CityU PhD students help combat capital markets misconduct

Sharon Ng

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PhD students Terrance Fung Chi-yeung and Jean Lai Hok-yin of City University of Hong Kong (CityU) have received scholarships of up to AUD$240,000 (around HK$1.3million) over three years to sponsor their research on ways to fight market misconduct and defend market integrity.

Granted by the Australian Federal Government-funded Capital Markets Cooperative Research Centre (CMCRC) in cooperation with the Hong Kong Securities and Futures Commission (SFC) for the first year, the scholarships aim to raise the quality of research on capital markets in Hong Kong, Australia and around the world. The funding contributed by the SFC as CMCRC’s industry partner is matched by the Australian Government.

The two PhD students, from the Department of Information Systems, will work on detecting market misconduct such as market manipulation by applying state-of-the-art technologies including artificial intelligence agents and data-mining techniques. The project, scheduled for completion in 2012, will help raise market efficiency and defend integrity. The pair will receive guidance from industry experts at the SFC.

Hong Kong’s capital market ranks seventh globally in terms of trading volume, with a total turnover of 200 million transactions in the first three quarters of 2008. Scholarship recipient Terrance pointed out that, as in other international financial hubs, an upgraded mechanism to tackle market misconduct is always welcomed.

“The ever-increasing trading volume is rapidly outgrowing the capacity of current data-processing systems, and more advanced detection techniques are needed,” Terrance said. “The globalisation of securities markets further complicates the matter. Foreign markets now must be monitored as well so that cross-border market irregularities can be kept in check.”

“More sophisticated detection mechanisms will enable regulatory bodies to better focus on targets of investigation and thus lighten their workload,” said Terrance.

Terrance, whose interest is in financial intelligence, said the research is a good chance for him to learn more about the applications of financial intelligence. His research partner Jean said her past experience in the banking sector enabled her to better understand the stock market’s operations, which is helpful to the research.

Terrance and Jean will receive training at the CMCRC in Australia in market data analysis using ALICE, a fourth-generation programming language specifically designed for analysing market data.

“This is a very good chance for both students to make use of business intelligence technologies to contribute to Hong Kong’s financial system,” said Professor Wang Huaiqing, from the Department of Information Systems and the students’ supervisor.

The CMCRC is an AUD100 million facility backed by The Australian Federal Government which involves 23 domestic and international partners, including four Sydney-based universities as well as stock exchanges and regulators in Europe, Asia and North America. The CMCRC aims to develop and commercialise technological solutions to enhance the efficiency and integrity of capital markets.

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