On 16 November 2021, the FCA published its latest newsletter regarding market conduct and transaction reporting issues, titled Market Watch 68.
This Market Watch discusses web-based trading platforms which are widely used for rates and fixed income products. The FCA have observed wholesale brokers introducing types of electronic trading platforms to increase access to liquidity and efficacy in trade execution.
The FCA are concerned that the requirements for market abuse surveillance are still not being fully met, 5 years after the introduction of the Market Abuse Regulation (MAR).
Topics of issue covered in the Market Watch newsletter include:
- Market abuse surveillance
- Market abuse risk assessments
- Data challenges
- Compliance awareness
- Record keeping
- Onboarding governance
- Firm rationales for failings
- Operators of web-based platforms
In terms of onboarding governance the FCA reports that it has seen firms using web-based trading platforms before completing formal new business procedures. The regulator has also seen instances where there is a lack of specific governance for onboarding these platforms. The FCA has found firms with formal procedures and good governance for onboarding new platforms are better able to ensure they capture and monitor all relevant trade and order data. Those that make the ability to retrieve this data a prerequisite to onboarding platforms reduced the risk that they will fail to meet regulatory obligations. This was not the case with all firms. The FCA states that when onboarding new platforms, firms should consider how they will meet their market abuse surveillance and record keeping obligations. Failure to do so may leave the firm in breach of its regulatory obligations under UK MAR.
Firms should consider the comments made in the Market Watch newsletter and take steps to monitor all orders and transactions to detect and report potential market abuse. The FCA will continue to visit firms and venues to assess their suspicious transaction and order reporting arrangements, systems and procedures, and work to ensure regulatory obligations are met consistently.