Nasdaq will pay for the acquisition with cash.
Nasdaq acquired a London-based regulatory technology firm Sybenetix which uses algorithms to catch rogue traders, the company said on Tuesday.
The stock exchange said it is paying an undisclosed amount and intends to fund the purchase with cash.
"Nasdaq is investing in the technologies, talent and capabilities that solve the complex challenges our clients face," Adena Friedman, president and CEO of Nasdaq, said in a press release on Tuesday.
"We believe behavioral science, cognitive computing and machine intelligence are essential to a successful, holistic surveillance offering and critical to efficient and effective organizational compliance with an increasingly intricate global regulatory environment."
Sybenetix uses algorithms to learn individual or group behavior at an organization. The software can then detect any unusual trading behavior and report that to the compliance team. Nasdaq already has some of its own risk and surveillance solutions, and the latest acquisition will add to its offerings.
There's a rising interest in regulatory technology companies amid increasingly complex regulations being put on financial institutions. Last year, regulatory technology companies raised $732 million globally with 102 companies getting funding, marking the highest number of deals, according to CB Insights.
Sybenetix will sit within the market technology business of Nasdaq which accounted for 12 percent of total net revenues in the first quarter.
"Being part of Nasdaq will provide enormous growth opportunities for Sybenetix's surveillance technologies and will also accelerate new product development for the buy-side industry," Taras Chaban, CEO and Wendy Jephson, chief behavioral scientist, said in a joint statement.
"Our clients will benefit from the added confidence of working with a world-leading company that understands the business and requirements of Sybenetix's buy-side customers."