Nasdaq Buys Smarts

Hey… I mean who better to “surveil” the markets for wrong doing than the exchanges, right? Does this raise a red flag to anyone?

Nasdaq OMX Buys Smarts as Surveillance Heats Up

By Jeremy Grant in London

Published: July 27 2010 08:34 | Last updated: July 27 2010 08:34

Smarts Group, the privately-held Australian company that provides market surveillance systems to exchanges, regulators and brokers, was on Tuesday snapped up by Nasdaq OMX, the US-based exchange operator.

The move comes amid an increasing focus on the need for pre-trade risk management checks and electronic market surveillance systems in the wake of the “flash crash” in US markets in May.

Nasdaq said the purchase was part of its strategy “to diversify its commercial technology business and enter the broker surveillance and compliance market”.

Anna Ewing, Nasdaq OMX’s chief information officer, said: “Efficient surveillance operations are imperative to ensure integrity in today’s financial markets, and Smarts allows us to capitalise on the growing demand for surveillance technology products in exchange, regulator and broker markets worldwide.”

Smarts was founded by an academic, Mike Aitken, and two research students at University of Sydney in 1994. The company’s first commercial customer was the Russian central bank. Mr Aitken, who has been chairman of the company, will stay on in an advisory role.

Last month, Smarts signed up US-based IntercontinentalExchange (ICE) to install a market surveillance platform, making ICE the Australian company’s largest derivatives customer.

Other companies providing similar services include MillenniumIT, the Sri Lankan technology company recently acquired by Nasdaq rival the London Stock Exchange, and Red Kite, a UK-based company.