BGC Brokers and two GFI subsidiaries get a £4.8 million fine

According to a recent report, the Financial Conduct Authority (FCA), the UK’s financial watchdog, has fined several brokerages, including BGC Brokers LP, as well as two subsidiaries of GFI Gropu — GFI Brokers Ltd. and GFI Securities Ltd. The fine in question is £4,775,200, and the regulator deemed it necessary due to the companies’ failure to implement MAR trade surveillance requirements.

Three brokers operated with inadequate systems for two years

The FCA stated that the failure to comply with the requirements left the customers open to potential market abuse due to the failure to provide appropriate control systems. The statement further says that failure to comply with the requirements led to a major increase in the risk of suspicious trading activity, which went undetected by the brokerages.

The trading companies operated with this flaw for almost two years, according to the regulator. The investigation uncovered that they lacked adequate surveillance processes between 2016 and 2018. During this period, the firms were unable to detect market abuse, and the companies’ existing systems also did not cover all asset classes that they should have, as required by the market abuse regulation (MAR).

The fine that the FCA originally came up with was actually around 30% larger, sitting at £6.82 million. However, the inter-dealer brokers agreed to resolve the case during its early stages, and admit their fault. As a result, the FCA was willing to reduce the fine.

One thing that the FCA did not specify, however, is how the penalty was divided between the three entities. There is no indication whether each firm has the same amount that it has to pay, or if one or two were found to be more guilty than the other(s).

The importance of keeping the systems upgraded

The regulator pointed out that BGC and GFI managed to improve their systems already, adding adequate levels of oversight and control, which should reduce the risks moving forward. The FCA’s Executive Director of Enforcement and Market Oversight, Mark Steward, commented on the situation, noting that the oversight of the markets works as a regulated partnership between market participants and the FCA itself. With that in mind, any gaps in the companies’ ability to monitor the market and detect any abusive trading behavior pose a direct risk to market integrity.

He said that the case involving the three regulators should serve as an example of the FCA’s determination to make sure that brokers would always prioritize the integrity of the market and that they would maintain the highest standards of compliance. This is the only way to keep their clients — as well as the market itself — safe from manipulation.

Since MAR was implemented six years ago, the fined firms clearly made a two-year gap before upgrading their systems to fit the requirements, leaving users exposed to the high risk of fraud. Meanwhile, the FCA — which conducts self-supervision of abuse — depends on the data from the market participants in order to be able to monitor the risks and market changes accurately