S7C - MAD 2 MAR: Operational Compliance

MAD 2 MAR Operational Compliance
Training Manual
© Copyright 2017 | Storm-7 Consulting | All Rights Reserved 1
MAD 2 MAR:
Operational Compliance TrainingManual
Storm-7 Consulting
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© January 2017 | Storm-7 Consulting Limited | All Rights Reserved
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Training Manual
TABLE OF CONTENTS
TABLE OF CONTENTS......................................................................................... 2
FIGURES ............................................................................................................... 9
TABLES............................................................................................................... 10
LIST OF ABBREVIATIONS................................................................................. 13
LIST OF RELEVANT DOCUMENTS ................................................................... 16
CHAPTER 1......................................................................................................... 17
The MAD 2 (Directive 2014/57/EU) and MAR (Regulation No 596/2014)
Operational Framework .................................................................................. 17
1 CHAPTER 1 ABBREVIATIONS ........................................................................................ 17
2 MAD 2 FRAMEWORK....................................................................................................... 18
3 NEW MINIMUM RULES FOR CRIMINAL SANCTIONS AND CRIMINAL PENALTIES ... 19
3.1 Aims........................................................................................................................................................... 19
3.2 Offences..................................................................................................................................................... 19
3.3 Application to financial instruments............................................................................................................. 20
3.4 Application to behaviour, transactions, and bids ......................................................................................... 20
3.5 Application to market manipulation offence ONLY ...................................................................................... 20
4 APPLICATION TO SPOT COMMODITY CONTRACTS AND TRANSACTIONS............. 21
5 MAR BENCHMARK MANIPULATION............................................................................... 22
5.1 Ratings examples....................................................................................................................................... 22
5.2 Indexes examples....................................................................................................................................... 22
5.3 Figures examples ....................................................................................................................................... 22
6 DIRECTIVE OFFENCES................................................................................................... 22
6.1 OFFENCE 1: Insider Dealing, recommending or inducing another person to engage in insider trading....... 22
6.1.1 Persons covered............................................................................................................................... 22
6.1.2 Other situations covered ................................................................................................................... 23
6.1.3 Recommending or inducing another person to engage in Insider Dealing ......................................... 23
6.1.4 Legitimate behaviour......................................................................................................................... 23
6.2 OFFENCE 2: Unlawful Disclosure of Inside Information.............................................................................. 23
6.2.1 Persons covered............................................................................................................................... 24
6.2.2 Other situations covered ................................................................................................................... 24
6.3 OFFENCE 3: Market manipulation.............................................................................................................. 24
6.3.1 Activity 1........................................................................................................................................... 24
6.3.2 Activity 1 Exemption.......................................................................................................................... 24
6.3.3 Activity 2........................................................................................................................................... 25
6.3.4 Activity 2 Exemption.......................................................................................................................... 25
6.3.5 Activity 3........................................................................................................................................... 25
6.3.6 Activity 4........................................................................................................................................... 25
6.3.7 Activity 5........................................................................................................................................... 25
6.4 OFFENCE 4: Inciting, aiding and abetting, and attempt.............................................................................. 25
6.5 Inchoate Offences in the UK....................................................................................................................... 26
6.5.1 Incitement......................................................................................................................................... 26
6.5.2 Aiding and abetting ........................................................................................................................... 26
6.5.3 Attempt............................................................................................................................................. 26

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6.5.4 Legitimate behaviour......................................................................................................................... 26
7 LIABILITY FOR NATURAL PERSONS ............................................................................. 27
8 LIABILITY FOR LEGAL PERSONS .................................................................................. 27
9 SANCTIONS FOR LEGAL PERSONS.............................................................................. 27
10 NEW OBLIGATIONS FOR TRADING VENUES.......................................................... 28
10.1.1 Multilateral Trading Facilities (MTFs) ................................................................................................ 28
10.2 Organised Trading Facilities (OTFs) ...................................................................................................... 31
10.3 Emission Allowances............................................................................................................................. 31
10.4 Issuers................................................................................................................................................... 32
11 MAR FRAMEWORK..................................................................................................... 33
11.1 NEW FINANCIAL INSTRUMENTS COVERED...................................................................................... 33
11.1.1 Full Scope Financial Instruments ...................................................................................................... 33
11.1.2 Partial Scope Financial Instruments.................................................................................................. 33
11.2 OBLIGATIONS AND OFFENCES.......................................................................................................... 34
11.2.1 Inside Information ............................................................................................................................. 34
11.2.2 Information of a Precise Nature......................................................................................................... 35
11.2.3 Protracted Process Precise Information ............................................................................................ 35
11.2.4 Intermediate Step ............................................................................................................................. 35
11.2.5 "Information which would be likely to have a significant effect".......................................................... 35
11.2.6 EAMPs ............................................................................................................................................. 35
12 PROHIBITIONS............................................................................................................ 35
12.1 Prohibition of Insider Dealing and Unlawful Disclosure of Inside Information.......................................... 35
12.2 Prohibition of Market Manipulation......................................................................................................... 36
13 OFFENCES.................................................................................................................. 36
13.1 OFFENCE 4: Insider Dealing................................................................................................................. 36
13.1.1 Recommending or Inducing .............................................................................................................. 36
13.1.2 Recommending or Inducing Situation 1............................................................................................. 36
13.1.3 Recommending or Inducing Situation 2............................................................................................. 36
13.1.4 Legal Persons................................................................................................................................... 37
13.1.5 Insider Dealing Type 1...................................................................................................................... 37
13.2 OFFENCE 5: Unlawful Disclosure of Inside Information......................................................................... 37
13.2.1 OFFENCE 5: Unlawful Disclosure of Inside Information - Exception ................................................. 37
13.2.2 Onward Disclosure of Recommendations or Inducements ................................................................ 37
13.3 OFFENCE 6: Market Manipulation......................................................................................................... 38
13.3.1 Market Manipulation Activities........................................................................................................... 38
13.3.2 Exception to Market Manipulation Activities (Types 1 and 2 Only)..................................................... 38
13.3.3 Fictitious Device Non-Exhaustive Indicators...................................................................................... 38
13.3.4 False and Misleading Signals and Price Securing Non-Exhaustive Indicators................................... 39
13.3.5 Market Manipulation Behaviour......................................................................................................... 39
13.4 Overview of Market Soundings .............................................................................................................. 40
13.4.1 What are Market Soundings?............................................................................................................ 40
13.4.2 Examples of Market Soundings......................................................................................................... 41
13.4.3 Conducting market soundings........................................................................................................... 41
13.5 Overview of Transactions by Persons Discharging Managerial Responsibilities (PDMR)....................... 41
13.6 Suspicious Transactions Reporting........................................................................................................ 42

