Britain’s Financial Conduct Authority (FCA) has undertaken a thematic review of MTF operators‘ rule books, reiterating that the FCA expects all multilateral trading facility (MTF) operators to be able to demonstrate that they have considered the Good Practice Observations when determining their approach to compliance with MAR 5.
An MTF operator should have rules and market control arrangements which enable it to provide for and maintain fair and orderly trading. As part of this, an MTF operator should identify the range of potential disorderly market conditions that could occur on the MTF e.g. stale market data, system outages or other business interruption events such as erroneous orders or trades.
Furthermore, An MTF’s rules and market control arrangements should seek to address the identified potential disorderly conditions through both preventative provisions, such as system security or erroneous order entry rejection, and re-active market control provisions, such as suspension of trading (e.g. at instrument or participant level) or cancellation, where appropriate.
In particular MAR 5.3.1 (Trading Process Requirements) requires that “a firm operating an MTF must have transparent and non-discretionary rules and procedures for fair and orderly trading.” The FCA expects that an MTF operator will have a rulebook in place and the rulebook will be publicly available on the MTF operator’s website.
An MTF operator should undertake regular assessments as to the types of market abuse that could occur on the MTF. An MTF should ensure it has appropriate monitoring and surveillance arrangements in place (systems, procedures and personnel) to monitor transactions undertaken by participants on the MTF and report to the FCA the activity of the types set out in MAR 5.6.1 in accordance with MAR 5.6.1 reporting requirements.
For the full report from the FCA, click here.