The Market Abuse Regulation (MAR) came into effect on 3 July 2016. It aims to increase market integrity and investor protection, enhancing the attractiveness of securities markets for capital raising.
The Market Abuse Regulation (MAR) strengthens the existing UK market abuse framework by extending its scope to new markets, new platforms and new behaviours.
It contains prohibitions of insider dealing and market manipulation, and provisions to prevent and detect these.
Our Handbook has been amended as a result of MAR, including the Code of Market Conduct (MAR 1) and several other chapters. These changes are outlined in our Policy Statement 16/13.
Application of MAR
The prohibitions of insider dealing and unlawful disclosure of inside information, and market manipulation, apply to:
- financial instruments admitted to trading on a regulated market or for which a request for admission to trading on a regulated market has been made
- financial instruments traded on a multilateral trading facility (MTF), admitted to trading on an MTF, or for which a request for admission to trading on an MTF has been made
- financial instruments traded on an organised trading facility (OTF)
- financial instruments not covered by point (a), (b) or (c), the price or value of which depends on or has an effect on the price or value of a financial instrument referred to in those points, including, but not limited to, credit default swaps and contracts for difference
‘Financial instruments’ are currently defined in MiFID I. From 3 January 2018 they will be defined in Annex 1 of MiFID II.
MAR also applies to emission allowances and emission allowance market participants (EAMPs), and benchmarks. Spot commodities are in scope in certain situations.
ESMA Guidelines: delay in the disclosure of inside information and market soundings
ESMA has published official translations of Guidelines relating to Articles 11(11) and 17(11) of MAR:
- legitimate interests to delay disclosure of inside information and situations in which the delay of disclosure is likely to mislead the public (ESMA/2016/1478, 20 October 2016),
- persons receiving market soundings (ESMA/2016/1477, 10 November 2016).
We have notified ESMA of our intention to comply with both sets of Guidelines.
As part of our compliance we reviewed our Handbook to ensure it is consistent with these Guidelines. We identified an overlap between guidance in the disclosure section (DTR) of our Handbook, specifically DTR 2.5, and ESMA’s Guidelines on legitimate interests to delay the disclosure of inside information. We are consulting on relevant changes to the Handbook in CP16/38.
Inside information and disclosure
The definition of ‘inside information’ is broadly unchanged from the previous definition, but is wider to capture inside information for spot commodity contracts.
The obligation to disclose inside information now extends to some EAMPs.
Issuers and EAMPs must notify the regulator after delaying disclosure of inside information. Financial institutions must seek consent from the regulator before delaying disclosure due to financial stability concerns.
Insider dealing and unlawful disclosure
MAR has clarified that the use of inside information to amend or cancel an order will be considered insider dealing.
MAR has also clarified that recommending or inducing another person to transact on the basis of inside information amounts to unlawful disclosure of inside information.
MAR extends this offence to capture attempted manipulation. Benchmarks, and in some situations spot commodities, are now also in scope of the manipulation offence.
Examples of behaviours and activities that are considered to be market manipulation are set out in the MAR Technical Standards, eg acting in collaboration to secure a dominant position over the supply or demand of a financial instrument, and certain algorithmic trading strategies that disrupt the functioning of a trading venue.
MAR introduces a framework to make legitimate disclosures of inside information in the course of market soundings.
Buy-back programmes and stabilisation measures
MAR makes revisions to the existing framework for conducting buy-back programmes and stabilisation measures.
Accepted market practices (AMPs)
MAR continues to permit regulators to establish an accepted market practice that is subject to certain criteria and conditions.
MAR obliges issuers and EAMPs to prepare and maintain a list of everyone working for them who has access to inside information.
Suspicious transaction and order reports (STORs)
MAR extends the existing obligation to report suspicious transaction reports, to include suspicious orders too.
Trading venues are also caught by the obligation to submit STORs, as well as buy-side firms and proprietary traders.
Persons discharging managerial responsibilities within issuers (PDMRs), and persons closely associated with them, must use the issuer’s financial instruments to notify the issuer and the regulator of relevant personal transactions they undertake.
The issuer in turn must make that information public within three business days.
MAR continues to require persons producing or disseminating investment recommendations to ensure information is objectively presented, and to disclose any conflicts of interest.
MAR places requirements on regulators and firms to be able to receive whistleblowing notifications.
Key policy and consultation documents
Here are some key FCA, ESMA and European Commission policy and consultation documents that give more information on rules relating to market abuse.
- FCA: PS16/18: Changes to the Decision Procedure and Penalties manual and the Enforcement Guide for the implementation of the Market Abuse Regulation (June 2016)
- FCA: PS 16/13: Implementation of the Market Abuse Regulation (April 2016)
- FCA: CP 16/13: Changes to the Decision Procedure and Penalties Manual and the Enforcement Guide for the implementation of the Market Abuse Regulation (April 2016)
- European Commission: various MAR technical standards (February/March 2016)
- ESMA: consultation on MAR guidelines regarding market soundings and delayed disclosure of inside information (January 2016)
- European Commission: implementing directive on whistleblowing (December 2015)
- FCA: CP 15/38: Provisions to delay disclosure of inside information within the FCA’s Disclosure and Transparency Rules (November 2015)
- FCA: CP15/35: consultation on changes related to the implementation of the Market Abuse Regulation (2014/596/EU) (November 2015)
- ESMA: draft technical standards submitted to the European Commission (September 2015)
- European Commission: Market Abuse Regulation (July 2014)