A smarter approach to preventing market abuse

The FCA’s 2025-2030 strategy document signals a new era in market oversight – one that prioritises a proactive, technology-enabled, and cross-market approach to surveillance and regulation. With significant enforcement actions on the horizon and a commitment to deeper market integration, the FCA is redefining how it protects UK financial markets.

Moving from reactive to proactive

Historically, the FCA’s approach to market abuse has been somewhat reactive, relying heavily on Suspicious Transaction and Order Reports (STORs) and firm-level compliance. But with advancements in AI, the regulator is now investing in more comprehensive, real-time data analytics to detect insider dealing and market manipulation earlier.

The FCA has been testing new surveillance technologies, including AI-powered anomaly detection tools that cross-reference trading patterns with communications data. This means the regulator is no longer waiting for firms to flag potential issues – it is actively hunting for signs of abuse.

Increased cross-market surveillance

One of the most notable shifts in the FCA’s approach is its focus on cross-market surveillance.

Traditionally, regulators have focused on monitoring specific asset classes in isolation – equities and derivatives, for example. But the FCA’s new strategy emphasises the need for a more interconnected view of market activity. The regulator will work more closely with international counterparts and trading venues to identify market abuse that spans jurisdictions and product types.

In practice, this means the FCA will be looking more closely at connections between primary and secondary markets, particularly around initial offerings and block trades. If firms have exposure across multiple markets, the expectation is that their surveillance systems must be capable of detecting cross-market manipulation.

The FCA’s expectation for firm-level surveillance

Firms operating in the UK should expect the FCA to set increasingly high expectations for surveillance technology and data retention. The strategy document hints at:

• Stronger data-sharing requirements for firms, particularly around communications surveillance.
• More granular expectations for trade surveillance systems, including the ability to detect new forms of manipulation facilitated by algorithmic and high-frequency trading.
• Greater scrutiny of firms’ use of AI and automation in compliance, including how AI models used for surveillance are validated and tested.

This aligns with a broader global trend: regulators are shifting from simply requiring firms to have surveillance systems to actively assessing whether those systems are effective.

A focus on data quality and market transparency

The strategy also places significant emphasis on data quality – both within the FCA and across the firms it regulates. Poor data quality has been a recurring issue in regulatory reporting, and the FCA is making it clear that this will no longer be tolerated.

Firms should expect:

• Increased expectations around transaction reporting accuracy, with potential enforcement action for persistent errors.
• Greater use of technology to audit and validate data submissions.
• More proactive engagement from the FCA on data integrity issues, rather than waiting for firms to self-correct.

Investment in enforcement

Alongside a more proactive surveillance approach, the FCA’s strategy signals a continued focus on enforcement.

In recent years, the FCA has been criticised for the length of its investigations and the perceived lack of high-profile market abuse prosecutions. The new strategy suggests an effort to address this by:

• Streamlining investigation processes, with a focus on faster case resolution.
• Investing in forensic analytics, particularly for digital communications and encrypted messaging platforms.
• Leveraging AI to automate parts of the evidence-gathering process, reducing reliance on manual review.

What this means for firms

For compliance teams, the FCA’s evolving approach presents both challenges and opportunities. Firms that stay ahead of regulatory expectations by investing in advanced surveillance technology, improving data quality, and fostering a culture of compliance will be best positioned to navigate this new landscape.

At eflow Global, we provide trade surveillance and regulatory reporting solutions designed to meet the FCA’s evolving expectations. Whether you need cross-market surveillance capabilities, AI-driven anomaly detection, or improved transaction reporting accuracy, we can help.

Get in touch to find out how we can support your compliance strategy.