MAR: Market Abuse Regulation

Definition

The Market Abuse Regulation, commonly known by its acronym MAR, is a European Union regulation that establishes a harmonised framework to prevent and detect unacceptable practices in financial markets.

These include insider dealing, unlawful disclosure of inside information, and market manipulation.

The regulation is directly applicable in all member states, intended to enhance investor protection and market integrity, and to ensure that financial instruments and trading venues are subject to transparent and consistent rules.

Within the AML/CFT context, MAR is particularly relevant because market abuse often intersects with money laundering, fraud, sanctions breaches, and other financial crime.

Manipulation of securities, misuse of inside information, or artificially influencing market prices may either be a standalone violation or part of a larger laundering or fraud scheme.

Financial institutions, securities firms, and regulated entities, therefore, must integrate MAR-related controls alongside their AML/CFT regimes.

Explanation

MAR provides a single regulatory standard across the EU for abusive behaviour in financial markets.

By being a regulation rather than a directive, it applies uniformly without needing national transposition.

It covers not only regulated markets but also multilateral trading facilities and organised trading facilities, as well as instruments that have an effect on such financial instruments, even if they are traded off-venue.

The regulation defines key offences such as insider dealing, unlawful disclosure of inside information, and market manipulation.

It places obligations on issuers, trading venues, market participants, and competent authorities to detect, report, and sanction abusive behaviours.

Market participants must implement systems, controls, and governance frameworks to monitor and prevent these abuses.

In relation to AML/CFT, the relevance arises from the fact that abuse of markets may support underlying criminal activity.

For example, insider trading may generate illicit profits which need to be laundered; market manipulation may be used to facilitate placement or layering of illicit funds; and suspicious trading patterns may indicate broader organised crime.

Therefore, integration of MAR compliance and AML/CFT controls enhances the overall financial crime risk framework.

Application of MAR in Compliance Frameworks

MAR has application across several dimensions of compliance, including risk assessment, monitoring, governance, reporting, and investigation.

The following highlights key areas of intersection.

Obligations on Issuers and Market Participants

• Issuers must ensure that any inside information is publicly disclosed without undue delay unless delaying is justified and permitted under narrow conditions.
  
• Market participants must establish insider lists, control access to inside information, and maintain records of persons with such access.
  
• Trading venues must have arrangements and systems in place to detect and report suspicious orders or transactions.
  
• Competent authorities must cooperate across borders, share information, and enforce sanctions for infringements.
  

Monitoring and Detection

• The regulation mandates the detection of trading patterns or orders that may represent manipulation of prices or signals.
  
• It requires surveillance of market soundings, communications before public announcements, to prevent misuse.
  
• It demands controls around buy-back programmes and stabilisation transactions to ensure they do not constitute abusive behaviour.
  

Governance and Compliance Structure

• Firms subject to MAR must design internal controls, compliance monitoring, reporting lines, record-keeping, and audit systems.
  
• They must integrate MAR obligations within their broader governance frameworks, aligning with AML/CFT, sanctions, and other financial crime controls.
  
• Senior management, boards, and compliance functions must ensure they understand their MAR obligations and their interaction with other risk frameworks.
  

Challenges and AML/CFT Integration

• MAR compliance requires real-time monitoring of market and trading data, which overlaps with AML/CFT indicators of transactional abuse.
  
• Financial institutions often need to align their trade surveillance, transaction monitoring, and sanctions screening so that suspicious patterns are detected, reported, and escalated across regulatory domains.
  
• Residual risk from market abuse must be considered alongside money-laundering and terrorist-financing exposure when submitting risk assessments and designing controls.
  

Key Components of MAR

Insider Dealing and Unlawful Disclosure of Inside Information

Insider dealing occurs when a person who possesses inside information uses it by acquiring or disposing of financial instruments relating to that information.

Unlawful disclosure happens when such information is disclosed to any other person outside the normal exercise of employment, profession, or duties.

These offences undermine confidence in market integrity and may facilitate illicit activity.

Market Manipulation

Market manipulation includes various behaviours that give misleading signals regarding financial instruments, distort the price or the market, or manipulate indices or benchmarks.

Such behaviours include spreading false information, conducting transactions that leave a false impression of supply or demand, or rigging benchmarks.

These manipulative behaviours can intertwine with fraudulent or money laundering schemes.

Liability of Trading Venues and Market Participants

MAR imposes obligations not only on issuers and investors but also on trading venues and intermediaries.

Trading venues must assist competent authorities by providing relevant data, ensuring transparency, and preventing abusive conduct.

Market participants must have controls to monitor for and respond to indications of abuse.

Scope and Instruments Covered

The regulation covers financial instruments admitted to trading on regulated markets, multilateral trading facilities, or organised trading facilities.

It also captures derivatives, emission allowances, and other instruments whose price or value depends on those traded on such venues.

This broad scope ensures that abusive behaviour cannot be hidden behind secondary or off-venue instruments.

Sanctions, Reporting, and Cooperation

MAR mandates that competent authorities impose administrative sanctions or criminal penalties for infringements.

It requires prompt reporting of suspicious orders or transactions and mandates cooperation among national authorities and with the European Securities and Markets Authority (ESMA).

