The foreign exchange (FX) market is a 'wild west' open to rigging, but regulators are becoming sharper as the spotlight is turned on the sector, the vice president of NASDAQ stock exchange's market surveillance team told CNBC.
Regulators across the globe are trying to crack down on manipulation of the market after a number of high-profile cases came to light in recent months.
The EU has proposed new rules to impose tougher sanctions against insider dealing and market manipulation, such as the benchmark fixing seen in the Libor scandal. European Union regulators are also looking into allegations of FX manipulation, the EU's antitrust chief Joaquin Almunia said in an online chat organised by the European Commission.
Swiss regulator Finma meanwhile has launched an investigation into several banks for possible rigging of the $5.3 trillion-a-day foreign exchange market.
Regulators have had to keep up with new technologies such as high frequency trading and other systems that use algorithms to buy and sell currencies.
But the "wild west" FX market is being reined in as surveillance technology advances, said Bill Nosal, vice president of NASDAQ's SMARTS division, the software aimed at market surveillance.
"Back in the day people got away with things in the FX market because there was no sheriff keeping an eye on things. In the trading analogy it is the regulators and the surveillance process who are the sheriffs.
"As soon as the spotlight shines on some of the abuse cases, there are more eyes watching that space and it becomes harder to get away with things," Nosal told CNBC.
Some trading patterns can make it difficult for surveillance officers to track misbehavior, Nosal told CNBC.
"It is important to recognize that some trading patterns that look like an attempt to manipulate the market may be legitimate. And that is the challenge. There is so much to look for out there and it is much a result of technology getting better and data quality that really drives the success of surveillance activities," he said.
Nosal argued that cross-asset trading used to rig financial markets is one of the toughest activities to stamp out. This is when trading occurs in one asset class to influence movement in another. Uneven levels in transparency make it difficult to monitor different markets at the same level of effectiveness, he told CNBC.
Market abuse surveillance is "looking good" but needs to constantly evolve with new forms of trading, Nosal said.
"There is more to do because anyone who wants to work around a system will find a way to do so. You can't say it is good enough right now because a year from now someone will find a new away to trade and manipulate."
-By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal