Thematic Review – Trading

Market Watch 49 published on 3 September is devoted to FCA feedback following a thematic review of commodities trading – although there is no reason why the relevance of some of the findings should not apply to a wider sphere.

  • Most firms had not carried out a Code of Market Conduct risk assessment which is key to ensuring that monitoring remains relevant to the market abuse risks to which they were exposed.
  • Generally governance and management structures were regarded as effective, although there were some instances of informal committee structures, unclear escalation procedures and no formal records of meetings and decisions.
  • Many firms did not have adequate procedures to identify suspicious transactions – or clarify what behaviours would fall within that definition –  and for escalating consequent STRs to the FCA.
  • With specific reference to the commodities sector, comment is made on the low number of STR submissions when compared to other asset classes.

The FCA promises to continue its supervisory work on commodities trading firms, taking into account the findings of the Fair and Effective Markets Review (FEMR).