As the capacity of optical transport networks increases, rapid fault identification and localization become increasingly important. These problems are more challenging than in traditional electronic networks because of optical transparency. In a transparent optical network which does not regenerate optical signals, a fault may propagate to various parts of the network from the origin, and multiple alarms can be generated for a single failure. Efficient alarm management and filtering requires a careful selection and placement of network monitoring equipment. In this paper, we survey the capabilities of current optical monitoring equipment and formulate a problem of selecting monitors to be placed throughout the network. Simulation results suggest that the number of monitors and generated alarms can be significantly reduced if monitor locations are selected judiciously.