Market Abuse Regulation (MAR)
The Market Abuse Regulation (MAR) is a comprehensive European Union regulatory framework designed to enhance market integrity and investor protection. It establishes strict rules around insider dealing, unlawful disclosure of inside information, and market manipulation across financial instruments traded on regulated markets, MTFs, and OTFs.
Core components of MAR
MAR creates a robust framework for detecting and preventing market abuse through several key mechanisms:
Inside information handling
- Mandatory disclosure requirements for inside information
- Insider lists maintenance and reporting
- Controls on delayed disclosure of inside information
- Requirements for trade surveillance systems
Market manipulation prevention
- Prohibition of manipulative trading practices like spoofing
- Requirements for suspicious transaction and order reporting (STOR)
- Enhanced monitoring of algorithmic trading activities
- Integration with real-time trade surveillance
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Technical implementation requirements
Data capture and storage
MAR requires firms to implement comprehensive data management systems that can:
- Capture and store all order and trade data
- Maintain detailed audit trails
- Support transaction latency analysis
- Enable trade reconstruction
Surveillance system capabilities
Modern MAR compliance requires sophisticated surveillance systems featuring:
- Pattern recognition for abuse detection
- Integration with market data feed handlers
- Real-time alerting capabilities
- Machine learning for false positive reduction
Cross-market surveillance requirements
MAR mandates comprehensive cross-market surveillance to detect abuse across:
- Multiple trading venues
- Different asset classes
- Related instruments
- OTC markets
This requires sophisticated data aggregation and analysis capabilities to identify potential manipulation across markets.
Impact on trading operations
Order handling requirements
- Implementation of pre-trade controls
- Enhanced audit trail requirements
- Integration with order management systems
Risk controls
- Enhanced pre-trade risk checks
- Implementation of algorithmic risk controls
- Regular testing and calibration requirements
Reporting obligations
MAR establishes comprehensive reporting requirements:
STOR reporting
- Suspicious Transaction and Order Reports
- Standardized reporting format
- Timely submission requirements
- Documentation of investigation process
Record keeping
- Minimum 5-year retention period
- Complete order and trade records
- Communication records
- Analysis and investigation documentation
Integration with other regulations
MAR operates alongside other key regulations:
- MiFID II for market structure requirements
- EMIR for derivatives reporting
- Best execution policies requirements
This requires firms to maintain integrated compliance systems that address multiple regulatory frameworks simultaneously.
Market abuse detection technologies
Modern MAR compliance leverages advanced technologies:
- Machine learning for pattern recognition
- Natural language processing for communications surveillance
- Big data analytics for cross-market manipulation detection
- Real-time monitoring and alerting systems
Future developments
The regulatory landscape continues to evolve with:
- Enhanced focus on crypto-asset markets
- Integration of artificial intelligence in surveillance
- Cross-border coordination of enforcement
- Adaptation to new trading technologies
These developments require firms to maintain flexible and adaptable compliance systems that can evolve with regulatory requirements.