Duff & Phelps experts have assisted many MTFs with their internal controls to deter and detect abusive behavior and also ensuring that the organization meets other regulatory requirements such as MAR5 and SYSC.
Regulatory changes over the past few years have led to a sharp increase in the number of MTFs operating in Europe. This is in addition to the existing number of Regulated Markets operated by Exchanges.
Following an ARROW or Thematic visit by the FCA, a number of our MTF clients are asked to review their monitoring efforts in respect of market abuse controls and other aspects of routine compliance such as SYSC and COBS. MTFs are also expected to comply with the provisions of MAR5 which relates to the operational aspects of MTFs. In addition to maintaining orderly markets, MTFs are expected to have strong internal systems and controls in place that allow them to detect and report abusive behavior in their markets.
The Financial Conduct Authority (“FCA”) has issued a clear message that it intends to continue the ‘intrusive supervision approach’ launched by the FSA at the end of the financial crisis. The FCA intends to continue the efforts to combat market abuse in an aim to strive to an environment with clean and orderly markets and seeks to shift to a more proactive and outcomes-focused style of supervision with four main elements:
- A more forward-looking assessment of potential detriment to identify earlier problems that need to be tackled;
- Delivering intensive supervision of firms, including early intervention;
- Ensuring appropriate level of redress; and
- Achieving a credible deterrence by taking action against firms that fail to meet standards.
The prevention, detection, investigation and prosecution of market abuse will remain a regulatory priority under the new regulatory structure. The FSA, and its legacy organization(s), will continue to support an intensive and intrusive approach towards identifying and mitigating risks. Senior management will continue to be held responsible for controls surrounding the prevention of firms’ systems being used to commit market abuse. MAR and associated processes, such as compliance with the STR regime, will continue to be at the forefront of intrusive regulatory supervision.
Duff & Phelps has an experienced team including staff that have been Head of Market Surveillance at both exchanges and MTFs. We have also successfully implemented surveillance systems, acting as the interface between the system provider and the business.
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