The new Market Abuse Regulation (MAR) represents a huge operational challenge for voice traders and the buy-side, according to Bloomberg’s head of compliance products.
“In the voice trading and broking world, we are seeing a huge number of challenges due to MAR; with the detection of manipulative behaviour an integral part to the rules, firms are contending with new requirements that have not historically covered the voice world,” Harald Collet, global business manager for compliance products at Bloomberg, told FOW.
Collet said regulators had traditionally focused on the sell-side to guard against market abuse but this has changed also, bringing with it new challenges.
He said: "In the lead-up to the implementation of MAR the scope widened, bringing in broker-dealers, hedge fund advisors and investment banks. The market has seen a big change as the buy-side is no longer at a less-regulated level. The buy-side has had to contend with a lot, it has been heavily impacted by the new rules.
“Pairing calls with executed trades – from initiation through to post-trade – is now required, so this increases regulatory pressure, as are the rules governing record-keeping which now state that files must be kept for five years. The latter alone creates a data storage challenge, but firms must also have appropriate content searching and reconstruction capabilities in place,” he added.
The market abuse regulation came into force on July 3 2016 but was overshadowed by the aftermath of the UK’s shock decision to leave the European Union on June 23 and preparation for the sweeping European directive Mifid II.
“The market was taken by surprise by MAR; Mifid II was the main focus for a lot of firms so it was only when the delay was confirmed that attention really started to ramp up on MAR prep. We saw a rush of clients in the month leading up to implementation,” said Collet.
The European Commission in February delayed the deadline for the introduction of Mifid II by one year to January 3, 2018 due to the technical build out required by the regulator and firms to meet the directive.
“The work undertaken to meet MAR rules will go a long
London Metal Exchange's head of regulation, Kirstina Combe believes the UK’s tough stance on regulation – including MAR and Mifid II - will be an important pawn in the country’s negotiations over its exit from the EU.
Lawyers said after the market abuse rules were introduced that they could become a potential global standard for tackling illicit trading activity.
In the months leading up to introduction of the rules, market experts raised concerns over the lack of practical guidance.