Nasdaq to acquire UK market surveillance startup

Nasdaq Inc has agreed to acquire Sybenetix, a London-based startup that uses artificial intelligence to help compliance officers at asset management firms analyse the behaviour of their traders in order to prevent market abuse.

Sybenetix will enable the exchange group to expand its current market surveillance technology offering to service buy-side firms, Nasdaq said on Tuesday. It did not disclose the amount it intends to pay but said the purchase price would be funded with cash on hand.

Adena Friedman, Nasdaq Chief Executive Officer has been vocal about investing more in innovative technologies such as cognitive computing. This deal is Nasdaq’s first acquisition since her appointment in January.

Other than running stock exchanges, Nasdaq has a large division that sells market technology to trading firms, exchanges and clearing houses around the world.

It runs a leading market surveillance software businesses, which includes a product called Smarts that helps brokers, exchanges and regulators identify potentially abusive trading across a range of markets.

More than 45 marketplaces, 17 regulators and 140 market participants use its surveillance tools.

“Our primary goal with this is our entry into the buy-side market with a compliance solution,” Valerie Bannert-Thurner, senior vice president and head of risk & surveillance solutions at Nasdaq, said in an interview. “We talk to firms globally who are looking at how they can beef up their surveillance and improve their compliance.”

The acquisition will also enable Nasdaq to develop solutions that analyse data beyond trading records to better spot conduct risk, Bannert-Thurner said.

Sybenetix was founded in 2011. Its technology uses advanced analytics and behavioural science to help buy-side firms such as hedge funds spot patterns for compliance purposes, but can also be used to enhance their performance.

Investors have been growing more interested in the sector known as “regtech”: companies offering technology that helps banks and investors cope with an array of post-financial crisis regulations in order to avoid hefty fines.

Regtech startups such as Sybenetix take advantage of technology to automate the analysis of vast amounts of data, helping financial firms improve the effectiveness of their compliance operations at lower costs.