Authorities continue imposing sanctions on Market Abuse

Following ESMA’s annual market abuse report for 2019 which shows that National Competent Authorities (NCAs) and other authorities imposed a total of €88 million related to 339 administrative and criminal actions under the Marker Abuse Regulation (MAR), the Cyprus Securities & Exchange Commission (CySEC) has recently imposed its first ever administrative fine of €40.000 to a CFD/Forex Cyprus Investment Firm (CIF) in relation to MAR.  According to CySEC, the said CIF did not maintain effective arrangements and procedures to detect and report suspicious orders and transactions, thus failing to comply with Article 16(2) of MAR.

There is no doubt that there has been a significant increase in the number of penalties and enforcements in recent years across the global financial markets in the areas of market abuse. With a growing pressure to detect market abuse, ensuring compliance with MAR continues to be a pressing issue for many firms.

It is imperative that firms carry out an in-depth risk assessment of their trading activities to understand and identify when and where they are most at risk of being used to carry out abusive market behaviour, whether this is market manipulation or insider dealing. With a proper understanding and identification of their risk, firms must ensure to implement appropriate trade surveillance systems to monitor and identify any suspicious trading behaviour to reduce the risk of market manipulation and fraud and protect their reputation.

The new Market Abuse Regulation came into effect in July 2016. In its new iteration, MAR has significantly extended its scope capturing financial instruments traded on all types of European trading venues and financial products (such as OTC (e.g. CFDs) and on-exchange derivatives) whose price or value is referenced to said financial instruments. Moreover, ‘inside information’ also includes commodities and emission allowances.

Recent EU cases have shown that CFD brokers are particularly vulnerable to being used in illegal ‘insider dealing’ activities. For example, in 2018, an online broker in the UK was fined over £1m for failings in its post-trade systems and controls for identifying and reporting suspicious transactions. More specifically, the broker failed to detect two highly profitable CFD trades that potentially used inside information.

Our affiliated compliance advisory firm, MAP S.Platis, has published last year an interesting article in relation to Market Abuse and CFD Brokers which can be accessed here market-abuse-and-cfd-brokers-are-you-doing-enough/.

Further to the above, interestingly, EU authorities have recently been contemplating of bringing spot FX contracts into the scope of MAR, albeit, ESMA has, for the time being, decided to postpone the decision on whether to extend the scope of MAR to spot FX contracts. This is an area also worth monitoring especially by CFD/Forex firms. More information about MAR and spot FX contracts can be found in a recent article issued by our analysts

How can MAP FinTech assist you?

MAP FinTech’s Trade Surveillance solution provides firms with the tools to monitor all trades and orders to identify potentially suspicious activity and behaviour. It is a comprehensive post-transaction analysis solution to detect suspicious trading activity such as market manipulation and insider dealing in equities, fixed income, foreign exchange, CFDs and other derivatives. The solution is designed to help firms comply with the regulatory requirements of MiFID, MiFIR/MiFID II, MAD/MAR and ESMA Guidelines in Europe, and Dodd Frank, Volcker Rule and MAD in North America.

Our services include the technology and the consulting from our experts to provide your firm with a holistic solution for developing and executing a comprehensive and truly risk-based market abuse surveillance programme covering both market manipulation and insider dealing, with superior record-keeping capabilities.

For questions or to discuss how MAP FinTech can help your firm strengthen its trade surveillance, increase efficiencies through technology and ensure your regulatory obligations are met, contact our team of experts.


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