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Challenges in market-abuse monitoring: Post MiFID
Since the implementation of the Markets in Financial Instruments Directive (MiFID) in 2007, the fragmentation and complexity of securities trading have increased and continue to do so even more particularly after the advent of MiFID2/MiFIR in 2018. European regulators, venues and investment firms are all required to contribute to the overall market-abuse monitoring but under widely different conditions and with access to totally different datasets with shifting quality and coverage. The emergence of the market abuse legislation since the first Market Abuse Directive from 2003 has meant that the obligations and expectations have steadily increased, which raises the questions of whether there is a big gap between what is expected and what is possible given the current situation, and what measures can be taken to close this gap. In this paper, the author evaluates the monitoring process with emphasis on the detection phase and the importance of correct trading data to enable the first steps in automating the detection of suspicious market abuse. The different startingpoints for regulators, venues and firms and their respective access and lack of necessary information result in an apprehension that no single entity is capable of collecting and conducting monitoring of correct, detailed data with full coverage.
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Peter Nylén has been working in the field of market surveillance since 2000, when he joined the Stockholm Stock Exchange’s (NASDAQ Stockholm) surveillance team. Subsequently, he spent five years at Finansinspektionen (the Swedish Financial Supervisory Authority) as a senior market abuse investigator before moving on to the Scandinavian multilateral trading facility (MTF) Burgundy as Head of trading surveillance until that organisation was acquired by Oslo Börs in 2013. Peter is currently Head of Outsourced Trading Surveillance (OTS) at the Swedish RegTech company Trapets AB. The OTS team is an independent department within Trapets that delivers real-time trading surveillance as an outsourced service to a growing number of European investment firms covering investigation and reporting cases of market abuse. Along with heading the OTS team, Peter is also the Product Manager for the trade surveillance system InstantWatch Market and is deeply involved in implementing this system with clients around the globe. This gives him a unique insight into the current market abuse-monitoring challenges for regulators, venues and firms combined with a solid experience of operational monitoring.