Market Abuse Risk Assessment

Client background 

Our client was a global broker group that employed c. 200 people.

The challenge 

Our client required an external advisor to review their market abuse control framework for their authorised entity in London and document their market abuse risk assessment in response to a request from the FCA. The project had an aggressive timeline, required interaction with a number of senior stakeholders in the front-office during a period of market volatility, and as with all engagements where the outputs will receive immediate scrutiny, required detailed documentation, augmented with a management summary so that the governing body could attest that they had adequately reviewed and challenged the assessment in advance of sending it to the FCA. 

This client story is similar to a number of engagements undertaken during the period Q1 2020 – Q4 2022 where Shapes First supported several clients in the broking and market making sector with regulatory enquiries as to their market abuse control framework, surveillance tools and suspicious transaction and order reporting (STOR) policies and procedures. 

Our approach and contribution 

Working in close partnership with the firm we:  

  • Created a forward schedule of meetings with senior stakeholders that had specific agendas relevant to their business areas and the types of market abuse that their business would be most sensitive to. 

  • Using the Shapes First methodology, which had by this time already been through regulatory and skilled person scrutiny, agreed where the methodology had to be tailored to suit the specific business activities undertaken by the client.

  • Created the tailored template and tailored methodology and agreed the structure with the senior stakeholders. 

  • Executed the forward schedule of meetings with senior stakeholders, populated the detailed risk assessment and provided it to the client for review. 

  • In parallel, discussed and reviewed the surveillance algorithms with the client’s third-party software providers and added the appropriate details to the risk assessment.

  • Post client review and challenge, created the management summary for the governing body. 

  • Supported the client post submission to the FCA with various questions. 

The outcome 

As a result of our engagement: 

  • The client satisfied the regulatory enquiry and demonstrated compliance with the appropriate regulations.

  • The client’s third-party software providers got a much better picture of the client’s business and was able to improve their service offering not only to this client but also other clients in their portfolio. 

  • The client’s senior management had a better understanding of how market abuse risks could manifest in their business and as a result were able to demonstrate improved front-office supervision and improved STOR procedures. 

  • As a result of improved front-office supervision the client was better able to evidence their responsibilities under the Senior Managers and Certification Regime (SMCR).