EC proposes regulation on insider trading and other abuses.

European firms are implementing market abuse surveillance systems ahead of new regulations.

“The sheer volume of transactions and the speed with which they are executed means that an electronic system is necessary for monitoring to be truly effective,” Trevor Barritt, head of compliance, EMEA, at NICE Actimize, told Markets Media. “The monitoring of a complex business such as DMA and broker dealer activities is very difficult or impossible to do manually.”

Otkritie Capital, a prime broker in Russia, has selected NICE Actimize to provide cloud-based Market Abuse Surveillance and Anti-Money Laundering solutions in support of its cross-asset Direct Market Access (DMA) platform and broker dealer activities.

Otkritie Capital will rely on NICE Actimize’s cloud-based technology for its trading practices compliance program to detect and report potential market abuse and money laundering activities across its European business.

A combined global team based in London, Moscow and Frankfurt will coordinate delivery of NICE Actimize’s Market Abuse Surveillance and Anti-Money Laundering solutions.

“The solution allows Otkritie Capital much more easily to document, in a controlled, organized and easily retrievable format, the steps that it takes to process and form a judgment about any potential case of market abuse or money laundering,” said Barritt.

In October 2011, the European Commission issued a proposed regulation on market abuse, which together with MiFID II will transform the way that EU financial markets are regulated.

MiFID deals more with issues around licensing and the EU ‘passport’ which allows authorized firms in one EU country to perform financial services business in other countries without having to get separately licensed by 27 different regulators – one for each EU member state.  It also addresses a large number of conduct of business rules.

“MiFID II augments MiFID in areas such as large holdings disclosures, algorithmic trading, duties of trading platforms, conflicts of interests, suitability of advice, best execution, transparency, etc.,” said Barritt.

MiFID II is still not in its final form, although it is unlikely that major changes will occur.

“Interestingly, in an earlier draft of MiFID II, much more was said about market abuse, particularly in the area of monitoring, but this was deleted in subsequent drafts, possibly because it is largely repetition of what Market Abuse Directives I and II say,” said Barritt.

The original Market Abuse Directive (MAD), which was adopted in 2004, addressed market abuse such as insider dealing and market manipulation. In October, the EC proposed replacing MAD with a Regulation on Market Abuse (MAR), also known as MAD II. As a regulation, MAR will have the force of law, and will not require transposition by Member States.

The NICE Actimize platform enables organizations to respond to complex regulatory and business requirements with the scale to process millions of transactions, Barritt said.

“The Actimize Platform centralises disparate systems into a single enterprise solution, ensuring consistency in operations, improving productivity, and lowering costs,” he said. “Actimize provides efficient alert management, reporting, and audit tracking ensuring investigations are effectively resolved according to compliance protocols.”