The Financial Conduct Authority’s new European Market Abuse Regulation (MAR), which took effect earlier this month, could become the global standard for tackling illicit trading activity, lawyers have suggested.
James Wootton, corporate partner at law firm Linklaters, told FOW: “Global firms are increasingly facing the challenge of how to apply different standards across the different jurisdictions in which they operate - we will see the role of compliance teams, especially in the banking world, continue to grow as firms grapple with these issues and work out how to apply consistent policies globally.
“It may be that the MAR framework becomes the benchmark for global regimes to follow over time,” he added.
Lisa Cawley, partner at law firm Kirkland & Ellis, told FOW more regulatory harmonisation across jurisdictions would be a good thing. “I think we can expect to see some firms moving towards MAR compliant policies across their offices… I have a lot of sympathy for firms trying to deal with so many different rules and regulations in the markets in which they operate - as it can be so complicated to work out exactly what rules are relevant in any particular scenario, particularly for global firms.”
Tony Sio, head of exchange and regulator surveillance, market technology, at Nasdaq, said: “Market abuse rules in other jurisdictions are not as explicit as MAR so the new regime is helping to improve market practices… We are increasingly seeing firms align globally with the directive, even if they are technically operating out of MAR’s scope. It is encouraging to see the European directive driving the global approach to market abuse rules.”
But Sam Tyfield, partner at law firm Vedder Price, warned there is more to this than creating a simple template: “A global ‘standard’ for what amounts to abuse or manipulation would be beneficial, but no new abuse regime can be looked at in isolation; any regime needs to be looked at in the context of global ‘equivalence’ of regulations, different market structures and market practices globally and between asset classes, the new ‘senior managers regime’, the microstructural developments, the order and trade reporting regimes etc.”
The FCA’s market abuse regulation came into force at the beginning of July.
As reported by FOW ahead of implementation, market experts have argued that firms are forced to adopt better practices and deliver benefits beyond basic compliance under the directive.
Nasdaq’s Sio said: “The new European rules are helping to improve detection activity. To help our clients comply we made enhancements to our detection algorithms as well as adding new ones. We’ve taken a lot of these improvements and applied them to many non-European markets."
Before the new regime took effect, market participants raised concerns over the surveillance requirements under the rules, as well as calls for practical guidance on the new regulatory landscape.
Linklaters’ Wootton said: “The rules under MAR prescribe record-keeping and monitoring of decision-making processes; this will make the life of a regulator much easier when it comes to market surveillance and investigating perceived abuses. No doubt in practice this environment of increasingly formalised decision-making and record-keeping will focus the minds of market participants at an earlier stage and to a greater degree than previously. “