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14 NEW WHISTLEBLOWING OBLIGATIONS ................................................................. 42
14.1 Reporting............................................................................................................................................... 42
14.2 Protections ............................................................................................................................................ 43
14.3 Financial Incentives ............................................................................................................................... 43
CHAPTER 2......................................................................................................... 44
MAR OPERATIONAL PRACTICES I: Suspicious Transaction and Order
Reports (STORs), Buy-Back Programme, and Stabilisation Measures ...... 44
15 CHAPTER 2 ABBREVIATIONS................................................................................... 44
16 SUSPICIOUS TRANSACTION AND ORDER REPORT (STOR) FRAMEWORK....... 45
16.1 General Requirements for Persons Professionally Arranging or Executing Transactions (PPAETs)....... 45
16.2 General Requirements for Market Operators and Investment Firms Operating a Trading Venue (IFOTV)
45
16.3 Arrangements, Systems, and Procedures.............................................................................................. 45
16.3.1 Requirements for Arrangements, Systems, and Procedures............................................................. 45
16.3.2 Proof and Documentation of Arrangements, Systems, and Procedures ............................................ 46
16.3.3 Human Analysis................................................................................................................................ 47
16.3.4 Delegation of Monitoring Functions................................................................................................... 47
16.3.5 Delegation of Data Analysis Functions.............................................................................................. 47
16.3.6 Software Requirements for Arrangements, Systems, and Procedures .............................................. 47
16.4 Suspicious Transaction and Order Report (STOR) ................................................................................ 48
16.5 Suspicious Transaction and Order Report (STOR) Content ................................................................... 48
16.6 Reporting Obligations ............................................................................................................................ 49
16.6.1 Level of Suspicion, Cancellation, and Modification of Orders ............................................................ 49
16.6.2 Prevention, Monitoring, and Detection Staff Training......................................................................... 50
16.6.3 Means for Transmission.................................................................................................................... 50
16.7 FCA Supervisory Priorities under the MAR STOR regime...................................................................... 50
16.8 FCA Connect Obligations ...................................................................................................................... 51
16.8.1 FCA's Supervisory Approach ............................................................................................................ 51
17 BUY-BACK PROGRAMME (BBP) AND STABILISATION FRAMEWORK.................. 54
17.1 Buy-Back Programme Framework ......................................................................................................... 54
17.2 Buy-Back Programme Regulatory Technical Standards (RTS) .............................................................. 55
17.3 BBP Definitions...................................................................................................................................... 56
17.3.1 Adequate Public Disclosure .............................................................................................................. 56
17.4 Disclosure and Reporting Obligations.................................................................................................... 56
17.4.1 Time-Scheduled Buy-Back Programme ............................................................................................ 57
17.4.2 BBP Information................................................................................................................................ 57
17.4.3 BBP Reporting Obligations ............................................................................................................... 57
17.5 Conditions for Trading ........................................................................................................................... 57
17.6 Trading Restrictions............................................................................................................................... 58
18 STABILISATION FRAMEWORK.................................................................................. 59
18.1 Stabilisation Definitions.......................................................................................................................... 59
18.1.1 Stabilisation ...................................................................................................................................... 59
18.1.2 Significant Distribution ...................................................................................................................... 59
18.1.3 Offeror .............................................................................................................................................. 59
18.1.4 Allotment........................................................................................................................................... 60
18.1.5 Ancillary Stabilisation........................................................................................................................ 60
18.1.6 Overallotment Facility ....................................................................................................................... 60

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18.1.7 Greenshoe Option ............................................................................................................................ 60
18.1.8 Limited Period................................................................................................................................... 60
18.2 Regulatory Technical Standards Stabilisation (RTS) Conditions ............................................................ 62
18.2.1 Stabilisation Disclosure and Reporting Obligations ........................................................................... 62
18.2.2 Stabilisation Price Conditions............................................................................................................ 63
18.2.3 Ancillary Stabilisation Conditions ...................................................................................................... 64
CHAPTER 3......................................................................................................... 65
MAR OPERATIONAL PRACTICES I: ACCEPTED MARKET PRACTICES
(AMP) AND MARKET SOUNDINGS (MS) ....................................................... 65
19 CHAPTER 3 ABBREVIATIONS................................................................................... 65
20 ACCEPTED MARKET PRACTICES ***....................................................................... 66
20.1 Accepted Market Practices (AMP) Exemption........................................................................................ 66
20.2 Establishing Legitimate Reasons and Conforming with Accepted Market Practice................................. 66
20.2.1 Accepted Market Practice (AMP) Outline Criteria.............................................................................. 66
20.3 Accepted Market Practice (AMP) Procedure.......................................................................................... 67
20.4 Accepted Market Practice (AMP) Detailed Criteria................................................................................. 68
20.4.1 Accepted Market Practice (AMP) Detailed Criteria: Transparency..................................................... 68
20.4.2 Accepted Market Practice (AMP) Detailed Criteria: Safeguards ........................................................ 69
20.4.3 Accepted Market Practice (AMP) Detailed Criteria: Liquidity and Efficiency ...................................... 70
20.4.4 Accepted Market Practice (AMP) Detailed Criteria: Trading Mechanism ........................................... 70
20.4.5 Accepted Market Practice (AMP) Detailed Criteria: Market Integrity Risks ........................................ 71
20.4.6 Accepted Market Practice (AMP) Detailed Criteria: Investigations..................................................... 72
20.4.7 Accepted Market Practice (AMP) Detailed Criteria: Structural Characteristics................................... 72
20.5 AMP Procedure ..................................................................................................................................... 72
20.5.1 AMP RTS Submission Annex............................................................................................................ 73
21 MARKET SOUNDINGS (MS)....................................................................................... 74
21.1 Standard Market Sounding .................................................................................................................... 75
21.2 Takeover Market Sounding.................................................................................................................... 75
21.3 Level II RTS and Implementing Technical Standards (ITS) on systems and notification templates to be
used by disclosing market participants conducting market soundings.................................................................... 77
21.4 MS Arrangements RTS: MS Communications Requirements................................................................. 77
21.4.1 MS Arrangements RTS: MS Communications Requirements (Inside Information)............................. 77
21.4.2 MS Arrangements RTS: MS Communications Requirements (Non-Inside Information)..................... 78
21.5 MS Arrangements RTS: MS Data Requirements ................................................................................... 79
21.6 MS Arrangements RTS: MS Cessation of Inside Information ................................................................. 80
21.7 MS Arrangements RTS: MS Record Keeping Requirements.................................................................. 80
21.7.1 Data Requirements: Written Minutes and Notes................................................................................ 81
21.8 ESMA MS Guidelines ............................................................................................................................ 81
21.9 Level II RTS and Implementing Technical Standards (ITS) on appropriate arrangements, procedures and
record keeping requirements. ................................................................................................................................ 81
21.9.1 Level II RTS Annex I......................................................................................................................... 82
21.9.2 Level II RTS Annex II........................................................................................................................ 83
21.9.3 Level II RTS Annex III....................................................................................................................... 84
SESSION 4 .......................................................................................................... 86
MAD 2 AND MAR EXEMPTIONS, POWERS, AND SANCTIONS ................... 86
22 SESSION 4 ABBREVIATIONS .................................................................................... 86
23 NEW EXEMPTIONS .................................................................................................... 87

