FCA Market Abuse Peer Review Of CFDs And Spread Bets
What has happened?
In April 2023, the FCA reported in its Market Watch publication on its recent market abuse peer review of firms that offer Contracts for Difference ('CFDs') and spread bets.
What are the key points of the peer review?
The review aimed to improve the regulator’s understanding of CFD providers’ arrangements to identify and report potential market abuse and raise firms’ standards.
To select the firms for the review, the FCA analysed firm data and selected nine firms in total. It asked them for information about their business models, market abuse risks, and arrangements for detecting and reporting market abuse and reviewed documentation, including policies and procedures, risk assessments and relevant management information. The FCA then undertook supervisory visits to seven of the firms to examine their risks and controls more closely.
The findings are based on observations from the firms visited but are expected to be of interest to all CFD providers.
The overall findings from the peer review were largely positive. All firms have surveillance in place to detect insider dealing, most of which the FCA considered effective.
The FCA did observe some weaknesses, such as the lack of consideration of market abuse risks in non-equity asset classes and market manipulation, leading to gaps in surveillance. It also found significant improvement from firms in meeting this obligation; firms are generally acting appropriately in dealing with clients of concern, but many lack a formally documented framework.
CFD providers are expected to consider the points the FCA makes. Firms should take steps to ensure that their systems and procedures for detecting and reporting potential market abuse are appropriate and proportionate to the scale, size, and nature of their business activities and that they have effective policies and procedures to counter the risk they are using to further market abuse-related financial crime.
The FCA has undertaken to continue to visit CFD providers and other firms to assess their Suspicious Transaction and Order Report (STOR) arrangements and work to ensure they meet their regulatory obligations.
How can we help you?
Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as and when, our team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
Are you looking for help with your market abuse arrangements, or more general regulatory questions? Contact our specialist credit team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.