Using Forestpin Analytics to Uncover Insider Trading and Market Manipulation Red Flags: A Guide

With evolving regulations and increasing scrutiny, financial institutions are prioritizing data-driven tools to combat insider trading and market manipulation. At Forestpin, our mission is to empower organizations with advanced forensic analytics that address these regulatory demands. This guide walks you through the process of using Forestpin Analytics to identify red flags mandated by the Central Bank, focusing on transaction monitoring using bespoke data analyses.

In this two-part article, we will outline how to establish a preliminary dashboard and use Forestpin’s tools to uncover essential red flags. For organizations seeking automated monitoring, Forestpin’s Risk Engine offers streamlined solutions, though we’ll focus here on manual, customized analysis.

Part 1: Creating a Preliminary Dashboard

The first step in using Forestpin Analytics to discover red flags in insider trading and market manipulation is establishing a foundational dashboard. This process involves uploading three key files with transactional, customer and dividend data.

• Transactions.csv: This file contains essential trading information, such as transaction dates, security identifiers, transaction types, share volumes, and turnover values. These details help to track trading behavior over time and serve as the basis for analyzing unusual volume or price movements.
• KYC.csv: Know Your Customer (KYC) data provides insights into each client’s purchasing history, monthly spending patterns, and occupation. This information is crucial in verifying if transactions align with customer profiles, helping to detect deviations that could indicate risky or manipulative activities.
• Dividends.csv: Dividend data is essential for identifying dividend-driven trading patterns that could signal insider trading if executed before public disclosures. Data points include dividend amount per share, shareholder names, and payment dates.
• Security Trading Statistics.csv: This file captures each security’s trading activity, such as opening/closing prices, highest/lowest daily values, and overall turnover. By examining this data, patterns and anomalies in security movements can be detected, which may indicate potential manipulation.

Once uploaded, these files are structured into a centralized dashboard. The dashboard provides a consolidated view, enabling users to track trading patterns, spot outliers, and segment data for more granular analysis.

Part 2: Identifying Red Flags in Transaction Monitoring

With a preliminary dashboard established, the next step is to dive deeper and apply specific forensic techniques to uncover mandated red flags. Below are some ways Forestpin’s analytics can be used to reveal patterns that may indicate insider trading or market manipulation:

• 1. Price and Volume Anomalies

By analyzing share price trends alongside trading volume, Forestpin enables the identification of abnormal increases or decreases that deviate from historical patterns. When unusual trading volumes coincide with price swings, these may be red flags for manipulation or insider trading.

• 2. Trading Timing and Sequence Analysis

Forestpin allows users to scrutinize transaction timing to spot suspicious patterns. For instance, transactions occurring before significant market events, such as dividend announcements, may indicate insider trading. Forestpin Analytics can also reveal if trades occur in unusual sequences or at unusual times, which may signal attempts to manipulate market perception.

• 3. Behavioral Consistency Checks

Leveraging KYC data, Forestpin can flag transactions that diverge from a customer’s expected behavior. Sudden increases in trade volumes, purchases of specific securities, or large trades inconsistent with typical patterns may signal potential insider activities.

• 4. Relationship Mapping

Forestpin’s analysis tools enable mapping of relationships across trading parties and securities, helping detect coordinated activities. For example, high-volume trades among accounts linked by common identifiers may suggest collusion for price manipulation or insider trading schemes.

• 5. Comparing Dividend and Trading Data

By aligning dividend payout dates with trade records, Forestpin can highlight possible cases where individuals may have traded on non-public information. Suspiciously timed transactions surrounding dividend dates often raise regulatory concerns for insider trading.

This guide serves as a step-by-step framework for utilizing Forestpin Analytics in detecting mandated red flags for insider trading and market manipulation. Forestpin’s tools offer a comprehensive platform to monitor, assess and act on transaction data with precision. As financial regulations continue to evolve, adopting such advanced forensic analytics is essential for any organization committed to upholding integrity in the marketplace.