Market Abuse
Market abuse occurs when a person misuses information in order to disadvantage other investors or gain an unfair advantage as an investor.
It consists of a number of specific conduct that create unfair market conditions to the advantage of those carrying them out, but to the disadvantage of honest market players.
- Legal framework relating to market abuse
The Market Abuse Regulation (“MAR”) came into force on 3 July 2016 and was onshored into UK law on 31 December 2020 by the EU (Withdrawal) Act 2018.
Changes to the regulation were made by the Market Abuse Exit Regulations 2019, to make sure that the onshored legislation (UK MAR) operates effectively in the UK.
The EU technical standards for MAR were also onshored into UK law on 31 December by the EU (Withdrawal) Act 2018 and were amended by FCA 2019/45.
Changes to the FCA Handbook were made by FCA 2019/23 in relation to the Market Conduct Sourcebook, and by FCA 2019/26 in relation to the Disclosure Guidance and Transparency Rules sourcebook.
Further changes to UK MAR were made by The Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021 to include the UK Emission Trading Scheme, with related changes to technical standards made by FCA/2021/16.
Changes to UK MAR were also made by the Financial Services Act 2021 in relation to insider lists and managers’ transaction (see section 30 of the Act).
- uk marKET RULES
These rules apply to:
a) Financial instruments admitted to trading on a UK or an EU regulated market or for which a request for admission to trading on a UK or an EU regulated market has been made.
b) Financial instruments traded on a UK or an EU multilateral trading facility (MTF), admitted to trading on a UK or an EU MTF, or for which a request for admission to trading on a UK or an EU MTF has been made.
c) Financial instruments traded on a UK or an EU 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.
- Emission allowances and related auction products as described in ‘UK MAR and UK Emissions Trading Scheme’.
Firms must have special measures in place to prevent such abuse as well as specific procedures to enable suspicious transaction and order reports (“STORs”).