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23.1 Exemption for trading in own shares in buy-back programmes (BBP).................................................... 87
23.2 Exemption for trading in securities for the stabilisation of securities and eligibility conditions ................. 87
23.3 Exemption for monetary and public debt management activities and climate policy activities................. 88
23.3.1 Public Authorities in Pursuit of Monetary Exchange Rate.................................................................. 88
23.3.2 Public Authorities in Pursuit of Public Debt Management Policy........................................................ 89
23.4 EU Agricultural Policy and Climate Policy .............................................................................................. 89
23.5 Chinese Walls........................................................................................................................................ 90
24 NEW POWERS AND SANCTIONS ............................................................................. 90
24.1 ESMA and Competent Authorities.......................................................................................................... 90
24.2 Minimum Supervisory and Investigatory Powers.................................................................................... 90
24.3 Member State Takeover Frameworks.................................................................................................... 92
24.4 MAR Legislative and Contractual Precedence ....................................................................................... 92
24.5 Member State Administrative Sanctions and Other Administrative Measures......................................... 92
24.6 MSCA Minimum Administrative Sanctions and Measures...................................................................... 93
24.6.1 Maximum Administrative Pecuniary Sanctions: NATURAL PERSONS.............................................. 94
24.6.2 Maximum Administrative Pecuniary Sanctions: LEGAL PERSONS................................................... 95
24.7 Exercise of Supervisory Powers and Imposition of Sanctions ................................................................ 95
SESSION 5 .......................................................................................................... 97
IDENTIFYING MARKET ABUSE, INSIDER DEALING, AND UNLAWFUL
DISCLOSURE OF INFORMATION BEHAVIOUR IN PRACTICE .................... 97
25 SESSION 5ABBREVIATIONS ..................................................................................... 97
25.1 Indicators for Suspicious Transactions................................................................................................... 97
26 INSIDER DEALING SIGNALS AND EXAMPLES........................................................ 98
26.1.1 Unexpectedly Large or Unusual Order .............................................................................................. 99
26.1.2 Out of Line with Historical Behaviour................................................................................................. 99
26.1.3 Immediate Execution of an Order...................................................................................................... 99
26.1.4 Unusual Trading in Shares................................................................................................................ 99
26.1.5 Employee's Own Account Transaction.............................................................................................. 99
27 MARKET MANIPULATION SIGNALS AND EXAMPLES ............................................ 99
27.1 Three possible signals of Market Manipulation....................................................................................... 99
27.1.1 Order Size ........................................................................................................................................ 99
27.1.2 Valuation Modification....................................................................................................................... 99
27.1.3 Bypassing Trading Safeguards ......................................................................................................... 99
27.2 Practical Examples of Market Manipulation............................................................................................ 99
28 EXAMPLE CASES ..................................................................................................... 101
28.1 Jabre Case.......................................................................................................................................... 101
28.2 Square Mile Securities Ltd (10 January 2008)...................................................................................... 101
28.3 BlackRock: Mark Lyttleton (October 2016)........................................................................................... 102
29 UNLAWFUL DISCLOSURE OF INFORMATION SIGNALS AND EXAMPLES......... 102
29.1 Factors to be taken into account in determining whether or not behaviour amounts to unlawful disclosure
(UK) 103
29.2 Indications of Unlawful Disclosure of Information ................................................................................. 103
29.3 Examples of Possible Inside Information Concerning the Corporation ................................................. 104
30 CROSS-MARKET MANIPULATION .......................................................................... 105
30.1 Nasdaq QMX SMARTS ....................................................................................................................... 106
31 THE STOR FRAMEWORK ........................................................................................ 106
31.1 STOR-related Communications ........................................................................................................... 107

