FCA Finds “Gaps in Surveillance” among UK CFDs Providers
- The FCA found weak surveillance of market manipulation and abuse of non-equity asset classes.
- However, most of the regulator's findings 'were largely positive'.
The UK Financial Conduct Authority in its latest market abuse peer review or Market Watch said it found “gaps in surveillance” among contracts for difference (CFDs) providers. According to the financial watchdog, its study of nine CFDs providers in the country show that they are not paying enough attention to market abuse risks in non-equity assets classes.
This is despite the fact that the regulator’s findings 'were largely positive' as all the reviewed CFDs providers had surveillance in place to detect insider dealing. The watchdog considered most of these surveillance mechanisms to be 'effective'.
“All these firms offer CFDs and/or spread bets in non-equity asset classes, but there was little consideration of these in their market abuse risk assessments and limited detail about market manipulation in all asset classes,” FCA said.
Poor Monitoring of Market Manipulation
Additionally, the regulator found that the firms are not doing enough to capture market manipulation practice called 'narrowing the spread'. This is a practice where traders seek to influence the prices of spread bets or CFDs by placing a buy or sell order of a security with a direct market access (DMA) brokerage in order to 'narrow' the spread of the security and influence the execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term price of a CFD or spread bet based on them.
The FCA noted that while some firms were not aware of this type of practice, most knew of it as they submitted Suspicious Transaction and Order Reports (STORs). However, none of the examined CFD providers listed this practice in their risk assessments or had compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term-based surveillance in place to detect them.
“CFDs and spread bets are particularly vulnerable to being used for insider dealing due to the speculative and leveraged nature of the products. They are a major source of Suspicious Transaction and Order Reports (‘STORs’),” the FCA explained.
“We are also aware of a potential increase in a type of manipulative behavior where spread bets and CFDs are being used to realize profits following manipulative practices in the underlying market via other firms,” the regulator added.
FMA flags fraudulent broker; new FX pairs on Admirals; read today's news nuggets.
The UK Financial Conduct Authority in its latest market abuse peer review or Market Watch said it found “gaps in surveillance” among contracts for difference (CFDs) providers. According to the financial watchdog, its study of nine CFDs providers in the country show that they are not paying enough attention to market abuse risks in non-equity assets classes.
This is despite the fact that the regulator’s findings 'were largely positive' as all the reviewed CFDs providers had surveillance in place to detect insider dealing. The watchdog considered most of these surveillance mechanisms to be 'effective'.
“All these firms offer CFDs and/or spread bets in non-equity asset classes, but there was little consideration of these in their market abuse risk assessments and limited detail about market manipulation in all asset classes,” FCA said.
Poor Monitoring of Market Manipulation
Additionally, the regulator found that the firms are not doing enough to capture market manipulation practice called 'narrowing the spread'. This is a practice where traders seek to influence the prices of spread bets or CFDs by placing a buy or sell order of a security with a direct market access (DMA) brokerage in order to 'narrow' the spread of the security and influence the execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term price of a CFD or spread bet based on them.
The FCA noted that while some firms were not aware of this type of practice, most knew of it as they submitted Suspicious Transaction and Order Reports (STORs). However, none of the examined CFD providers listed this practice in their risk assessments or had compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term-based surveillance in place to detect them.
“CFDs and spread bets are particularly vulnerable to being used for insider dealing due to the speculative and leveraged nature of the products. They are a major source of Suspicious Transaction and Order Reports (‘STORs’),” the FCA explained.
“We are also aware of a potential increase in a type of manipulative behavior where spread bets and CFDs are being used to realize profits following manipulative practices in the underlying market via other firms,” the regulator added.
FMA flags fraudulent broker; new FX pairs on Admirals; read today's news nuggets.