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FCA reminds that “peer” approaches to MAR compliance are invalid – and other anti abuse news

Earlier this week, the FCA issued this Market Watch document on market conduct and transaction reporting issues. There are several observations on market abuse surveillance, some of which are relevant for energy and commodities market participants:

  • That systems must be calibrated according to the company’s requirements, and not on a “communal” basis, i.e. with commons thresholds and settings across companies. Each firm is responsible for their own calibration and thresholds.
  • That the list of indicators in MAR is not exhaustive.
  • That the facilities (process and technology) implemented to comply with MAR cannot be based on what peers do. Each case is considered on a separate basis, in effect ruling out “industry” and “tick box” solutions.
  • That arrangements, for example in the submission of specific STORs (suspicious transaction or order reports), relate to a company and not people. The “newness” of employees and previous departures are not mitigating factors for monitoring failures or a lack of STOR submissions.

The contents of the newsletter is food for thought for any company in the sector that is or has rolled out surveillance systems and processes.

CFTC fines two traders for physical/financial manipulations in agricultural commodities and other CFTC fines

The CFTC has fined two traders $125k and $250k for physical/financial manipulations in wheat contracts. The press release can be found here and the orders here and here. The general scheme involved purchasing physical wheat and then cancelling the orders thus sending a misleading price signal to the market and manipulating related derivatives. The traders also gave misleading news to certain publishers and used other means to push the price.  The company level fine was levied earlier this year (see here), and is described here on the DCM blog.

There have also been several other enforcements for spoofing, as reported here on the Tabb Forum:

  •  A settlement of $1.5m with Geneva Trading LLC for spoofing in various commodity derivatives (see here).
  • A fine of $2.3M for single and cross market spoofing in copper derivatives, a first fine for this type of cross market manipulation (see here).






About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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