FCA fines three inter-dealer brokers for inadequate trade monitoring
Inter-dealer brokers BGC Brokers LP, GFI Brokers Limited, and GFI Securities Limited have been fined £4.77 million ($5.80 million) by the UK’s Financial Conduct Authority (FCA).
The London-based firms were hit by the regulatory penalty for their inability to properly implement the Market Abuse Regulation (MAR) trade surveillance requirements relating to the detection of market abuse.
The FCA said they failed to ensure they had appropriate systems and controls aimed at spotting suspicious trading in shares and commodities. As a result, BGC/GFI were not able to monitor its trading activities for specific types of insider dealing and market manipulation effectively.
The watchdog found that between July 2016 and January 2018, BGC/GFI failed to properly implement manual, automatic and communications surveillance processes. The firms’ flawed implementation led to significant gaps in addressing the risk of market abuse. Additionally, BGC/GFI’s systems did not have proper coverage of all asset classes which are subject to MAR, while its arrangements and procedures failed to assess specific risks in its business may have been prone to and needed to detect.
Mark Steward, Executive Director of Enforcement and Market Oversight, commented: “Oversight of our markets is a regulated partnership between the FCA and market participants and so gaps or holes in a firm’s ability to monitor and detect abusive trading poses direct risks to market integrity. This case is another example of the FCA’s determination to ensure firms prioritise market integrity and the maintenance of high standards of compliance.”
Originally introduced in 2016, the MAR regulation requires inter-dealer brokers of exchange listed and OTC financial products and related derivatives to monitor orders as well as trades, to spot potential and attempted market abuse across a wide scope of markets and financial instruments.
The London-based BGC/GFI agreed to resolve the case at an early stage and qualified for a 30% discount, otherwise they would have been fined £6.8 million.