Detecting Front-Running with RSMS: A Case Study in Regulatory Excellence

ABSECON, N.J. - Sept. 1, 2025 - PRLog -- Introduction: Safeguarding Market Integrity
In an era of fast-paced trading, maintaining compliance and fairness is paramount for financial institutions. Capital Market Solutions' Regulatory Surveillance and Management System (RSMS) stands at the forefront of regulatory tech, offering robust oversight against manipulative trading. This case study demonstrates how RSMS effectively detected a front-running activity — highlighting the strength of modern compliance tools.
capmarketsolutions.com

What is Front-Running?
Front-running is a serious infraction where insiders exploit knowledge of large upcoming client orders to trade ahead of them — thereby profiting from the subsequent price moves. This unethical behavior undermines market fairness and violates fiduciary obligations.

The Role of RSMS in Detection
RSMS (Regulatory Surveillance and Management System) automatically monitors trade data, detecting patterns that may indicate front-running — such as sudden trades before large client orders. In this case, RSMS identified suspicious pre-order trades, enabling the firm to take action before regulatory consequences escalated.

Broader Compliance Ecosystem: CAIS, CAT, and CAIS-Connect
RSMS often integrates with other essential systems to form a multi-layered compliance framework:

Customer Account Information System (CAIS) — Records detailed client account profiles, enabling correlation between trader behavior and customer relationships.
Consolidated Audit Trail (CAT) Compliance — Ensures firms adhere to robust reporting requirements, feeding data into RSMS's surveillance engine.
CAIS-Connect — Bridges CAIS with RSMS and CAT systems, providing seamless data flow for real-time detection and reporting.
Together, these systems — RSMS, CAIS, CAT Compliance, and CAIS-Connect — create an advanced ecosystem for proactive compliance and transparency.
https://capmarketsolutions.com/cais/

Regulatory Enforcement: From Detection to Action
Once RSMS flags potential front-running, firms can cross-reference with customer data (via CAIS), confirm trade anomalies (via CAT), and then escalate for review. This structured flow ensures swift remedial or disciplinary steps, reducing reputational and regulatory risks.

https://capmarketsolutions.com/cat/