[ M A R K E T
R E V I E W
Y
ou would think a regula-
tion tackling the head-
line-grabbing illicit trading
activities of spoofing and market
manipulation would grab the full
attention of European regulators.
Considering the scale of the Libor
rigging scandal and the high profile
arrest of Singh Sarao in 2010, the
Market Abuse Regulation (MAR)
was a crucial implementation for
the financial markets and its exter-
nal reputation among the general
public.
On 3 July 2016 the regulation
went live, but after a year we’ve
scarcely heard anything about the
rules as they have been overshad-
owed by a greater beast – MiFID II.
Considered quite the headache
for firms back in the summer of
2016, MAR replaced the Market
Abuse Directive and expanded
requirements in terms of assets,
markets and products. It eliminat-
ed activities like spoofing or mar-
ket manipulation through complete
system surveillance and reporting.
Now more than a year since it
was introduced, talk of MAR has
been relatively muted as firms con-
tinue to prepare for the onslaught
of MiFID II, which is set to turn
the industry on its head. MiFID II
has in many ways overshadowed
the implementation of MAR. The
European Commission delayed
MiFID II by a year after coming
to terms with the fact most firms
- and the authorities themselves -
would not have sufficient systems
in place to handle the requirements
on the original deadline, 3 January
2017. Market participants assumed
the delay would be put in place for
MAR, but this was not the case.
“MiFID II covers front, middle
and back-office functions whereas
MAR is much more specific. Many
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TheTrade
Fall 2017
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M A R K E T
A B U S E
R E G U L AT I O N ]
“We have noticed greater competition for
resources for delivering projects at our
clients due to other priorities like MiFID II
and Brexit.”
ADEDAMOLA ADETOLA, COMMERCIAL DIRECTOR, ANCOA
market participants implemented
MAR as part of their MiFID II
projects which meant it wasn’t as
prioritised as it perhaps should’ve
been. It was also widely expected
to be delayed alongside the initial
delay to MiFID II,” says Dan Simp-
son, head of research at regulatory
consultancy firm JWG.
“It meant that MAR from an
implementation standpoint was
only focused on in a serious way
in the last few months before the
deadline. In the current climate,
it’s not unusual for regulations to
be implemented relatively last min-
ute and include short-term fixes to
make quick winds, but MAR was
dealt with much quicker than most
other regulations,” he adds.
Last minute panic
Just prior to the delay, there was a
flurry of market participants buy-
ing systems labelled as being ‘MAR
compliant’ in order to tick that box
for the regulator.
There is no doubt market
surveillance is big business. PwC
estimated in a study last year banks
would increase spending on market
surveillance technology over the
next 18 months by an additional £5
million - £10 million.
Interestingly, the study also
found tier one banks were largely
unsatisfied with the technology,
describing it as ‘not working as
well as banks need it to’. More than
65% stated the number of false
positives - or messages and events
incorrectly flagged as high risk -
generated by surveillance systems
was too high. PwC said the study
highlighted widespread dissatisfac-
tion with error rates and the high
cost of reviewing inaccurate alerts
from automated monitoring of
both electronic messages and trade
patterns. In spite of this demand
for market surveillance products
continues to grow.
“Due to the scope and complexity
of their market activity, market
participants are increasingly
looking at automated solutions.
Technology plays a part in enabling
firms to monitor for market abuse,
but it is also about internal pro-
cesses, culture and an understand-
ing of how instruments trade,” says
Adedamola Adetola, commercial
director at market surveillance
technology provider Ancoa.
“We haven’t seen a drop off in
interest post-MAR, but we have
noticed greater competition for
resources for delivering projects at
our clients due to other priorities
like MiFID II and Brexit. In the
future, we anticipate increased
focus on the output of automat-