Question 1 of 30
Imagine you are the Chief Compliance Officer (CCO) at \"Northern Lights Exchange\" (NLE), a newly established Canadian marketplace specializing in technology sector equities. The NLE is experiencing rapid growth in trading volume and attracting a diverse range of participants, including high-frequency traders, institutional investors, and retail brokers. In a recent internal audit, concerns were raised about the adequacy of NLE\'s existing trading supervision system to effectively detect and prevent potential manipulative trading practices, particularly in light of the increasing complexity of order types and algorithmic trading strategies being employed by participants. Considering the requirements of UMIR Policy 7.1 regarding trading supervision obligations, what is the MOST critical action NLE must take to ensure compliance and maintain market integrity in this dynamic environment?
Implement a comprehensive, risk-based monitoring program that continuously analyzes trading data for patterns indicative of potential manipulative or deceptive practices, and establish clear procedures for investigating and escalating suspicious activity to CIRO.
Focus primarily on reviewing order audit trails on a weekly basis to identify instances of potential front-running or insider trading, and rely on participant self-reporting to address other potential rule violations.
Conduct annual training sessions for all marketplace participants on prohibited trading practices under UMIR, and implement a system of random audits of participant trading activity to deter potential misconduct.
Establish a committee comprised of representatives from major trading firms to collaboratively develop and enforce trading rules, and rely on their collective expertise to identify and address potential market manipulation.

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