On 30 January 2024, the FCA published Market Watch 76.

In this edition of Market Watch, the FCA shares its observations about ‘flying’ and ‘printing’, and how firms can mitigate the risks of misleading the market by their staff engaging in such behaviours.

‘Flying’ and ‘printing’

As the FCA had previously explained in Market Watch 57, flying and printing can be described as follows: 

  • Flying involves a firm communicating to its clients, or other market participants, via screen, instant message, voice, or other method, that it has bids or offers when they are not supported by, or sometimes not derived from, an order or a trader’s actual instruction.
  • Printing involves communicating, by one of the above methods, that a trade has been executed at a specified price and/or size, when no such trade has taken place.

These activities create a false impression of a financial instrument’s liquidity and/or price. Accordingly, investment decisions of clients and other market participants may be based on false information, which may in turn cause financial harm to those participants and undermine the integrity of, and confidence in the market. Such behaviour may breach various provisions of the law, including Article 12.1.a(i) of the UK Market Abuse Regulation and/or Sections 89 and 90 of the Financial Services Act 2012 (Misleading impressions), as well as sections of the FCA’s Handbook.

The FCA highlights the following recent observations:

  • It is continuing to see possible flying and printing in several markets, including fixed income, commodities, and currencies in instruments such as bonds, swaps and options. This has included entering prices in dark markets to generate orders in lit markets.
  • The FCA has also seen cases where management is failing to deal with instances of this behaviour in a robust and timely way, including failing to recognise the risks of flying and printing; failing to implement appropriate surveillance; failing to submit suspicious transaction and order reports, or market observations, relating to flying or printing; and taking an extended amount of time to investigate potential misconduct.

The Market Watch further outlines possible steps that firms can take to mitigate the risks of the harms caused by flying and printing. These include:

  • Ensuring compliance manuals prohibit flying and printing and that annual attestations of compliance are obtained. Senior management should also ensure that they effectively communicate their expectations on culture and compliance to policy.
  • Ensuring that training includes the nature of and the prohibition of flying and printing, alongside the consequences of such behaviours, and potentially considering enhanced training for desks that are considered higher risk.
  • Taking steps to assure themselves that surveillance procedures to identify and report flying and printing are robust and that relevant behaviours are incorporated into risk assessments. Elements to consider include properly targeted surveillance to identify spread compression, order cancellation rates and order to trade ratios.
  • Ensuring that disciplinary procedures offer a clear and consistent framework for dealing with misconduct, and that commercial interests are not drivers of outcomes.

Finally, the FCA notes that firms should take all steps to ensure they comply with relevant legislation, and make changes where gaps are identified. It warns that it will not hesitate to intervene if it suspects behaviour detrimental to confidence in, and the fairness of, UK markets.