into a standardised format. For example, if one trading system logs timestamps in UTC and another in BST, those need to be reconciled. Similarly, trade IDs, client identifiers, and trader codes must match across platforms.

Without this standardisation, it’s nearly impossible to perform accurate surveillance across asset classes or communication channels.

Enrichment: Adding critical context

Once normalised, data must be enriched to support meaningful surveillance. This can include:

• Mapping LEIs, ISINs, or proprietary identifiers
• Overlaying market conditions (e.g., news, volatility spikes)
• Identifying counterparties or order origination channels
• Tagging internal vs external communications

This context is vital for identifying subtle patterns, such as insider trading or layering, as well as providing support to firms when regulators come knocking.

Parameter setting: From static to dynamic

Traditionally, firms used static thresholds to detect misconduct - for example, flagging trades over a fixed volume. However, such rigid rules can generate false positives, especially in volatile markets.

Modern systems must use dynamic parameters that flex with context, adjusting alert thresholds based on time of day, asset class, or trader behaviour, to surface more meaningful insights.

• Time of day
• Asset class
• Market conditions
• Trader profile

This ensures more relevant and actionable alerts, with less noise.

Stage 3: Alert generation and dynamic thresholding

With enriched data in place, the system begins monitoring for misconduct and generating alerts. But generating fewer, higher-quality alerts is more valuable than flooding teams with noise. Static rules often fail to reflect real-world trading dynamics - particularly across volatile or fragmented markets - leading to excessive false positives and alert fatigue.

Why static rules fall short

The FCA has repeatedly expressed concern about “alert fatigue” - where compliance teams are overwhelmed by high alert volumes, often triggered by rigid or poorly calibrated rules.

For example, flagging every trade over a specific size might make sense in a small-cap environment, but not in large-cap equities or fixed income markets. Similarly, a voice call referencing a client’s position might be benign in one context, but suspicious in another.

Enter: Dynamic surveillance

Dynamic alerting utilises machine learning and rules-based logic to adjust thresholds in real-time dynamically. This could mean:

• Raising the threshold during high-volatility sessions
• Applying stricter filters to traders with previous escalations
• Flagging deviations from personal or team trading norms

This adaptability not only reduces false positives but also strengthens your defensibility in the eyes of regulators. The key isn’t just flagging more, it’s flagging smarter.

For instance, a mid-sized UK broker using static parameters saw over 80% of alerts flagged during high-volume sessions. After implementing dynamic thresholding based on time-of-day and trader risk profiles, meaningful alerts increased, and false positives dropped by 60%.

Stage 4: Escalation logic, audit trails, and review process

Generating an alert is only half the battle. Under SMCR, failure to demonstrate proper oversight or explain missed red flags can expose senior managers to personal regulatory liability, including fines, public censure, or bans. Surveillance failures are no longer just operational risks; they are leadership risks.

What makes an alert audit-ready?

An audit-ready surveillance system should automatically capture:

• Time and date the alert was generated
• Rule or condition triggered
• Reviewer’s notes and actions
• Final resolution and classification
• Escalation path (if applicable)
• Supporting data (e.g., trade details, chat transcripts)

This creates a transparent, immutable audit trail that can be reviewed internally or by regulators. Importantly, any manual overrides or rule changes must also be logged, with user attribution.

Why it matters for FCA inspections

FCA Market Watch publications have repeatedly emphasised the need for end-to-end documentation. Firms that cannot explain why an alert was generated or how it was handled face increased scrutiny during thematic reviews or investigations.

Additionally, firms must demonstrate that alert volumes are manageable and meaningfully reviewed, not simply dismissed or backlogged. Systems must support triaging, tagging, and workflow management across compliance teams.

Firms must be able to demonstrate not just that alerts were handled, but that appropriate decisions were made, escalated, and documented in line with SMCR accountability expectations.

Live Monitoring vs Post-Trade review: Finding the right balance

A common question from UK firms is whether real-time monitoring is necessary or if a post-trade review is sufficient.

The answer depends on your business model, trading velocity, and regulatory exposure. High-frequency or high-volume desks may require near real-time alerting, especially where conduct risk is high. For others, T+1 reviews may suffice - provided alerts are reviewed promptly and thoroughly.

The FCA doesn’t mandate real-time surveillance for all firms, but it does expect firms to have proportional systems that can detect and respond to suspicious behaviour before it escalates. The ideal setup? A blended approach:

• Real-time flagging for high-risk scenarios (e.g., spoofing, insider trading)
• Scheduled post-trade reviews for pattern-based alerts
• Integrated communications surveillance to contextualise behaviour

How eflow delivers end-to-end surveillance infrastructure

At eFlow, we’ve built a platform-based surveillance system that reflects the real-world complexity of UK compliance - without overwhelming compliance teams.

Our modular platform supports:

• Unified data ingestion – structured and unstructured, from any source
• Dynamic parameter setting – rules adapt based on volume, trader profile, or asset
• Real-time and post-trade monitoring – configurable by desk or product
• Integrated eComms and trade surveillance – see the full picture
• Audit-ready workflow tracking – including escalation paths and reviewer actions

With proactive support, fast deployment, and industry-leading false positive reduction, we help UK firms stay compliant, efficient, and inspection-ready.

Summary: Why it matters for UK firms

As regulators increase scrutiny under MAR, SMCR, and evolving FCA standards such as DP24/2 and T+1, defensibility and auditability are no longer optional. Surveillance systems must not only detect misconduct, they must explain how and why alerts were triggered, escalated, and resolved, with supporting documentation at every step. With persistent data governance issues cited in Market Watch 81, firms need real-time oversight across data ingestion, thresholds, and review workflows - not just to stay compliant, but to remain credible under regulatory inspection.

Is Your Surveillance System Audit-Ready?

Use this quick checklist to assess your infrastructure:

• Can you trace every alert back to the triggering rule and original data?
• Do your alert thresholds adjust dynamically based on context?
• Are all relevant trade and comms channels integrated and time-synced?
• Do you have end-to-end documentation that supports audit and SMCR accountability?
• Is your escalation workflow fully mapped, monitored, and tested?

If the answer to any of these is “no” or “not sure,” it’s time to act.

At eflow, we help UK firms build surveillance systems that don’t just tick the compliance box—they withstand real regulatory scrutiny.