FCA’s Market Watch 76

The FCA published 'Market Watch 57' in 2018; however, they have stated that they continue to see instances of possible flying and printing in several markets, including fixed income, commodities, and currencies in instruments such as bonds, swaps and options.

Flying is an instance where a firm communicates to its clients that has bids/offers when they are not supported by, or derived from, an order or a trader’s actual instruction.

Printing is when a firm communicates that a trade has been executed at a specified price/size when no such trade has taken place.

To reduce the negative effects caused by flying and printing, firms are encouraged to:

1.      Ensure compliance manuals prohibit flying and printing, and that annual attestations of compliance are obtained. Senior management should ensure that they effectively communicate their expectations on culture and compliance to policy.

2.       Ensure that training includes the nature of and the prohibition of flying and printing and the consequences of such behaviours. Firms may also want to consider enhanced training for desks considered to be higher risk.

3.       Take all steps to assure themselves that surveillance procedures to identify and report flying and printing are robust, and that the behaviours are considered in risk assessments. Factors to be considered could include properly targeted surveillance to identify spread compression, order cancellation rates, order to trade ratios, and the lexicons embedded in e-comms surveillance systems.

4.       Ensure that disciplinary procedures offer clear and consistent processes for dealing with misconduct, and that commercial interests are not drivers of outcomes.