FCA fines three broker firms £4,775,200 for failures relating to the detection of market abuse

BGC/GFI failed to properly implement the Market Abuse Regulation (MAR) trade surveillance requirements. This meant there was an increased risk that potentially suspicious trading would go undetected.

BGC/GFI are inter-dealer brokers specialising in broking exchange listed and over-the-counter financial products and related derivative products. It is of fundamental importance to the integrity of the market that brokers such as BGC/GFI have effective market abuse surveillance systems in place.

Between July 2016 and January 2018, BGC/GFI had manual, automatic and communications surveillance processes that were deficient, and therefore, inadequate in properly addressing the risk of market abuse. Additionally, BGC/GFI’s systems for monitoring market abuse did not have proper coverage of all asset classes which are subject to MAR.

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.’

BGC/GFI agreed to resolve the case at an early stage and qualified for a 30% discount. Without this discount, the fine would have been £6,821,800.

BGC/GFI have since enhanced their systems and controls. 

Notes to editors

1. Final Notice for BGC/GFI[1].
2. The FCA conducts its own surveillance for market abuse by consolidating data obtained from market participants to detect potential insider dealing and market manipulation.
3. MAR was introduced in 2016 and expanded requirements to detect and report potential market abuse. It introduced a requirement to monitor both orders and trades to detect potential and attempted market abuse across a broad range of markets and financial instruments.
4. The FCA’s Market Surveillance team conducts specialist supervision of the suspicious transaction and order reporting (STOR) regime. As part of its extensive supervisory programme, it undertakes regular and ad hoc visits to a wide range of market participants to assess their market abuse surveillance arrangements.
5. BGC Brokers LP (BGC), GFI Brokers Limited and GFI Securities Limited (GFI) are separate legal entities. BGC is the UK subsidiary of BGC Inc. GFI was purchased by BGC Inc in January 2016. Although GFI is run separately, it is part of the wider BGC organisation and shares the same compliance department.
6. MAR is a significant piece of legislation that covers the offences of insider dealing, unlawful disclosure of inside information, and market manipulation. Firms that arrange or execute transactions in financial instruments are required by Article 16(2) of MAR to establish and maintain effective arrangements, systems, and procedures to detect and report potential market abuse.
7. These failings meant that BGC/GFI breached Article 16(2) of MAR and Principle 3 of the FCA’s Principles for Businesses – that a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
8. Find out more information about the FCA[2].