In October, the European Securities and Markets Authority (ESMA) published a consultation paper on the EU’s Market Abuse Regulation (MAR), which has been in force since July 2016.
MAR prohibits insider dealing, unlawful disclosure of inside information and market manipulation across a broad range of markets and platforms and defines prohibited trading behaviour. The latest consultation covers a wide range of topics including asking whether MAR should be extended to cover spot FX contracts as well as extending insider dealing requirements to Collective Investment Undertakings (CIUs). Additionally, the consultation seeks to harmonize rules prohibiting benchmark manipulation in MAR and the Benchmark Regulations (BMR), as well as proposing the establishment of a pan-European cross-market order book surveillance framework.
ESMA’s consultation indicates yet another ratcheting up of regulatory oversight for financial sector firms in the EU. Simon Green, Head of Compliance at RIMES, explains: “for firms that have already struggled with the rapidly increasing regulatory burden, this latest move by ESMA is troubling in a number of ways. If, for example, MAR is extended to the spot FX market, firms will need to assess whether it will be possible for them to adapt their existing market surveillance capabilities, or whether they will need to put in place a new system.
“The same is true of ESMA’s proposal to widen insider dealing controls to specifically include CIUs. The proposals include detailed requirements for persons discharging management responsibilities and highlights the need for firms to put in place strong controls around restricted and watch lists and to be able to monitor staff dealings in relation to this.”
The consultation paper not only indicates that ESMA is looking to broaden its oversight, it also suggests that the body is looking to beef-up MAR enforcement. Certainly, the proposal for a cross-market order book surveillance which would harmonize report data across trade venues and the introduction of standard penalties for insider dealing and market manipulation are all indicative of MAR enforcement becoming stronger.
Additionally, the paper specifically calls out the use of MAR as a mechanism to deal with benchmark manipulation in tandem with the Benchmarks Regulation (BMR). The power of MAR to penalize cases of benchmark manipulation would be extended to benchmark administrators and supervised contributors and marks another tightening of the regulatory screw.
Green concluded: “there should not be any doubt about the thrust of EU Regulation: the regulators are cracking down on market manipulation and insider trading in all its forms. Firms cannot bury their heads in the sand and hope for the best: they must act now.
“Fortunately, managed service providers like RIMES offer a simple to use and rapidly deployable regulatory compliance tool. Our award-winning market surveillance solution, RegFocus MS, is a cloud service that provides a dynamic response to evolving compliance obligations. As MAR expands into new areas, such as FX, so too does RegFocus MS, including an important safety net for firms through robust monitoring of restricted and watch lists. The regulatory focus is sharpening, but with the right approach firms can mitigate this challenge with ease and at a low cost.”
Contact us to receive more information about RegFocus℠ Market Surveillance, our award-winning solution which handles the many complex challenges of market surveillance, including MAR compliance: https://www.rimes.com/contact-us/
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