[ M A R K E T
R E V I E W
ed systems, particularly around
the ability to accurately calibrate
alerts.”
Dermot Harriss, senior vice
president of regulatory solutions
including market surveillance at
OneMarketData, explains surveil-
lance activity has picked up again
in recent months. Although he says
this has more to do with MiFID II
than with MAR. He also highlights
the effects of firms being aware
that regulators cannot enforce
MAR perhaps as diligently as they
would like to.
Regulators knocking
“MiFID II’s best execution and
MAR have a very similar phi-
losophy,” adds Harriss. “Savvy
market participants are more than
aware regulators are ill equipped
to enforce the MAR rules at the
moment. As a vendor, we often find
banks implement surveillance sys-
tems due to internal policy rather
than regulatory requirements.”
“There has certainly been more
activity leading up to MiFID
II. Interestingly enough there
has been more activity on trade
practice surveillance - which firms
should have already implemented
under MAR - and MiFID II best
execution projects. But yes, there
has been a resurgence in MAR sur-
veillance coming up to the MiFID
II deadline,” he adds.
Looking specifically at enforce-
ment, it’s rare that regulators
would seek to impose penalties on
non-compliant firms from day one
of any new regulatory implemen-
tation. It takes time for firms and
the market to work out the rules,
and it requires authorities to have
sufficient and decipherable data
to have a holistic view to find out
which firms are compliant and
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M A R K E T
A B U S E
which are not.
Spoofing - or the act of bidding
with the intent to cancel before
execution - has hit headlines over
the course of this year. In January,
Citigroup’s global markets business
was slapped with a $25 million fine
for spoofing US Treasury futures
and failing to monitor the activity
or have adequate systems in place
to detect such illicit activities. En-
forcement is a difficult and painful
process as it can take up to several
years for investigations into illicit
trading activity to be carried out.
In the case against Citigroup, the
alleged activity took place between
July 2011 and December 2012, yet
the penalty was handed out more
than five years later. Neverthe-
less cases like this one often see
market participants sit up and pay
attention, and MAR experts agree
a high-profile case of non-com-
pliance would bring MAR to the
forefront of firms’ attention once
again.
A report produced by global law
firm Linklaters in June this year
outlined whether firms should
expect a knock on the door from
authorities checking up on MAR
implementation any time soon.
In the case of identifying inside
information, announcements
R E G U L AT I O N ]
and disclosures Linklaters said:
“In our experience it has become
increasingly common for the FCA
to launch inquiries after signifi-
cant announcements. Companies
should be prepared for the FCA to
ask questions if the correct proce-
dures have not been followed, or
if an announcement has not been
badged as inside information but
triggers a price movement.”
In some cases regulators are
satisfied if a firm can show and
take them through plans for
compliance, demonstrating an
understanding of how the rules
will affect a business overall.
Market participants are also aware
regulatory texts are subject to
change, even once implementation
deadlines have been and gone. But
MAR could see a new lease of life
from authorities once 3 January
2018 has passed.
“MAR is definitely an area we can
anticipate tweaks and maybe a the-
matic review from the FCA around
market abuse and the way it’s
addressed in the UK next year. It
should kick off discussions around
what worked and what didn’t,” says
Simpson. As the financial services
industry continues to be swept up
by preparations for MiFID II, one
thing is certain: MAR isn’t over yet.
“Many market participants implemented
MAR as part of their MiFID II projects
which meant it wasn’t as prioritised as it
perhaps should’ve been.”
DAN SIMPSON, HEAD OF RESEARCH, JWG
Issue 53
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