Market abuse regulation: meeting FCA expectations

In its 2026 wholesale markets priorities report, the FCA named prevention of financial crime and market abuse as a key focus for the year ahead. Noting weaknesses across data feeds, alert calibration, and surveillance governance, the regulator expects firms to have robust systems in place to identify, prevent and report market abuse. This has been reinforced further through a rise in enforcement activity, high-profile fines, and a recent FCA speech.  

However, increasing trading complexity, cross-asset activity and reliance on technology are placing greater pressure on firms' control environments. As such, many firms struggle to demonstrate an effective market abuse framework, creating further risks relating to financial crime, regulatory action and reputational damage.  

Improving the market abuse risk assessment 

Market abuse regulation is underpinned by a robust market abuse risk assessment. This maps risks across business models, products, trading activities and clients, linking them to the relevant preventative and detective controls. From a risk management standpoint, this document provides the basis for firms to calibrate their surveillance work, while demonstrating a proportionate approach.  

However, it can be challenging to keep the risk assessment up to date and many firms’ documents no longer reflect current business activities. As a result, they’re often disconnected from the surveillance scenarios configured in the firm's monitoring systems. This makes it tricky for firms to demonstrate how their market abuse controls align with regulatory requirements or the firm’s own risk appetite. 

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Market abuse surveillance coverage and calibration 

Effective surveillance is an integral element of FCA market abuse regulation, and surveillance frameworks often evolve in line with new products or emerging expectations. As a result, they can become fragmented over time, with gaps between identified risks and configured monitoring scenarios.  

Additionally, firms often rely heavily on third-party systems without a clear understanding of how alerts are generated. They may not know whether coverage extends across all relevant asset classes and trading behaviours. Mapping each monitoring scenario back to an identified risk keeps market abuse surveillance comprehensive and helps close gaps quickly. 

Alert calibration  

Poorly calibrated surveillance alerts can lead to excessive false positives or, more critically, failure to detect genuine abusive behaviour. Incomplete or inaccurate data flowing into surveillance systems further weakens the effectiveness of monitoring and testing activities. Regular tuning, informed by alert outcomes and investigation feedback, helps firms keep detection thresholds proportionate as trading patterns shift.  

Data quality is crucial 

Surveillance systems are only as effective as their underlying data. Incomplete transaction records, missing reference data, or inconsistent flows from order management systems can cause suspicious activity to go undetected. Firms need robust, accurate data governance to check that all orders, amendments, cancellations and transactions are captured correctly. Clear data lineage, from capture through to the surveillance engine, also helps demonstrate completeness to the regulator. 

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Escalation, STORs and the documentation gap 

When creating a suspicious transaction and order report (STOR), firms need to be able to detect potential abuse, investigate it and reach a conclusion. But inconsistent escalation thresholds and investigation processes across desks, regions or asset classes mean that similar activity can be treated differently by different teams. This can result in poor audit trails and firms can struggle to demonstrate to the regulator why they opted, or didn’t opt, to escalate the findings.  

Effective training at the first line 

Preventing and detecting market abuse is a responsibility across all three lines of defence. So, it’s essential to ensure first line teams (including front office staff, traders and business managers) are well trained in identifying and escalating suspicious activity. First line teams need to know what spoofing looks like, where information leakage risks arise in their workflows, and how to escalate any issues. As such, it’s essential to tailor workshops to the firm's specific trading flows, risk profile and individual job roles.  

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Building a resilient market abuse framework 

Across all three lines of defence, firms need effective governance and oversight to ensure their market abuse regulation framework is current, proportionate and fit for purpose. That starts with a thorough and up-to-date market abuse risk assessment, which should inform surveillance coverage, alert calibration and the production of well-documented STORs. Firms looking to strengthen their position should consider the following: 

• Establish a comprehensive and regularly updated market abuse risk assessment, clearly linked to surveillance scenarios. 
• Ensure end-to-end coverage of trading activity, including cross-asset and cross-market risks. 
• Validate data quality and completeness feeding into surveillance systems.  
• Review and recalibrate alert thresholds to balance detection and operational efficiency.  
• Strengthen STOR decision-making processes and documentation standards.  
• Deliver practical, scenario-based training to front office and compliance teams.  
• Enhance governance and MI to enable effective oversight and challenge. 

For more information on market abuse regulations, contact Rebecca Deane.