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31.2 FCA STOR Supervisory Visits ............................................................................................................. 107
31.3 FCA Connect....................................................................................................................................... 107
31.4 Analysing the STOR Template............................................................................................................. 111
31.5 STOR Section 3 (Description of the Nature of the Suspicion)............................................................... 117
31.6 STOR Section 4 (Identity of Entity/Person Suspected)......................................................................... 119
31.7 STOR Section 5 (Additional Information) ............................................................................................. 120
31.8 STOR Section 6 (Documentation Attached)......................................................................................... 120
SESSION 6 ........................................................................................................ 122
IMPLEMENTING AND UPDATING MARKET ABUSE COMPLIANCE
PROGRAMMES.............................................................................................. 122
32 SESSION 6 ABBREVIATIONS .................................................................................. 122
33 MARKET ABUSE OPERATIONAL COMPLIANCE ................................................... 122
33.1 The FCA's General Enforcement Powers............................................................................................. 123
33.2 FCA Thematic Review: Asset Management Firms and the Risk of Market Abuse (February 2015) ...... 123
33.3 Commodities Trading Thematic (CT) Review (September 2015).......................................................... 124
33.4 MAD 2 MAR Operational Review......................................................................................................... 125
33.5 MAD 2 MAR Regulatory Compliance Policy......................................................................................... 125
33.6 MAD 2 MAR Operational Compliance Framework ............................................................................... 126
33.6.1 MAID Risk Assessment................................................................................................................... 127
33.6.2 Sample MAID Risk Metrics ............................................................................................................. 128
33.7 Developing MAIDOC Programmes and Manuals ................................................................................. 129
33.8 Pre-Trade Controls and Surveillance (Real-time and Post-trade)......................................................... 131
33.8.1 Pre-Trade Controls ......................................................................................................................... 131
33.8.2 Post-Trade Surveillance.................................................................................................................. 131
33.8.3 Case Study: W H Ireland (WHI) Fined £1.2 Million by the FCA ....................................................... 133
33.9 Insider Lists ......................................................................................................................................... 134
33.10 Record Keeping................................................................................................................................... 135
33.11 STOR Storage..................................................................................................................................... 136
33.12 Investment Recommendations............................................................................................................. 136
33.12.1 Disproportionate Disclosure ....................................................................................................... 137
33.12.2 Investment Strategy Type B Persons and Experts...................................................................... 137
33.12.3 Conflicts of Interest .................................................................................................................... 138
33.12.4 Investment Strategy Type B Persons and Experts Conflicts of Interest Disclosures ................... 139
34 MODIFICATION OF EXISTING INFORMATION TECHNOLOGY
INFRASTRUCTURES............................................................................................................. 140
35 ORGANISATION: SYBENETIX ................................................................................. 140
35.1 Solution: Sybenetix Compass .............................................................................................................. 140
36 ORGANISATION: NICE ............................................................................................. 141
36.1 Solution: NICEActimize........................................................................................................................ 141
36.1.1 NICEActimize - Trading Surveillance Solution................................................................................. 141
37 ORGANISATION: R3COGNITION............................................................................. 143
37.1 Solution: r3cognition ............................................................................................................................ 143
37.1.1 r3cognition - Trade Surveillance and Monitoring System................................................................. 143
37.1.2 Advantages..................................................................................................................................... 143
37.1.3 Areas Covered................................................................................................................................ 143
37.1.4 Surveillance System: r3cognition Web............................................................................................ 144
37.1.5 Benefits .......................................................................................................................................... 145

