Image Copyright: Financial Conduct Authority
This week, the Financial Conduct Authority (FCA) released its most recent Market Watch report. Market Watch 76 highlights its concerns over two market practices commonly known as 'flying' and 'printing,' which can mislead clients and harm market integrity.
These activities are considered violations of the UK Market Abuse Regulation (MAR), the Financial Services Act 2012, and various sections of the FCA's Handbook. The FCA's Market Watch 76 report highlights the harmful consequences of these practices, which involve firms misleading market participants by falsely communicating bids, offers, or trades. This can lead to an incorrect understanding of financial instrument liquidity and prices, causing financial harm and eroding market integrity and confidence.
Despite previous guidance, these malpractices continue to occur across various markets, with some compliance teams failing to address the issue effectively. To mitigate risks and ensure market integrity, the FCA advises firms to enhance their compliance, training, surveillance, and disciplinary procedures. Their strong messaging on the topic emphasizes the importance of adhering to relevant legislation in order to maintain market confidence and fairness.
The latest edition of the FCA's Market Watch reinforces the need for market participants to take these issues seriously and take necessary measures to maintain market integrity and fairness. Key takeaways from Market Watch 76 have been summarized below.
- 'Flying' involves firms communicating bids or offers without backing from actual orders or trader instructions via screen, instant message, and voice.
- 'Printing' refers to falsely informing clients about trade executions at specific prices or sizes when no such trades occurred.
- The FCA has observed these practices across various markets, including fixed income, commodities, and currencies, and highlighted instances where management has failed to address these behaviors effectively.
- Recommendations for firms include enhancing compliance manuals, improving surveillance procedures, and establishing clear disciplinary frameworks to tackle these issues.
HOW STEELEYE CAN HELP
Through its comprehensive approach, SteelEye can help firms ensure compliance and mitigate risks associated with these practices. SteelEye offers several product features that can help combat flying and printing, including:
- Robust Reporting: SteelEye's reporting capabilities enable firms to efficiently document and report suspicious activities, ensuring compliance with regulatory expectations.
- Communication Surveillance: SteelEye is designed to monitor and analyse various communication channels it can detect indications of 'flying' and 'printing' in electronic communications and voice conversations. This helps firms to identify and mitigate these malpractices proactively.
- Trade Surveillance Capabilities: Analyze trading patterns, identify anomalies, and provide insights using our Message Volume MAR algo which identifies new orders and cancellations over a period of time. This proactive approach enables firms to stay ahead of potential compliance issues.
- Record Keeping: SteelEye's Record Keeping solution ensures that all electronic communications and trades are captured, encrypted, and stored securely in compliance with regulatory requirements. This not only aids in the detection of malpractice but also provides a robust audit trail for investigations and compliance checks.
SteelEye's Integrated Surveillance solutions empower firms to address the FCA's concerns proactively, ensuring that they comply with regulatory standards and contribute to a fairer and more transparent market environment.
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