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MAR STOR Regime: Suspicious Transaction & Order Reporting

18th May 2016

MAR’s Suspicious Transaction & Order Reporting (STOR) Regime

The implementation of the new EU Market Abuse Regulation (MAR) on 3rd July 2016 will result in new surveillance obligations coming into force for market participants.

The current Suspicious Transaction Reports (STRs) under the Market Abuse Directive (MAD) will be replaced with a new regime for Suspicious Transaction and Order Reporting (STOR).

Key differences between STR and STOR:

The new regime will see ‘notifiers’, (these being market operators, trading venues and any other person that professionally arranges or executes transactions in financial instruments), be required to detect and report any suspicious behaviour or activity that is within the scope of the new Market Abuse Regime (MAR).

The suspected activities of ‘attempted insider dealing’ and ‘attempted manipulation’ will also come within the scope of the new regulation.

Under MAR, trading venues will also need to have systems in place to prevent market abuse and indeed all notifiers must be mindful of ensuring that their systems and procedures are effective and take into account the indicative list of indicators of manipulation that MAR offers.

Furthermore, MAR will cover instruments traded upon a much wider range of venues compared to those under the scope  of MAD and will include the reporting of not only suspicious transactions but suspicious orders also, with the likelihood that quotes will need surveillance too. With such side scale changes to the market abuse regime, it is important that those within firms have been trained upon the new requirements well before July’s implementation.

Article 16 of MAR, along with the MAR Delegated Regulation provides the entire outline of MAR’s STOR Regime.

Surveillance of quotes:

As the FCA advises, the new STOR regime is likely to require a number of significant technology changes for some notifiers, specifically with regards to surveillance of quotes.

From the Commission Delegated Regulation that was published in March 2016 by the European Commission, the FCA anticipates that the final EU legislation will include a definition of an order that incorporates quotes, thus some level of surveillance on order quotes is to be expected when MAR is implemented.

At present, the regulator understands that some notifiers might not be in a position to bring into effect adequate and complete surveillance measures for all types of quotes, however in instances where notifiers have not been able to deploy this, the FCA state that they must be able to “demonstrate that they have made best efforts to achieve full compliance, and be ready to explain how approaches will be further developed.”

The FCA have made it clear that they expect detailed and realistic plans to be in place that they may demand to see at any time.

STOR Submission process upon Connect:

Earlier this year the FCA conducted a series of STOR workshops for industry members that aimed to provide an outline of the new MAR STOR regime along with an overview of the FCA’s supervisory approach as well as demonstrating use of the new STOR reporting form.

Concerns about potential market abuse will, going forwards, be made electronically using the FCA’s Connect system. Whilst Connect is currently used for authorisations and approved persons applications from 3rd July 2016 it will also be used to submit STORs.

Details of the submission process for STORs within the FCA’s Connect system along with notes on the FCA’s expectations for implementation of the MAR STOR regime have now been made available as an online slide presentation by the regulator.

Reporting firms will not only be able to provide all details for the STOR online but also upload any supporting documents and related attachments such as:

The FCA believe that the use of their Connect system to notify of STORs will satisfy ESMA’s Delegated Regulation requirements that require an electronic means of submitting reports and attachments to the competent authority that “shall ensure that completeness, integrity and confidentiality of the information are maintained during the transmission.”

STOR: Your obligations

Once a STOR has been submitted to the FCA, it will be reviewed by the Market Monitoring department who will review all of the information provided to them and determine any appropriate course of action. Should they require any additional information, they may contact you, however you may not be receive any further communication or update from the regulator after Connect’s initial confirmation of submission.

Since STORs are received and reviewed under the strictest of confidentiality firms should be reminded of the following obligations upon submitting a STOR:  

• To secure all relevant documents and records, including e-mails, Bloomberg messages and any message on any instant messaging system and under COBS 11.8.10 to secure tapes of telephone conversations for a minimum of six months.
• To maintain confidentiality of any STOR submitted to the FCA
• To maintain a record of every STOR submitted to the FCA for a period of five years.

Firms should also be aware that once your STOR has been submitted online, you will only have one opportunity to download a pdf copy of your STOR submission upon the submission confirmation page entitles ‘Thank you for your submission’. Once this page is closed within Connect, you will no longer be able to download a pdf copy of your STOR submission for reasons of security.

Prepare for the MAR STOR Regime: What should firms do now?

STORs are to be submitted from 3 July 2016 when the Market Abuse Regulation comes into effect.

Firms will no doubt be in their last stages of preparation for MAR to take effect this summer. To ensure implementation goes smoothly it is vital that staff are adequately trained and up-to-date with their obligations under the new MAR STOR regime.

Firms would also do well to review their security measures and ensure only appropriate individuals have administrator access to the FCA’s Connect system.

If your firm should like any assistance or support in reviewing your Market Abuse preparations or would like to discuss tailored MAR training or how MAR may affect your business please contact our friendly compliance specialists who would be happy to help.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.

• Broker reports
• Power of Attorney documents; and
• Relevant media comments etc

• Emails
• Recordings of conversations
• rder/transaction records
• Confirmations