Our agenda to combat market abuse

Introduction

I last spoke to you in February 2024, which, if you’re anything like me, feels like it was both five minutes and five years ago.

Our world has changed a lot since then.

There’s been a change of government, with a new urgency and focus on growth. Every day lately the headlines are led by financial news.

There’s been a lot of change in the sector-wide battle against market abuse too.

You’ll hear about the new challenges and opportunities from the speakers today. But I think it’s important that we also take this opportunity to step back and reflect on how much good work that we all, collectively, have done over the past year.

Because, make no mistake, this is a group effort.

It makes me think of how lots of offices now have jigsaws in communal spaces. We started doing it recently on my floor at the FCA.

It’s a team-building exercise, encouraging staff to sit down throughout their working day, look at the pieces laid out all over the table and then play their part in building the jigsaw.

Bit by bit, day by day, week by week, large groups of people, all playing their small but impactful part, to help solve the whole puzzle, to see the big picture at the end.

FCA strategic focus on market abuse

Last month, the FCA launched our 5-year strategy to take us to 2030.

In it, we have a pillar dedicated to fighting financial crime, in addition to supporting sustained economic growth, helping consumers navigate their financial lives, and being a smarter, more efficient regulator.

And our work on market abuse is a critical part of all areas of that strategy.

Because cleaner markets instil confidence, which encourages investment into our markets, which encourages growth and innovation. It’s a virtuous cycle.

And, what’s more, we can help you to do your part, to fit your piece of the jigsaw in less burdensome ways.

Market cleanliness and economic growth go hand in hand. For us, there’s no way to achieve the finished jigsaw without them.

Our strategic focus on financial crime and market abuse are not just words on paper. As one of my colleagues recently said, “the strategy is not just a document, it’s a way of life!”

I think he was only half-joking too.

But I know the serious intent behind his words. Our strategy isn’t just something we say, it’s something we do.

So, here’s what we’re doing to deal with market abuse.

Three Ps

Our objectives, put plainly, are:

• to understand more across more markets
• to work with you to stop market abuse before it happens
• to punish and deter offenders

To achieve that, we need to be predictable, proportionate and purposeful.

Predictable

By predictable, I mean we clearly explain what we are doing and why.

It’s about being transparent and consistent in our decision-making; and in how we engage and communicate with the industry around our priorities and risks.

It’s about being clear about what information we care about and need from you.

All of this aims to stop market abuse before it happens.

So, how are we doing this, and not just talking about it?

We’re trying to reduce the amount of information we put on your radars, by streamlining our communications. For example, with portfolio letters.

But we will communicate with you, where it matters to you. We’ve had consistent feedback that our MarketWatch newsletter and Primary Market Bulletins (PMBs) have been very useful to the industry, both for flagging unsatisfactory behaviour and as training material.

We have used these publications to highlight areas where we see the greatest risk of harm so firms can focus on them. For example:

• the scale of organised crime group (OCG) insider trading[3], and how firms must be alert to client behaviours which suggest membership of OCG;
• identifying and managing the risk of inadvertently facilitating insider dealing by actors who mask their identities through overseas brokers[4]; and
• the importance of good governance[5] around market abuse surveillance and data in safeguarding market integrity. 

We also know how important it is for us to engage with you face to face. We’ve held sponsor roundtables and policy forums, most recently on transaction reporting.

Our surveillance supervision team hosts regular forums for investment banks, venues and CFD/Spreadbet broking firms.

Engagement is critical – we need you to talk to us, and we need to talk to you.

Proportionate

Being proportionate naturally follows from this.

We see firms as the first line of defence against market abuse, and, in our experience, most firms work very hard to get it right.

That’s why our aim is to ask no more of you than we need and will use. But that means that the information and data we do collect from you matters even more.

Last November, we published our discussion paper[6] on transaction reporting, setting out how we hope to streamline some of our data and what we will do with it. We’d like to reduce the reporting burden on firms, while at the same time maintaining market integrity. We’ve received your feedback on where you’d like to see changes.

