{"id":21641,"date":"2023-02-07T08:00:52","date_gmt":"2023-02-07T08:00:52","guid":{"rendered":"https:\/\/davies-group.com\/consulting\/blog\/market-abuse-fca-fines\/"},"modified":"2026-01-22T16:58:06","modified_gmt":"2026-01-22T16:58:06","slug":"market-abuse-fca-fines","status":"publish","type":"blog","link":"https:\/\/davies-group.com\/consulting\/blog\/market-abuse-fca-fines\/","title":{"rendered":"Financial Markets Compliance – Lessons From FCA Fines"},"content":{"rendered":"

Our four-part series on market abuse explores why firms need to stay focused on compliance.\u00a0 This third piece explores the importance of data provision and automated market surveillance solutions in the light of the most recent – and high profile – regulatory fines.<\/em><\/p>\n

December 2022’s FCA fine<\/a> of three brokers (BGC Brokers LP, GFI Brokers Limited and GFI Securities Limited, collectively known as BGC\/GFI) to the tune of \u00a34,775,200 has once again highlighted the risks for firms who fail to provide full coverage in their automated surveillance systems.<\/p>\n

Given the size of the business conducted by BGC\/GFI (executing $100bn of trades over 18 months), comprehensive automated surveillance is a necessity. Equally essential is the fact that surveillance needs to be tailored to the firm\u2019s business, asset classes and method of trading – for example,\u00a0 communication surveillance is vital for a voice broker. And yet:<\/p>\n

“Between July 2016 and January 2018, BGC\/GFI had manual, automatic and communications surveillance processes that were deficient, and therefore, inadequate in properly addressing the risk of market abuse. Additionally, BGC\/GFI\u2019s systems for monitoring market abuse did not have proper coverage of all asset classes which are subject to MAR.\u201d\u00a0<\/em><\/p><\/blockquote>\n

Sadly, BGC\/CFI neither the first, nor likely to be the last, case to highlight disparate processes and inadequate monitoring.\u00a0 But what – and when – will firms learn?\u00a0 As the FCA themselves make clear, the lessons from this fine go far beyond the actual sums, or individual firms involved:<\/p>\n

\u201cIt is of fundamental importance to the integrity of the market that brokers … have effective market abuse surveillance systems in place.”<\/em><\/strong><\/p><\/blockquote>\n

Here are the key lessons that we believe firms can put into practice, right now.<\/p>\n

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  1. Data completeness<\/strong><\/li>\n<\/ol>\n

    We have a simple mantra: right data in \u2013 effective results out. Taking the BGC\/CFI use case as an example of disparate process and inadequate monitoring, puts the importance of data provision and automated market surveillance solutions straight at the top of the to do list.<\/p>\n

    “Data quality<\/em>“, “data completeness<\/em>“, “data wholeness<\/em>“, or even the emotive “dirty data<\/em>” are all terms that are frequently thrown around to define gaps in any source-to-target process where accuracy of input data ensures measurable outputs.<\/p>\n

    For an effective market surveillance solution, \u2018data completeness\u2019 can be achieved by initially performing a thorough MAR Risk Assessment to highlight data required related to your firms business lines and asset classes. This will help you determine where your key data resides, both internal source systems and market data providers.<\/p>\n

    But more often than not, firms often fail at this initial stage, which is why we recommend that, as a starting point, firms consider the inclusion of:<\/p>\n