Shearman & Sterling LLP | FinReg | FICC Markets Standards Board Final Guidelines on Surveillance and Training in Wholesale Markets
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  • FICC Markets Standards Board Final Guidelines on Surveillance and Training in Wholesale Markets

    12/08/2016
    The Fixed Income, Currency and Commodities Markets Standard Board published guidelines on surveillance and training in wholesale markets. The guidance is outlined in the FMSB's Statement of Good Practice for Surveillance in Foreign Exchange Markets and Statement of Good Practice for Conduct Training. The Statement of Good Practice for Surveillance highlights the FMSB's Core Principles that firms should consider in advance of designing and implementing their surveillance measures in the foreign exchange markets, such as ensuring that: (i) the surveillance function is independent of front office; (ii) there are effective governance controls; and (iii) there is a regular review of surveillance systems to ensure that they are fit for purpose given the element of constant change in risk. It also identifies emerging practices to combat the risk of insider dealing and market manipulation, including the use of automated voice surveillance systems using techniques such as Natural Language Processing.

    The FMSB’s Statement of Good Practice for Conducting Training sets out Core Principles for member firms to conduct training and the good practices that should be followed to achieve the desired outcomes. Member firms should have a clear organizational structure for delivering a risk-based program of conduct training that is appropriate to their firm. The FMSB highlights that, amongst other things, whilst there is no clear consensus on which function within a firm should be responsible for determining the conduct training needs, it has specified some elements for a training framework, including clear roles and responsibilities for administering the framework and strong first line accountability for decision-making. The FMSB has also recommended that senior front office management should play a bigger role in conduct training to enable face-to-face discussion with staff on conduct issues.

    The FMSB was established in 2015 and has developed standards to improve conduct in the FICC markets. The Statements of Good Practice are not part of the FMSB Standards and are not binding on FMSB members, but reflect the FMSB’s view of what constitutes good or best practice in the areas covered.

    View the Statement of Good Practice for Surveillance in Foreign Exchange Markets.

    View the Statement of Good Practice for Conducting Training.