MAR Presents a Real Challenge for Buy-Side Firms

On July 3 2016, the new Market Abuse Regulation (MAR) will come into force across the European Union. This important piece of regulation has been created with the aim of clamping down on abusive and reckless trading. Measures include: the explicit outlawing of benchmark manipulation; extending existing insider trading laws to multilateral trading facilities (MTFs) and organized trading facilities (OTFs); and extending the current reporting of suspicious transactions. MAR therefore brings into law a number of significant measures that will help bring greater transparency and help reduce market distortions caused by abusive trading.

For buy-side firms, the implications of MAR should not be taken lightly, particularly when it comes to the reporting of suspicious transactions. As industry commentators have already pointed out: as a consequence of MAR’s Suspicious Transaction and Order Reports regime, brokers will in the future report any suspicious transactions directly to the regulator. The consequence of this change is that from July buy-side firms will need to carry out their own market data monitoring to ensure they are compliant with MAR. This involves the storage and analysis of market data on a scale the buy-side has not seen before.

Therefore, for businesses that are not yet compliant with MAR there is a huge job of work that needs to be completed before the July 3 deadline. Moreover, the implications of not achieving compliance in time are significant: firms could be fined up to 15 percent of turnover for using transactional data that cultivated market manipulation or distortion. Buy-side firms should therefore act now to ensure that when July 3 comes around they are able to immediately identify any trading data that might be suspicious.

Certainly, buy-side firms can look to build up their own in-house data capabilities and resources to meet this challenge. However, the current lack of skilled data professionals combined with the short timeframe before the implementation of MAR means that firms that have not already up-scaled their teams might find themselves struggling. For these businesses, it might make more sense to opt for a managed data service from companies such as RIMES.

A managed data service will enable buy-side firms to be fully compliant with the reporting and data surveillance requirements of MAR in a highly cost-effective way. Moreover, the managed service approach will mean not only that firms are compliant in time for MAR but will also help them meet the data challenge of other impending regulations; not least the EU Benchmark Regulation and MiFid II.

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