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37.1.6 Trading Activity Statistics: Activity Statistics.................................................................................... 145
37.1.7 Benefits .......................................................................................................................................... 145
38 ORGANISATION: CINNOBER................................................................................... 145
38.1 Solution: Cinteg™................................................................................................................................ 145
38.1.1 Cinteg - Turnkey Surveillance System ............................................................................................ 145
39 ORGANISATION: SOFTWARE AG........................................................................... 147
39.1 Solution: Software AG Capital Markets: Market Surveillance and Monitoring ....................................... 147
39.1.1 Software AG Apama Trade Surveillance and Market Surveillance .................................................. 147
39.1.2 Trade Surveillance.......................................................................................................................... 147
39.1.3 Benefits .......................................................................................................................................... 147
39.1.4 Market Surveillance ........................................................................................................................ 148
39.1.5 Benefits .......................................................................................................................................... 148
APPENDIX 1...................................................................................................... 149
Directive 2014/57/EU of the European Parliament and of the Council of 16
April 2014 on criminal sanctions for market abuse (market abuse
directive). ....................................................................................................... 149
APPENDIX 2...................................................................................................... 160
Regulation (EU) No 596/2014 of the European Parliament and of the
Council of 16 April 2014 on market abuse (market abuse regulation) and
repealing Directive 2003/6/EC of the European Parliament and of the
Council and Commission Directives 2003/124/EC, 2003/125/EC and
2004/72/EC Text with EEA relevance. .......................................................... 160

Training Manual
FIGURES
Figure 1: AMP RTS Submission Annex ....................................................................................... 73
Figure 2: Overall Market Sounding Requirements ..................................................................... 76
Figure 3: MS Written Minutes or Notes Template (Disclosure of Inside Information) ............ 82
Figure 4: MS Written Minutes or Notes Template (Disclosure of Non-Inside Information).... 83
Figure 5: MS Cessation of Inside Information Template............................................................ 84
Figure 6: Example MAIDOC Framework .................................................................................... 128
Figure 7: MAIDOC Programme Areas ........................................................................................ 129
Figure 8: MAID Defence Framework .......................................................................................... 130
Figure 9: Pre-Trade Risk Management ...................................................................................... 132
Figure 10: Post-Execution and Back Office Risk Management............................................... 133
Figure 11: Objective Presentation of Recommendations Requirements............................... 136
Figure 12: Additional Presentation of Recommendations Requirements ............................. 137
Figure 13: Additional Presentation of Recommendations Requirements ............................. 139

Training Manual
TABLES
Table 1: CHAPTER 1 Abbreviations ............................................................................................. 17
Table 2: MiFID II definitions of multilateral system, investment firm, and market operator .. 28
Table 3: MiFID II definitions of financial instruments and investment services and activities
......................................................................................................................................................... 29
Table 4: Annex II of the Emissions Directive .............................................................................. 32
Table 5: MAR Full Scope Financial Instruments......................................................................... 33
Table 6: MAR Partial Scope Financial Instruments .................................................................... 33
Table 7: Four Types of Inside Information .................................................................................. 34
Table 8: Insider Dealing Applicability .......................................................................................... 36
Table 9: Five types of Market Manipulation activities ................................................................ 38
Table 10: Seven Indicators of Manipulative Behaviour.............................................................. 39
Table 11: Five types of Market Manipulation Behaviour............................................................ 39
Table 12: Type 3 Effect .................................................................................................................. 40
Table 13: CHAPTER 2 Abbreviations........................................................................................... 44
Table 14: Six requirements for Arrangements, Systems, and Procedures.............................. 45
Table 15: Three Outsourcing Conditions .................................................................................... 47
Table 16: MAR Articles 16(1) and 16(2) Persons ........................................................................ 48
Table 17: Five STOR Contents...................................................................................................... 48
Table 18: FCA SIF Functions ........................................................................................................ 51
Table 19: FCA Number of Suspicious Transaction Reports (STRs) received by the FCA
(2013-2015)...................................................................................................................................... 52
Table 20: Six TIOS and BBP Conditions...................................................................................... 55
Table 21: Four Pre-Trading Public Information Disclosures..................................................... 56
Table 22: Five Conditions for Trading ......................................................................................... 57
Table 23: Trading Restrictions, Restricted Activities, and Exemptions................................... 58
Table 24: Three definitions of Limited Period............................................................................. 60
Table 25: Five Stabilisation of Securities Conditions ................................................................ 61
Table 26: Six Pre-Offer Disclosures ............................................................................................. 62
Table 27: Three definitions of Limited Period............................................................................. 63

