On 26 April 2023, the FCA published Market Watch 73. In this Market Watch, the FCA discusses the observations and findings from its recent market abuse peer review into firms that offer Contracts for Difference (CFDs) and spread bets, both of which are particularly vulnerable to being used for insider dealing due to the speculative and leverage nature of the products.

Firms should read this edition in conjunction with Market Watch 69 and alongside the FCA’s December 2022 portfolio letter: Our CFD Strategy.

Market Watch 73 highlights the following findings:

• The FCA’s overall findings from the peer review were largely positive. All firms have surveillance in place to detect insider dealing, most of which the FCA considered effective.
• There were some weaknesses, such as the lack of consideration of market abuse risks in non-equity asset classes and market manipulation, leading to gaps in surveillance.
• Compliance with SYSC 6.1.1R was also a key component of this review. The FCA found significant improvement from firms in meeting this obligation, with firms generally acting appropriately in dealing with clients of concern, but noted that many firms lack a formally documented framework.

While most of the FCA’s findings were positive, this edition of Market Watch focuses on areas requiring improvement. The FCA asks CFD providers to consider the points made, take steps to ensure their systems and procedures for detecting and reporting potential market abuse are appropriate and proportionate, and ensure they have effective policies and procedures to counter the risk they are used to further market abuse related financial crime. The FCA will continue to visit CFD providers and other firms to assess their suspicious transaction and order reports and work to ensure they meet their regulatory obligations.