The latest FCA Market Watch newsletter has set out their increased expectations regarding Market Abuse surveillance, building on prior guidance on the continuous challenge of surveillance for the financial services sector. 

Recently, the FCA (Financial Conduct Authority) published their Market Watch 68 newsletter, focusing on their expectations and concerns regarding web-based trading platforms – used for Rates and Fixed Income products, in addition to their concerns about gaps in users’ surveillance of web-based platform activity. 

The newsletter further supports VoxSmart’s views on the importance of being regulator ready and compliant with end-to-end communication surveillance using a one platform approach.  

Market Abuse Surveillance 

Due to the recent spike in remote working, brought on by the latest strain of the Coronavirus, capital markets continue to face obstacles in capturing and monitoring employees away from the security of trading floors. Alternative messaging services like WhatsApp and Telegram have become ingrained in the way traders are communicating, increasing firms monitoring requirement and creating a higher risk for market abuse to take place on these platforms.  

The FCA state in their report; “We are concerned that users of web-based platforms may not be able to monitor all their orders to detect potential market abuse”.  

Persistent Data Challenges 

The newsletter touched on the challenges facing compliance teams in securing useable data in order to assess and uncover market abuse. This is despite tentative steps from certain market participants to understand the quantity of employee activity on diverse communication channels. Gaps in knowledge regarding employee-client conversations still remain, and on discovery of such instances of abuse the FCA criticised the lack of action in stomping out the issue.  

This comes as The Business Times reports that a leading America tier one bank looks set to pay a US$200m fine over lax staff monitoring. Another telling sign that firms must keep evolving their surveillance strategy, now more than ever as the SEC continue to clamp down on trade surveillance breaches. 

Record Keeping 

Failing to capture trade and order data adequately falls short on the regulatory requirements as set out in Article 25(1) of UK MiFIR regarding order handling and record keeping.  

In the wake of the Archegos fallout in April of this year, as covered by Global Risk Regulator’s, we see how regulatory boards continue to clamp down on instances of market abuse. Further calling attention to the importance of eComm surveillance and effective record keeping measures in the year ahead.   

With our Trade Reconstruction solution, we connect the dots between trades and orders, and their corresponding communications for enhanced risk management. Not only are firms regulator ready with this solution but over 800 hours of team resources are saved.  

“Firms that are unable to provide accurate records of when an order was placed on a platform, may be unable to respond satisfactorily to our regulatory enquiries.” 

Order and Execution Tracking 

Highlighting the value in our newly acquired NLP technology, the newsletter indicated the regulatory board’s concerns that firms may not be able to monitor all orders in detecting potential market abuse. With real-time transcription and increased voice recognition accuracy, the benefits in utilising our NLP technology in data surveillance across a firm is tenfold. NLP helps to effectively capture all data relating to trades and orders via communication channels and ensures that no data is missed. It also assists in filtering out malpractice and ensuring compliance, in addition to leveraging this data throughout various facets of the company. 

“Orders are a critical component in effective monitoring for some types of actual or attempted market manipulation, eg, layering and spoofing as well as cross venue and product manipulation where users have a unique line of sight of their own trader activity.” 

As part of VoxSmart´s continued commitment to ensuring firms are regulator ready, we strive to enhance and grow our product suite to give our clients assurance should audits arise. Our one platform approach to voice and eComms surveillance equips firms with the technology needed to meet regulatory requirements and create a seamless audit experience.  

Should you wish to learn more about how VoxSmart’s solutions are solving firms regulatory issues then contact us today for a demo here! 

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