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Table 28: Stabilisation Price Conditions ..................................................................................... 63
Table 29: Ancillary Stabilisation Conditions............................................................................... 64
Table 30: Chapter 3 Abbreviations............................................................................................... 65
Table 31: AMP Outline Criteria ..................................................................................................... 66
Table 32: AMP Detailed Criteria 1: Transparency....................................................................... 68
Table 33: AMP Detailed Criteria 2: Safeguards........................................................................... 69
Table 34: AMP Detailed Criteria 3: Liquidity and Efficiency...................................................... 70
Table 35: AMP Detailed Criteria 4: Trading Mechanism............................................................. 70
Table 36: AMP Detailed Criteria 5: Market Integrity Risks......................................................... 71
Table 37: AMP Detailed Criteria 6: Investigations ...................................................................... 72
Table 38: AMP Detailed Criteria 7: Structural Characteristics .................................................. 72
Table 39: Five MSCA AMP Notification Elements....................................................................... 73
Table 40: MAR MS Information Requirements............................................................................ 76
Table 41: MAR MS Operational Requirements............................................................................ 76
Table 42: MS Arrangements RTS: Communications (Inside Information) Requirements...... 78
Table 43: MS Arrangements RTS: Communications (Non-Inside Information)....................... 78
Table 44: MS Arrangements RTS: Data Requirements .............................................................. 79
Table 45: MS Arrangements RTS: Cessation of Inside Information Requirements................ 80
Table 46: MS Arrangements RTS: Record Keeping Requirements .......................................... 80
Table 47: MS Arrangements RTS: Record Keeping Requirements .......................................... 81
Table 48: Session 4 Abbreviations............................................................................................... 86
Table 49: BBP Exemption Conditions.......................................................................................... 87
Table 50: Stabilisation of Securities Exemption Conditions..................................................... 88
Table 51: MSCA Minimum Supervisory and Investigatory Powers .......................................... 91
Table 52: MAR Infringements........................................................................................................ 92
Table 53: MSCA Minimum Administrative Sanctions and Measures ....................................... 93
Table 54: Maximum Administrative Pecuniary Sanctions for Natural Persons....................... 94
Table 55: Maximum Administrative Pecuniary Sanctions for Legal Persons.......................... 95
Table 56: MSCA All Relevant Circumstances Issues................................................................. 96

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Table 57: Session 5 Abbreviations............................................................................................... 97
Table 58: Practical Examples of Market Manipulation Practices .............................................. 99
Table 59: Session 6 Abbreviations............................................................................................. 122
Table 60: Risk Selection Scorecard (Adapted from CEB Compliance & Ethics Leadership
Council, Building a Risk-Based Monitoring Dashboard)......................................................... 127
Table 61: Sample Insider Dealing Risk Metrics......................................................................... 128
Table 62: Sample Market Manipulation Risk Metrics ............................................................... 128

