[Photo: rct-systems.com]

Kudos went to the Analysis and Detection Center (ADC) of the SEC's Market Abuse Unit when plumber Gary Pusey pleaded guilty in May to insider trading.  This victory for NY prosecutors was also one for the little-known squad inside the SEC that uses data analysis to spot unusual trading patterns.

Formed in 2010, the ADC culls through billions of rows of trading data going back 15 years to identify individuals who have made repeated, well-timed trades ahead of corporate news. The new strategy is starting to show results, enabling the SEC to launch 9 insider trading cases, around 7% of cases the agency brought since 2014 against people who trade on confidential corporate information.

This makes a shift in how the agency initiates insider trading probes, which more often originate from FINRA or an informant's tip. That data was key to spotting trades by Pusey ahead of at least 10 deals from 2014 to 2015 involving Barclays, where his friend Steven McClatchey worked.

The SEC has also used data mining in a high-profile probe of traders who it says made more than $100 million using information obtained by Ukrainian hackers.

Others charged include former employees of law firm Wilson Sonsini Goodrich & Rosati and investment bank Goldman Sachs. In August, former Perella Weinberg Partners banker Sean Stewart was convicted in a case credited to the SEC unit. He denies wrongdoing and is expected to appeal.

SEC’S DATA BANK & ‘ARTEMIS’.   For the SEC, the 6-year data-push has had the benefit of giving it some extra autonomy in pursuing insider trading probes beyond the inquiries and referrals that SRO’s like FINRA produce for the agency. "Why wait to do a referral when you could do it proactively?" said Daniel Hawke, a former chief of the SEC's Market Abuse Unit now at the law firm Arnold & Porter.

The SEC does not have a direct feed of the markets' trading data. Instead, it mines 10 billion rows of "blue sheet" data of trades executed by brokerages that the agency gathered in various investigations.

Analysts use a home-grown program called Artemis to analyze patterns and relationships among multiple traders.

The SEC also uses software from privately-held Palantir Technologies, which identifies links between individuals and entities by connecting pieces of information from multiple data sources. In 2015, the agency awarded a $90 million, 5-year contract to Palantir.