Introduced in July 2016, the Market Abuse Regulation (MAR) replaced the Market Abuse Directive (MAD) to create a stronger, more uniform framework for tackling insider trading and market manipulation across EU financial markets. Today, MAR is a cornerstone of financial regulation, ensuring fairness and transparency. Increasing regulatory obligations in European financial markets have fueled the growth of Regulatory Technology (Regtech) as markets continue to grow and technology advances.

Whether looking at equities, fixed interest, commodities, or any other investment market, market integrity, trust, and investor protection are central to their success. In essence, MAR ensures that everyone follows the same rules, keeping markets honest and trustworthy.

In this article, we will examine MAR compliance and surveillance obligations and their impact on broader trading activities.

Understanding MAR regulations

MAR is an EU regulatory framework designed to prevent market manipulation, insider trading, and unfair trading practices. Its core objective is simple: to ensure transparency, fairness, and equal opportunity in financial markets and prevent any participant from gaining an unfair advantage.

Those operating in the financial markets will likely already be well aware of the ever-changing regulatory environment, and while it has evolved over time, MAR maintains several key objectives in aid of the fight to retain market integrity.

Key objectives of MAR

With the broad objectives of MAR in mind, it is worth exploring the regulations’ key objectives in more detail:

Enhancing market transparency

To ensure that all investors have equal access to material information, MAR requires listed entities to disclose inside information that could impact asset prices.

Preventing insider trading and market abuse

The regulations prohibit individuals with non-public information from trading financial assets for personal gain. They also include additional trading practices such as spoofing, pump-and-dump schemes, and false rumours that can mislead investors and markets.

Ensuring fair competition among market participants

Fair competition relies on a level playing field where no trader or institution has an unfair advantage. This promotes confidence, which then creates additional liquidity and more efficient markets.

Key provisions of MAR

In order to appreciate the regulatory obligations of MAR, it’s important to be aware of its key provisions:

Insider trading

• What is insider trading?: Trading which leverages non-public information that, if made public, would significantly affect the price of an asset.
• How does insider trading occur?: Executives, employees, or other connected individuals use privileged information for personal gain or pass it on to third parties.

Regtech is a powerful tool that allows companies to monitor trading activity for suspicious patterns, analyse communications, and flag activity for further investigation.

Market manipulation

• What is market manipulation?: Any attempt to deliberately alter the value of a financial instrument by way of misleading or illegal trading practices.
• What are some examples of market manipulation?: Prohibited trading practices include spoofing, wash trading, pump and dump, pinging and layering.

Using enhanced Regtech, real-time data analysis allows companies and regulators to spot suspicious patterns in trading behaviour. Machine learning allows the systems to adapt to new manipulation tactics, which may involve cross-border trading activity.

Obligations for financial firms

Under MAR, financial firms are required to take several steps to ensure their compliance.

• Trade surveillance: Firms must monitor employee and client trading activity using multiple data sources and flag trades that deviate from standard patterns.
• Reporting suspicious transactions: Firms have a legal obligation to report suspicious transactions to regulators promptly and with supporting evidence.
• Maintaining market integrity: Through internal controls, firms must have clear policies on market abuse, staff training and the use of RegTech to enhance detection accuracy/rates.

To put this into perspective, a report by Thomson Reuters back in 2020 noted an increase in global regulatory changes from 10 a day in 2008 to 200 a day by 2016. What will the figures be today with the introduction of digital assets and even tighter regulations on traditional trading?

Best practices for MAR compliance

When it comes to compliance with MAR, many different factors must be considered. Each is an important part of the overall picture and provides a degree of regulatory and legal cover for the companies.

Implementing robust surveillance systems

Rather than seeing the implementation of surveillance systems as a burdensome cost, it should be considered an investment. These systems can analyse huge amounts of data in real-time, highlighting suspicious activity such as insider trading and market manipulation. One key to long-term success is the ability of machine learning algorithms to detect unusual trading prior to the release of critical news.

Reflecting the constant improvement and adoption of Regtech services, contextual analysis has seen a significant fall in false positives. This ensures compliance teams are not overwhelmed by unnecessary notifications that may require additional action.

We can only estimate the level of cross-market manipulation as only recent technological enhancements have allowed the tracking of multiple asset classes and markets. For example, manipulating the price of oil in commodities markets can influence the value of options contracts.

Employee training on market abuse

Training is now a core element of any business, but it is particularly important in financial services and MAR. Employees must be trained to recognise potential market abuse, be clear about the internal code of conduct, and understand acceptable and prohibited trading practices. When all employees work together, this creates an additional level of compliance, which benefits everyone.

Some firms conduct simulated compliance drills to test employee responses to insider trading leaks or suspicious trades. These exercises provide practical exposure, helping employees recognise and respond to potential market abuse in real scenarios.

Enhancing internal controls and reporting mechanisms

When looking at the cutting-edge technology used in Regtech, it isn’t difficult to see the importance of enhanced internal controls and reporting mechanisms. These mechanisms not only protect firms from regulatory actions but also help maintain market integrity and transparency.

While real-time monitoring (which is reported to regulators) may not be enough to prevent insider trading, it has undoubtedly reduced its frequency. In reality, looking back over suspicious trades and gathering strong evidence of illegal activity and manipulation is as critical as real-time monitoring.

We only need to look back 20 or 30 years to see the collapse of numerous alleged insider trading cases due to overly technical or insufficient evidence. The introduction of whistle-blower protection and anonymous reporting has strengthened ethical trading enforcement.

By implementing these best practices, firms can reduce regulatory risks, enhance operational efficiency, and maintain strong investor market confidence.

How eflow helps firms stay MAR-compliant

eflow provides advanced Regtech solutions to help financial firms comply with MAR regulations efficiently and effectively.

• Trade Surveillance & Market Abuse Detection: eflow’s trade surveillance system monitors trading activity, identifying suspicious patterns such as insider trading and market manipulation.
• Dynamic Reporting & Automated Compliance Tools: Our platform automates MAR reporting, reducing manual workload and ensuring timely and accurate Suspicious Transaction and Order Reports (STORs).
• Regulatory Adaptability: eflow’s solutions are continuously updated to align with evolving MAR requirements, helping firms stay ahead of regulatory changes without overhauling their compliance framework.

eflow combines AI-driven automation, post-trade surveillance, and regulatory adaptability to help firms reduce compliance risks, improve efficiency, and maintain market integrity in an evolving regulatory landscape.

Conclusion

The Market Abuse Regulation (MAR) is more than just a legal requirement; it is essential for ensuring fair, transparent, and trustworthy financial markets. MAR protects investors and upholds market integrity by preventing insider trading and market manipulation. However, compliance is not without its challenges. Firms must navigate complex reporting obligations, evolving regulations, and increasing surveillance demands.

Financial institutions need smart, efficient, and scalable compliance solutions to stay ahead. This is where Regtech plays a critical role. Advanced tools like eflow’s trade surveillance, automated reporting, and AI-driven risk detection can help firms reduce regulatory risks, enhance operational efficiency, and maintain investor confidence.

Now is the time for firms to strengthen their compliance frameworks. By embracing Regtech-powered MAR compliance, businesses can meet regulatory obligations and gain a competitive edge in today’s fast-moving financial landscape. Are you ready to take control of your MAR compliance? Let’s talk.