We know some reporting obligations are duplicative. We understand there are challenges specific to certain instruments, like FX. And we understand the burden on some firms may be greater than others.

We will be clear on instruments where we really need data to support our market abuse investigations, for example, CFDs and Spreadbets.

But we will be proportionate where the value of data does not justify its cost, and consult on removing fields which are not regularly used, such as some of the indicator fields.

We will also consider how to be smarter and more efficient with other data we receive, such as EMIR reports, for monitoring derivatives such as FX.

We also understand that the FCA is not the only reporting regime firms have to deal with. International standards and harmonisation can lower costs and improve data quality. This was recognised in many responses to our discussion paper.

But we’ve also heard that, first and foremost, our rules must work for our firms and our markets.

I want to stress that transaction reports are vital in our work to identify and act against market abuse.

The data also provides us with a rich and unique view of our markets. This is particularly relevant during periods of volatility, like we have seen in recent weeks.

On Monday 7 April alone, 76 million transaction reports were received across asset classes – more than double the daily average of 30 million.

Our data and our engagement with firms indicate that markets functioned well and remained resilient despite these extreme conditions.

We plan to publish a consultation paper on transaction reporting later this year and look forward to your continued engagement. The hard work on your part is worth it.

There’s another important way we’re trying to be proportionate in our approach to the industry and that is, a calculated increase in our risk appetite to support growth.

An example of how we’re willing to innovate and take more risks is our plan[7] for a ‘Private Intermittent Securities and Capital Exchange System’, or PISCES.

This is a new type of stock market for private companies currently being designed. It will allow firms to trade shares in private companies on a periodic basis, outside the Market Abuse Regulation (MAR) regime.

It’s essentially a ‘private plus’ mechanism, building on the private market model.

But it is not a public market for private companies. Transaction reporting will not apply in this market, and disclosures made by companies will be made to eligible investors only.

And companies will retain more control over aspects of their trading events, such as timing, frequency and participation.

We hear you when you say the public model is sometimes burdensome in terms of regulatory requirements and will not be suitable for all scenarios.

But if there’s a proportionate way for us to try something new, something that may contribute to growth, we’re open to trying it.

Purposeful

And that brings me to being purposeful.

This means having clear intent in our market abuse work - being deliberate, targeted, and focused on outcomes that truly matter.

We will intervene where firms persistently discharge their responsibilities poorly.

For example, we recently imposed restrictions on Dinosaur Merchant Bank, preventing it from onboarding any new customers to its CFD business without the FCA’s permission.

Firms providing trading services must have adequate systems and controls to identify and report market abuse.

This isn’t just a nice-to-have – it’s a fundamental responsibility, and one that supports the virtuous cycle I mentioned earlier.

I want to emphasise that this is the responsibility of firms too. Firms should not be afraid of offboarding an entire corporate relationship if it doesn’t fit their risk profile.

In fact, this is often the right response when risks are identified.

Where firms fail to improve after flaws are highlighted, we will act assertively.

It’s not just about acting when we see wrongdoing. We’re also using more sophisticated tools to detect these bad actors before serious harm happens.

Disruption is another priority. We want the market to be as hostile as possible for bad actors, and we’ll use our full regulatory toolkit to achieve this.

For example, we’re continually working with broking firms so they’re able to identify and terminate suspicious accounts.

We’re working with advisors to help them minimise the number of people with access to inside information and we’re sharing information with other agencies to allow them to do to the same.

We focus our enforcement on cases that bring the most impactful deterrence.

Where full investigation isn’t warranted, we’ll take early alternative action to prevent potential harm. This includes disclosing trading to employers leading to employees being dismissed, disclosures to other regulators who have secured convictions in their own jurisdictions, and suspensions of listings.

One particularly effective way you can help us is through Suspicious Transaction & Order Reports (STORs).