Training Manual
LIST OF ABBREVIATIONS
Abbreviation Term
AMP Accepted Market Practices
APEA Auctioned Product based on an Emission Allowance
APs Auctioned Products
APsEAs Auctioned Products based on Emission Allowances
BBP Buy-Back Programmes
CATV Competent Authority of the Trading Venue
CDS Credit Default Swaps
CEP Complex Event Processing
CFD Contracts for Difference
CH4 Methane
CO2 Carbon Dioxide
CPS Crown Prosecution Service
CSMAD Criminal Sanctions for Market Abuse Directive
CT Commodities Trading Thematic
DMP Disclosing Market Participant
EA Emission Allowance
EAM Emission Allowance Market
EAMP Emission Allowance Market Participant
EASP Effective Arrangements, Systems and Procedures
EFSF The European Financial Stability Facility
ESCB European System of Central Banks
ESM European Stability Mechanism
ESMA European Securities and Markets Authority
ESMA Final
Report
ESMA Final Report (Draft Technical Standards on the Market Abuse Regulation)
EU European Union
FCA Financial Conduct Authority
FI Financial Instrument
FSA Financial Services Authority
FSMA Financial Services and Markets Act
HFCs Hydrofluorocarbons
IFOTV Investment Firms Operating a Trading Venue
IRO Independent Review Obligation
IT Information Technology
ITS Implementing Technical Standards
LEI Legal Entity Identifier
MAD Market Abuse Directive (Directive 2003/6/EC)
MAD 2 Updated Market Abuse Directive (Directive 2014/57/EU) (The Directive)

Training Manual
Abbreviation Term
MAID Market Abuse and Insider Dealing
MAIDOC Market Abuse and Insider Dealing Operational Compliance
MAR Market Abuse Regulation (Regulation No 596/2014) (The Regulation)
MATA Market Triage and Allocation
MiFID II Markets in Financial Instruments Directive II (Directive 2014/65/EU)
MiFIR Markets in Financial Instruments Regulation (Regulation No 600/2014)
MS Market Soundings
MS&F Market Surveillance and Forensics
MSCA Member State Competent Authority
MSR Market Sounding Recipient
MTF Multilateral Trading Facility
N2O Nitrous Oxide
NCAs National Competent Authorities
OTF Organised Trading Facility
PAN Permanent Account Number
PDMRs Persons Discharging Managerial Responsibilities
PFCs Petrofluorocarbons
PPAETs Persons Professionally Arranging or Executing Transactions
RM Regulated Market
RSO Reasonably Suspicious Orders
RTS Regulatory Technical Standards
SCC Spot Commodity Contracts
SCP Stabilisation Central Point
SEBI Securities and Exchange Board of India
SEC United States Securities and Exchange
SF5 Sulphur Hexafluoride
SIF Significant Influence Function
SMFG Sumitomo Mitsui Financial Group
SPV Special Purpose Vehicle
SSI Standard Set of Information
STORs Suspicious Transaction and Order Reports
STR Suspicious Transaction Report
STRs Suspicious Transaction Reports
SYSC Senior Management Arrangements Systems and Controls
TFEU Treaty on the Functioning of the European Union
TIOS Trading In Own Shares
TOB Transaction, Order or Behaviour
TOBB Transaction, Order, Bid or Behaviour
UK United Kingdom

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Abbreviation Term
WHI W H Ireland

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LIST OF RELEVANT DOCUMENTS
NO DATE ORGANISATION TITLE REF
1 14 November 2013 ESMA Discussion Paper: ESMA's policy
orientations on possible implementing
measures under the Market Abuse
Regulation).
2013/1649
2 February 2015 FCA Asset management firms and the risk
of market abuse.
TR15/1
3 July 2015 FCA Financial Benchmarks: Thematic
review of oversight and controls.
TR15/11
4 November 2015 FCA Policy Proposals and Handbook
changes related to the implementation
of the Market Abuse Regulation
(2014/596/EU).
CP15/35
5 November 2015 FCA Provisions to delay disclosure of inside
information within the FCA's
Disclosure and Transparency Rules.
CP15/38
6 December 2015 FCA Flows of Confidential and Inside
Information.
TR15/13
7 28 January 2016 ESMA Consultation Paper Draft Guidelines on
the Market Abuse Regulation
(ESMA/2016/162).
8 April 2016 FCA Policy Statement: Implementation of
the Market Abuse Regulation
(2014/596/EU), including feedback on
CP15/35 and CP15/38, and related
amendments to the Handbook.
PS16/13
9 2016 HM Treasury The Financial Services and Markets
Act 2000 (Market Abuse) Regulations
2016 (DRAFT).
2016 No
0000

S7C - MAD 2 MAR: Operational Compliance

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