Trading Technologies International, a leading independent provider of software for trading futures, has acquired Neurensic, a compliance firm that uses artificial intelligence to sniff out trading irregularities in close to real time.
Neurensic’s technology allows market participants and regulators to identify spoofing and other forms of market abuse more effectively than traditional surveillance tools. The Chicago-based company, which was founded in 2015, uses machine learning to sift through vast amounts of order messages and other market data and identify suspicious patterns of trading activity.
TT plans to integrate the Neurensic offering with its platform within the next six months, the company said, which will allow any TT user to quickly identify problematic behavior and take action to avoid violating rules against disruptive trading. The next step will be to apply the machine learning technology it has acquired to other areas of the company's products and services.
“Artificial intelligence and machine learning are rapidly altering the landscape of trading, and acquiring certain assets of Neurensic enables Trading Technologies to offer AI solutions that no other professional trading platform has offered before,” TT Chief Financial Officer Michael Kraines said when the deal closed in October.
In November 2015, Neurensic's founders, David Widenhorn and Blake Hausladen, wrote an article for MarketVoice describing how machine learning can be used as a compliance tool. They explained that their system can be "trained" to know what regulators are looking for and then search client data for patterns that resemble this activity. Each pattern receives a score that indicates the risk of attracting regulatory attention. Machine learning is much better suited for this type of surveillance than a simple rules-based system, they explained.