Firms must be prepared to respond to regulatory investigations and provide data and support.

Examples of MAR-Related Scenarios

• A corporate insider obtains unpublished financial information and trades shares ahead of a major announcement, thereby profiting unfairly and disadvantaging other investors.

• A trader places a series of orders to create a false impression of market interest in a security and then liquidates positions for profit, manipulating the price before unwinding trades.

• An issuer initiates a share buy-back programme but fails to disclose the programme in line with regulation, thereby misleading markets and distorting supply.

• A brokerage fails to update insider lists, permits access to inside information by unauthorised persons, and subsequently incurs penalties from the regulator.

• A trading venue identifies unusual patterns of transactions in derivative instruments that mirror suspicious transfers in correspondent banking, indicating possible mixing of AML risk and market abuse.
  

Impact on Financial Institutions & Compliance Programmes

Integration with AML/CFT and Financial Crime Risk Management

MAR emphasises market integrity and investor protection, but for financial institutions, it represents an additional layer of risk that must be managed in harmony with AML/CFT programmes.

Firms must ensure their systems detect activity relevant to market abuse and link findings into suspicious transaction or order reporting frameworks.

This integrated approach enhances overall financial crime defence.

Operational and Cost Considerations

Compliance with MAR requires investment in surveillance systems, transaction and order monitoring, data analytics, record-keeping, and training.

Firms must budget resources for governance and remediation of incidents.

The cost of non-compliance includes fines, suspensions, reputational damage, and increased regulatory scrutiny.

Regulatory Alignment and Supervisory Expectations

Supervisors expect firms to demonstrate a clear understanding of MAR obligations, to maintain effective controls, and to report infringements.

Failure may result in supervisory action, increased ongoing monitoring, and restrictions on business operations.

Firms with cross-border operations face added complexity as MAR interacts with national rules and on-shored versions of the regulation.

Enhanced Risk Profiles and Correspondent Relationships

Institutions servicing clients that engage in securities trading, investment banking, or derivatives must recognise elevated risk under MAR.

Correspondent banks must evaluate whether their counterparties have appropriate market abuse frameworks, especially when those counterparties serve clients in high‐risk segments or high-frequency trading.

Weak MAR compliance can become a channel for laundering or fraud via capital markets.

Challenges in Implementation

Data Volume and Complexity

Firms must process vast volumes of market data, orders, trades, communications, and metadata to detect potential abuse.

Matching this with transaction and AML data adds complexity.

Cross Jurisdictional Harmonisation

MAR is EU-wide, but its interaction with third countries, on-shored legislation (such as the UK version), and national exemptions creates implementation challenges for global institutions.

Evolving Market Technology and Typologies

Rapid developments in algorithmic trading, dark pools, cryptocurrencies, emission allowances, and tokenised securities mean that MAR controls must evolve in tandem to remain effective.

Detection of Hidden Patterns

Some market abuse may be subtle and combined with legitimate trading.

Firms must distinguish normal behaviour from manipulation, often requiring advanced modelling and cross-domain intelligence.

Coordination Between Compliance and Trading Floors

Market abuse controls sit at the intersection of front-office trading, compliance, surveillance, legal, and risk functions.

Effective coordination is required to ensure a swift response to flagged behaviour.

Regulatory Oversight and Governance

European Securities and Markets Authority (ESMA)

ESMA provides guidance, technical standards, and cooperation among member state regulators.

It supports the consistent application of MAR and helps develop market surveillance mechanisms.

National Competent Authorities

Each Member State has a regulatory authority responsible for monitoring compliance with MAR, imposing sanctions, and supervising trading venues and market participants. Firms must engage with these authorities proactively.

Internal Governance Structures

Boards, senior management, and compliance functions must oversee MAR, integrate it into risk appetite frameworks, ensure controls are tested, and escalate issues appropriately.

Internal audit must evaluate MAR controls as part of risk governance.

Annual Risk Assessments and Control Reviews

Institutions should assess their exposure to market abuse as part of their financial crime risk assessment, reviewing key controls, running scenario analyses, calibrating detection models, and reporting findings to the board or audit committee.

Importance of MAR for AML/CFT Compliance

Understanding and implementing MAR obligations is vital for any institution active in securities, trading, investment services, or market infrastructure.

While MAR focuses on market integrity, its intersection with money laundering and fraud means that overlooking it may leave a significant gap in a firm’s financial crime risk framework.

A robust MAR programme strengthens the institution’s capability to detect illicit financial flows disguised as trading, to respond efficiently to regulatory investigations, and to protect customer trust and market reputation.

Incorporating MAR into the overall AML/CFT architecture ensures that no channel remains unmonitored, thereby aligning with best practices for financial crime prevention.

Related Terms

• Insider Trading
  
• Market Manipulation
  
• Trading Venue
  
• Multilateral Trading Facility (MTF)
  
• Organised Trading Facility (OTF)
  
• European Securities and Markets Authority (ESMA)

References

• Regulation (EU) No 596/2014 on Market Abuse (Market Abuse Regulation)
  
• European Commission – Implementing and Delegated Acts, Market Abuse Regulation
  
• FCA – Market Abuse Regulation (UK)
  
• Central Bank of Ireland – Market Abuse Regulation

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