NASDAQ Tackles Cryptocurrency Manipulation with Advanced Surveillance Tech

NASDAQ’s Bold Move into Crypto Surveillance

The world’s second-largest stock exchange, NASDAQ, recently made headlines for its ambitious mission to rein in market manipulation in the cryptocurrency arena. As reported by Bloomberg on November 1, NASDAQ highlighted its extensive experience in developing technological tools that can help identify and eliminate deceptive practices in trading.

Years of Development Pay Off

With decades of investment in surveillance technology, NASDAQ has honed its capability to detect a variety of malicious trading behaviors. Their unpublished paper outlines the various manipulative activities they combat:

• Pump-and-Dump Schemes: Where traders pump up the price of a cryptocurrency to sell at a profit before the price crashes.
• Insider Trading: Using confidential information to gain an unfair edge in trading.
• Wash Trading: Buying and selling a security to create misleading activity.
• Spoofing: Placing fake orders to manipulate prices.
• Layering: Creating a false impression of demand or supply to mislead investors.

Why Now?

This initiative emerges amidst a period where Bitcoin has shown unexpected stability, leading many to overlook the potential for market manipulation. Yet, industry analysts and regulators have not forgotten the volatility witnessed earlier this year, often attributed to the activities of large traders.

The First Partnership: Enter Gemini

In April, NASDAQ took its first step into the cryptocurrency market by partnering with Gemini, the exchange run by the Winklevoss twins. Valerie Bannert-Thurner, a key figure at NASDAQ, labeled this collaboration a “major milestone” in their ongoing efforts. She stressed the significance of this partnership as a strong sign of NASDAQ’s commitment to branching out into unconventional marketplaces.

A Broader Impact

Beyond crypto, NASDAQ’s SMARTS Market Surveillance solutions are in use across various non-cryptocurrency exchanges. The goal? To ensure transparency and fairness in all trading environments. As this technology continues to mature, one can only hope it will create a more level playing field for all investors, digital or traditional.