Final spurt in the implementation of the Market Abuse Regulation (MAR)

Most of the requirements of the European Market Abuse Regulation (MAR) must be implemented by July 3, 2016. Many institutions have initiated the final spurt.

What are the essential requirements of MAD II and MAR?

The monitoring of the trade in financial instruments has become more extensive, and now affects more institutions, markets, and instruments than before. The new rules originate from the European Market Abuse Regulation (MAR) and European Market Abuse Directive (MAD II). Institutions that have not been affected so far as well as institutions that need to expand their current measures in terms of MAD I must act now. Among other things, MAR requires the implementation of measures for the prevention and detection of market manipulation, the keeping of insider lists, and the clarification of suspicious orders and transactions. The European Securities and Market Authority (ESMA) has issued recommendations, guidelines, and technical standards for the implementation of these requirements.

What should institutions that have already implemented the previous MAD I do?

Many institutions have already implemented the old Market Abuse Directive. MAD II and MAR have now replaced the old directive. In certain aspects, the new regulatory requirements go further than the old ones. Previously, the financial instruments that were subject to regulation  were those that  were traded on regulated markets. This has been extended to cover other markets and trading systems. The examples of market manipulation now also include orders that have been clearly changed. Furthermore, new indicators and examples of market manipulation are described. Institutions with MAD systems now need to review the extension that MAR has brought about and supplement their inspections, as well as the instruments to be inspected insofar as necessary.

What should institutions to which MAR now applies do?

Many institutions now fall under the Market Abuse Regulation (MAR) for the first time. The majority of which are institutions that arrange for transactions or execute them on behalf of customers. These institutions now need to establish effective arrangements, systems, and procedures to detect and report suspicious orders and transactions. Any indications that suggest insider trading, market manipulation or an unsuccessful attempt thereof must be investigated. The institutions concerned must reconcile the applicability of the suggested indicators and examples with their transactions, supplement these with their own indicators if necessary, and introduce appropriate inspections in their IT systems. In this regard, it must be ensured that the records of the investigation remain replicable for at least 5 years.

How can the requirements be implemented efficiently?

Institutions that are implementing the requirements for the first time are looking for efficient ways to comply with the complex requirements. In certain respects, even institutions that have already implemented MAD are rethinking the method of their implementation, because the implementation is difficult to understand and, accordingly, not easy to extend. In determining an appropriate inspection for the business of an institution, ACTICO relies on standard rules. These are graphically modelled with ACTICO Rules and can be easily adjusted to the individual circumstances of an institution by means of the tooling. The adjustment makes it possible to comply with the regulations and, at the same time, to reduce the reports from the investigations by substantially reducing the reports that are unnecessary for the business of the institution. The MAID module (Market Abuse and Insider Dealing Detection) of the Compliance Suite offers the necessary functions to carry out the inspections, create additional evaluations, perform investigations, and to keep all the necessary information for the prescribed period in a replicable manner. The combination of prepared standard rules and a standard application means that solutions are provided quickly. The individual optimization of the inspection rules and the experience of several implementations results in a permanent reduction of expenses.