FCA to help develop market abuse regimes for Crypto Assets and Private Intermittent Securities

The FCA recently published its 2024/25 business plan where it outlined a number of priorities, including that it will continue to deliver on its public commitment to “take assertive action on market abuse”. During the next financial year this commitment will involve the FCA:

• Increasing their ability to detect and pursue cross-asset class market abuse, including fixed income and commodities;
• Issuing a discussion paper on transferring MiFID data reporting regimes for transactions (RTS22) and reference data (RTS23) as part of the Smarter Regulatory Framework (SRF) process;
• Assisting in delivering a proportional market abuse regime for Crypto Assets and the Private Intermittent Securities and Capital Exchange System (PISCES) facility;
• Extending their data reporting supervision approach to EMIR, SFTR and Orderbook regimes;
• Publishing the results of their peer review of market abuse systems and controls in providers of Direct Market Access (DMA); and
• Publishing updated Market Cleanliness Data in Q3 2024

Market abuse regime for Crypto assets

It’s too early to tell but it is expected that the market abuse regime would apply to all persons committing market abuse on a crypto asset that is admitted to trading on a UK trading venue, regardless of where the person is based or where the trading takes place. 

In addition, UK based crypto asset trading venues will be required to have controls to detect and disrupt market abuse and report suspicious activity to the UK regulator.

Private Intermittent Securities and Capital Exchange System (PISCES) facility

As anticipated, PISCES will allow privately held companies to open ‘intermittent trading windows’ in which shareholders can sell existing shares through its platform. Buyers in the trial period are likely to be limited to institutional and professional investors, although this could be expanded to include sophisticated and high-net worth investors.

From the UK Treasury’s Consultation Paper relating to PISCES, the proposed market abuse regime will draw on existing definitions and concepts from MAR where appropriate. The proposed regime will also focus on the greatest market abuse risks in the context of PISCES (to avoid being disproportionate) and the scope will be limited to on-PISCES trading. The three market abuse offences under MAR, which the government intends to apply to PISCES are unlawful disclosure of inside information, market manipulation and insider dealing.

In relation to the monitoring and enforcement against market abuse on the PISCES facility:

• market participants, such as the PISCES operator and intermediaries, will need to establish and maintain effective arrangements, systems and procedures to prevent, detect and report suspected market abuse to the FCA
• the PISCES operator would also be subject to requirements to ensure fair and orderly markets
• the FCA will be the statutory authority for investigating and taking any enforcement action
• participant companies will not be able to delay disclosure of inside information
• the offences would apply to both firms and individuals

UK authorities helping markets by fostering innovation

It is always interesting to see where the FCA intends to increase its focus of attention in the short-term. Investing £11.3m in the SRF to repeal assimilated law and replace these with FCA rules, including MiFIR transaction and reference data reporting was to be expected. 

Tailored market abuse regimes for crypto assets and for the trading of shares in private companies shows how the UK Treasury and the FCA are both helping to foster innovation and are embracing the FCA’s secondary objective for international competitiveness and growth.   

• Please get in touch to see how we can help your firm improve its monitoring controls and achieve peace of mind with regards to detecting any suspicious activity or market abuse.