AN ONTOLOGICAL APPROACH FOR MONITORING AND SURVEILLANCE SYSTEMS IN UNREGULATED MARKETS A Thesis submitted to the University of Manchester for the degree of PhD in Business Administration In the Faculty of Humanities 2013 Mohamed Zaki Faculty of Humanities Table of Contents Acknowledgements ............................................................................................................................ xi Preface .............................................................................................................................................. xii 1 Introduction ................................................................................................................................ 1 1.1 Background and motivation ................................................................................................ 1 1.2 What are the drivers in issuing securities in an unregulated market? ............................... 2 1.3 The vulnerability of the unregulated market ...................................................................... 3 1.3.1 Manipulative practices in unregulated markets ......................................................... 4 1.3.2 Manipulation Participants ........................................................................................... 5 1.4 Market surveillance in unregulated markets ...................................................................... 7 1.5 Aims and Objectives ............................................................................................................ 9 1.6 Research Questions .......................................................................................................... 10 1.7 Structure of the thesis ...................................................................................................... 11 2 Literature Review ...................................................................................................................... 13 2.1 OTC and Pink Sheets Market Structure and Trading Process Background ....................... 13 2.1.1 Market Tiers .............................................................................................................. 14 2.1.2 The Trading Process .................................................................................................. 18 2.2 Review of financial economics literature .......................................................................... 20 2.3 Market Manipulation: Importance, Definitions, and Types ............................................. 23 2.3.1 Market Manipulation Types ...................................................................................... 26 2.3.2 Information- Based Manipulation ............................................................................. 31 2.4 Market monitoring and surveillance systems: Definition and technologies .................... 39 2.4.1 Technologies which support market monitoring and surveillance systems ............. 39 2.4.2 Previous research on BI for fraud detection ............................................................. 46 2.4.3 Existing systems and frameworks ............................................................................. 49 2.5 Financial Market Ontology ................................................................................................ 54 2.5.1 Existing Financial Ontologies ..................................................................................... 57 2.6 Gaps in the literature ........................................................................................................ 61 3 Research Methodology ............................................................................................................. 64 3.1 Description of the methodology ....................................................................................... 64 3.1.1 The design science research cycle ............................................................................ 65 3.1.2 Steps and outputs of design research methodology ................................................ 66 3.1.3 The philosophical grounding of design science research ......................................... 69 3.2 Justification of the chosen methodology .......................................................................... 70 i 3.3 Methodology application .................................................................................................. 75 4 Financial ontology for fraud purposes ...................................................................................... 78 4.1 The process of constructing the financial domain ontology ............................................. 80 4.2 Financial Ontology Methodology analysis ........................................................................ 84 4.2.1 Stage 1: Unitizing ...................................................................................................... 85 4.2.2 Stage 2: Categorizing ................................................................................................. 91 4.2.3 Stage 3: Filing in patterns ........................................................................................ 108 4.2.4 Stage 4: Member checking ...................................................................................... 110 4.3 Ontology Layering Architecture ...................................................................................... 114 4.3.1 Lexical Ontology Layer ............................................................................................ 115 4.3.2 Data Source Layer ................................................................................................... 118 4.3.3 Domain Layer .......................................................................................................... 123 4.3.4 Application Layer .................................................................................................... 126 4.4 Ontology Mapping .......................................................................................................... 146 4.5 Summary ......................................................................................................................... 151 5 “Stock-touting” Spam E-mails Text-Mining Application ......................................................... 154 5.1 Background ..................................................................................................................... 154 5.2 Instantiation of the Stock Spam E-mail Text-Mining Application ................................... 155 5.2.1 Application Ontology .............................................................................................. 158 5.2.2 Ontology Mapping .................................................................................................. 176 5.3 Summary ......................................................................................................................... 178 6 BI Financial Market Service system for a financial market monitoring and surveillance system 180 6.1 Background ..................................................................................................................... 180 6.2 Financial Ontology Instantiation as BI Financial Market Service system ........................ 182 6.2.1 Data Source Layer ................................................................................................... 184 6.2.2 Application Layer (BI Financial Market Service System) ......................................... 187 6.3 Case Study ....................................................................................................................... 189 6.3.1 Data Sources ........................................................................................................... 191 6.3.2 Information Management ...................................................................................... 192 6.3.3 Economic Analysis ................................................................................................... 201 6.3.4 Output Management .............................................................................................. 202 6.4 Summary ......................................................................................................................... 202 7 Discussion ................................................................................................................................ 204 7.1 Financial ontology for fraud purposes ............................................................................ 206 ii 7.1.1 Domain Ontology Methodology analysis ................................................................ 208 7.1.2 Ontology evaluation ................................................................................................ 211 8 Conclusions ............................................................................................................................. 217 8.1 Overview of the work...................................................................................................... 217 8.2 Contributions .................................................................................................................. 219 8.3 Limitations of the work ................................................................................................... 221 8.4 Future Work .................................................................................................................... 222 9 References .............................................................................................................................