RegTech Intelligence

Key surveillance takeaways from the MAR review

In Partnership with:

By PJ Di Giammarino and Sam Tyfield, Partner, Shoosmiths.

The MAR review report was finally released on 23 September and clocked in at 276 pages. It raises a number of key issues for senior management at financial institutions, already struggling to form a holistic view of their communications surveillance obligations under COVID.

The extensive review suggests several changes including: the definition of inside information, insider dealing controls/ disclosure, market soundings, insider lists and the establishment of an EU framework for cross-market order book surveillance. The findings are linked to a 59-page MiFIR Consultation Paper which also raises key questions on reference data, linking executions to orders, order book transmission to NCAs in ISO20022 format.

We have looked at the potential implications in advance of JWG’s Trade Surveillance meeting on 3 November.

Conclusions from the MAR review

  • Regulators will use the review of MAR as “cover” for a fundamental review of what is and is not market abuse and their desired shape and form of their financial markets and market participants
  • In parallel, the burgeoning retail access to markets and complex financial instruments and trading tools and various other projects in process (such as the putative Consolidated Tape and ISO 20022) will further complicate requirements for surveillance
  • Every act or omission by a firm (including its ISVs and other outsourced suppliers) can now be reviewed through the lens of whether or not it is market abuse.
  • The acts and omissions which should be surveilled do not stop at “trading” activity – the non-trading activity of staff and the culture of firms is in bounds.


Management Implications

  • Firms should not be complacent; the reviews of markets and order flows from H1 2020 have not even got into their strides, let alone reached any conclusions.
  • Regulators’ supervisory agendas probably are significantly more discretionary than they were – it will be up to an individual supervisor to determine whether a firm or any specific circumstances fit within the agenda and therefore are worthy of investigation.
  • ESMA and the FCA may not be mentioning RegTech specifically, but this is all about RegTech for firms and SupTech for regulators.
  • Most firms have some sort of RegTech applied in their back- and middle-office (or even in their front-office), which means:
    • so far as the FCA is concerned, the quality of the RegTech implementation becomes subject to a peer-to-peer benchmarking exercise;
    • firms must need to review, fundamentally, their adoption of the “3 lines of defence” – indeed, does that model even work anymore?
    • firms should consider at what “harms” those RegTech tools are pointed (and why).



  1. Review your firm’s (and your suppliers’) RegTech model and requirements.
  2. Review your “3 lines of defence” model and whether it is applicable.
  3. Accept that the working paradigm has changed; more staff and clients are WFH, so you have to adapt your systems to that rather than prevent what is happening. This means accepting that staff and clients will communicate on unofficial or unapproved devices and that informal over-the-shoulder supervision within teams might not be possible.
  4. Accept that the likelihood is that the volatility in the markets and the undoing and re-making of correlations, inverse correlations and risk models will continue for the medium term – there will be no period of relative calm during which the industry or regulators can pause and take stock.
  5. A firm has to “catch” every manipulative or abusive message in real- or near real-time; a regulator only has to “catch” a firm once. And it will be doing so with historic, (relatively) accurate, reported data.
  6. Collaborate with your peers to define the new measures of success, and the method of benchmarking yourself against your peers before someone else does this for you.

Sam has also posted his views on the latest FCA speech on surveillance obligations under COVID. You can watch him rattle his sabre here.

If you would like to join JWG’s Trade Surveillance meeting on 3 November  with 19 firms on 3 November, please contact


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