“As we move into 2017,
there is no time for
The Market Abuse Surveillance
Regulation (MAR) which came
into force in July 2016 was a key
milestone in improving the integrity of the financial markets
as it now requires participants
to deploy adequate surveillance
capabilities to detect and deal
with manipulation attempts.
Furthermore, the scope of
the regulation has widened
compared with predecessors: not only are monitoring
requirements cross asset class
and across jurisdictions, surveillance systems now need to
cover both manipulation intent
As we move into 2017, there is no time for complacency.
Three months on from the MAR deadline, the FCA has
made their views clear in their ‘Market Watch 51’ News-
letter: “Some firms in our review were unable to demon-
strate how the market abuse surveillance tools they cur-
rently employ are effective and fit for purpose... the most
effective surveillance programmes involve significant and
careful calibration of both the alert parameters and alert
logic based on the surveillance officers’ experience of that
firm’s trading patterns and clients.”
When the regulators come knocking - and we antici-
pate they will - firms will need to prove that they have
the right level of automated surveillance systems and
procedures in place that are proportionate to their firms’
trading volumes and risk appetites.
More than ever, compliance teams need to be confident in their surveillance approach across asset classes:
they also need to ensure monitoring takes into account
both structured and unstructured data sets, traditionally
stored across internal silos, which is a particularly acute
issue in FICC markets.
Only by having a holistic, contextual view, that includes
trading data but also electronic communications, messenger (Yahoo, Whatsapp, Skype), social media and news,
can a compliance officer effectively monitor trading activity, investigate suspicious behaviour and report potential
abuse to the relevant authorities efficiently.
To cut out the noise and extract actionable intelligence
from your surveillance system, it is essential that firms
convert their big data to smart data, normalising event
timestamps accurately across multiple time zones. This
can be achieved by combining best-of-breed record keeping and analytics technology empowering an overarching
surveillance system to relate disparate pieces of information in a meaningful way.
Finally, it is important for financial firms and vendors
to realise that technology is only part of the solution and
that institutions will need to invest in organisation-wide
training to create a culture of compliance, to help achieve
the regulator’s policy goal of fair and effective markets.
Stefan Hendrickx, CEO, Ancoa