Japan Exchange Group

Japan Exchange Regulation uses AI to market surveillance ahead of other countries and aims to bring fairness and reliability to the market.

Japan Exchange Regulation, a subsidy of Japan Exchange Group, conducts market surveillance operations to inspect (monitor) the details of orders to look for insider trading, market manipulation, and other unfair trading practices to ensure a fair and reliable market at the securities exchanges. In the preliminary investigation of market surveillance operations, the orders likely to fall within unfair trading are first systematically identified on the basis of specific criteria. Surveillance personnel then individually analyze the trading situation surrounding such orders.

In recent years, the environment surrounding stock exchanges has dramatically changed. While the volume of transaction data is on the rise and the method and form of stock transactions are becoming more complicated, it is crucial to ensure proper market surveillance operations.

Japan Exchange Regulation has partnered with NEC to examine ways to use AI technology in the preliminary investigation of market surveillance operations.

The AI technology used for verification is NEC’s RAPID machine learning system with deep learning technology. The RAPID machine learning system studies suspicious orders that might constitute unfair trades during the preliminary investigation and then investigated past market surveillance operations. The system uses the results determined by the RAPID machine learning system in the preliminary investigation done by surveillance personnel. The verification tests revealed that NEC’s AI was highly accurate in determining the possibility of unfair trading when the technology was applied to the preliminary investigation.

NEC’s AI technology allows surveillance personnel to focus on detailed investigations. This approach is expected to facilitate even more sophisticated and detailed market surveillance and further increase the fairness and reliability of the trading market at the securities exchanges.