ACTICO software supports banks, insurance companies and financial service providers in the process of automating decision making. Our compliance module MAID analyzes and evaluates compliance environment scenarios that point to insider trading or market manipulation. It delivers results that a Compliance Officer can specifically clarify.
How can compliance officers detect whether all
the rules are being complied with in stock market trading? The monitoring of
the trade in financial instruments has become more extensive with MAD II and
MAR, the new guidelines, recommendations, and technical standards of the ESMA.
The FINMA in Switzerland has implemented this through its circular 2013/8 on
the rules of conduct in the market. It is now necessary to analyze customer
transactions, the transactions of employees and the transactions of a bank for
its own account, and to identify market abuse.
The Market Abuse Directive MAD II and the Market Abuse Regulation MAR apply since July 2016 in the EU. This results in the monitoring of trade in financial instruments being more extensive and affect more institutions, markets, instruments, orders, and transactions than before.
MAD II does not regulate the same aspects as MAD I. It is replaced primarily by the Market Abuse Regulation (MAR) which requires the prevention and detection of market abuse by all operators of markets and professional brokers of transactions. Besides keeping insider lists by issuers, MAR also requires the monitoring of restrictions for employees, the clarification and reporting of suspicious orders and transactions in a traceable manner with retention periods.
Banks require more security in respect of compliance with the rules on trading transactions by their employees. They accordingly implement systems that enable audit-proof documentation and analysis. The core is the analysis of the securities transactions of the employees. In doing so, third-party bank transactions or general restrictions, such as minimum retention periods, are inspected, or trade bans in respect of certain instruments are indicated.
The MAID (Market Abuse and Insider Dealing Detection) software module enables you to register employee transactions with third-party banks and investigate these. In addition, it also allows the inspection of employee orders prior to their appointment, as part of a pre-clearance.
Insider knowledge arises in many areas of an institution in attending to the requirements of customers. Issuers must keep a list of their insiders. Insider trading arises wherever insider information is exploited by employees for private securities transactions or the credit institution’s own trading. Financial enterprises have a duty to identify potential insider trading at an early stage. The MAID software module is able to keep an insider list and run a comparison with the orders.
The European Securities and Markets Authority (ESMA) has submitted recommendations, guidelines and technical standards on market abuse based on the MAR. The technical standards include information as to which suspicious orders and transactions must be reported and how the insider list must be kept. The recommendations amplify the indicators listed by MAR in respect of market manipulation, such as ping orders, phishing or cross-product manipulation.
Certain indicators point to manipulation scenarios. The scenarios and indicators must be individually adapted to the circumstances of the company. ACTICO assists in the definition of the inspections. The starting point is the standard rules of the software module MAID (Market Abuse and Insider Dealing Detection). They can be adapted to the circumstances of the institution. In respect of institutions that have implemented MAD I, the existing rules can be extended.