These reports are invaluable to our work, with over 70% of our current market abuse investigations originating from a STOR.

Last year, we received 4,528 STORs: 3,495 related to insider dealing and 581 to market manipulation – a continuation of the increasing trend over previous years.

One of our recent enforcement operations is a great example of how vital your vigilance and reporting is.

We charged 5 individuals for insider dealing offences[8], including a former Janus Henderson analyst, who we allege used inside information to enable trading that yielded profits of around £1.5m for him and his co-conspirators.  I can’t say more because the trial is ongoing.

But this was a case that started from a STOR that prompted us to interrogate the trading data we have access to.

Look, the challenges in prosecuting insider dealing are significant: sophisticated communications, international culprits, and outdated legislation.

But our appetite for tackling difficult cases remains strong.

Priorities in tackling market abuse

This leads me to our major priorities in tackling market abuse.

First and foremost, we’re focusing on OCGs.

The figures are stark: OCGs represent the most serious threat to our markets, accounting for around 25% of all STORs.

The NCA’s National Strategic Assessment states it is likely that the most serious market abuse harm is coming from insider trading OCGs, who recruit and reward information sources employed across the financial services sector.

We’ve identified over half a billion pounds in OCG profits from suspicious trading since 2022.

We’re working hard to make OCG’s lives difficult through our disruptive tools, including executing arrests, and sharing information and coordinating with multiple agencies and partners both here and abroad.

But it’s also important that we address financial crime more broadly, in line with the National Strategic Assessment. Because this directly informs our own priorities.

The nature of this rapidly evolving landscape means it’s not just the traditional instances of market abuse that we’re seeing, but new products and markets creating fresh complexities in an increasingly digital world.

We’re also concerned about strategic leaks (as discussed in Primary Market Bulletin 54[9]) and unlawful disclosure.

The passage of inside information makes the industry more vulnerable to market abuse.

These are situations where a company might deliberately leak information to the press to try to influence share prices.

We often see mergers and acquisitions (M&A) in the press before the news reaches the Regulatory Information Services (such as RNS).

This is detrimental to market integrity. It creates an uneven playing field for investors. Both the FCA and the Takeover Panel monitor this, following up suspected leaks thoroughly.

We recently held a joint roundtable with the heads of M&A from major investment banks to discuss how we can stamp out this behaviour.

We see it as a joint problem and we’re attacking it together.

Looking forward, we have significantly ramped up our effort and coverage across Fixed Income, Currencies & Commodities (FICC) markets, and will continue to do so.

An example of work we’ve done in this area is our investigation into three bond traders regarding the alleged manipulation of Italian government bond futures[10]. We decided to ban all three traders and impose fines. The tribunal hearing for that case took place in January, and a judgement is expected this summer. 

Finally, we’re strengthening our international engagement and strategy.

Suspicious behaviour crosses borders with ease. Close and cooperative relationships with domestic and international regulators and law enforcement are more important than ever.

Each of you has a part to play in this process, as market abuse is truly a global challenge requiring global solutions.

These priorities are more than just words. They represent our commitment to protecting the integrity of UK markets, supporting sustainable growth, and ensuring the UK remains a safe, trusted place to do business.

Alongside our three Ps approach – being predictable, proportionate, and purposeful – we have a comprehensive strategy that we believe will significantly strengthen our collective defence against market abuse.

Conclusion

Yes, we have a fight on our hands.

Market abuse continues to evolve in its complexity and reach. The jigsaw puzzle becomes more intricate with each passing year.

But we are ready for the fight.

As we look ahead, I see both challenges and opportunities. Those who seek to abuse our markets are becoming more sophisticated. But so are our detection and enforcement capabilities.

Thank you for your continued partnership in this critical work.

Together, let’s keep building a market that remains hostile to abuse and welcoming to honest participation. Let’s complete this jigsaw, piece by piece, day by day – creating a clear picture of what good markets look like.