On 3rd July 2016 the Market Abuse Regulation (MAR) mandate comes into force, strengthening the existing UK market abuse framework by extending its scope to new markets, new platforms and new behaviours. New provisions to prevent and detect insider dealing and market manipulation are contained in the mandate. And this raises a legitimate question regarding how both buy and sell side firms are approaching threats of market abuse and manipulation. Will these firms be MAR ready and regardless of the framework, should firms, even those outside the jurisdiction where MAR applies, take steps to ensure they are also compliant?
Regardless of their previous exposure to market abuse, buy-side and investment firms are taking compliance extremely seriously as the July deadline for MAR approaches. Although these firms will typically trade less frequently than banks or brokers, they will often buy or sell large percentages of a company over a period of time. Consequently their trades have potential to impact on the price of an instrument. Automated surveillance systems can alert their compliance officers quickly to potential acts of market abuse, by identifying suspicious situations based on a number of pre-defined scenarios. Many firms operating in highly regulated jurisdictions are implementing automated surveillance tools because MAR regulations and pressure from authorities such as the Financial Conduct Authority (FCA) oblige them to do so. However, for other firms, the driver for using automated surveillance extends beyond compliance and has become more about ‘doing the right thing’.
One such example can be found in a leading investment fund based in Europe, Middle East and Africa (EMEA), which conducts business with organisations that operate within the European Union. The fund uses b-next’s Capital Markets Compliance (CMC) solution to monitor its trading activity as well as activity of its own employees to identify potential leakage of insider information that could lead insider dealing and market abuse. The solution’s wide range of automated monitoring rules identifies fraudulent practices and alerts the compliance division whenever suspicious activity is detected. The fund operates in a lightly regulated jurisdiction, so it is under no obligation to comply with a market abuse regime. If not compliance, then what lies behind the decision to implement CMC? The fund’s compliance director sums up the decision in two words: “reputational risk”. For this fund, reputation is paramount, it is compliant because it believes and recognises the inherent value of protecting its integrity and reputation, particularly in a cross-border context. And rather refreshingly, it is this moral stance, rather than simply an obligation to comply with regulations, that guided its decision to choose b-next as its partner.
b-next is a specialist global provider of proven multi-venue, multi-asset class, Capital Markets Surveillance and Compliance software solutions. It supports an expanding international customer base including banks, exchanges, buy side clients and regulators, to meet regulatory mandates, manage risk and drive trading efficiencies.
b-next’s CMC solution offers a single integrated compliance platform with over 100 different scenarios for the detection of Market Abuse, Insider Trading, Conflicts of Interest, FX benchmarking, Derivatives/OTC Monitoring, Best Execution reporting and monitoring of trading activity. It supports a diverse range of global clients including banks, brokers, asset managers, exchanges, regulators and energy utilities.
A highly focused provider of capital markets solutions for more than 25 years, b-next has a growing international client base, supported by its offices in Europe and the US. Its proprietary development team and strong client centric approach ensure that its solution remains at the leading edge of regulatory change and market best practice.