Where market members give customers direct electronic access to enter orders into their trading system for execution firms are obligated to mitigate risk and combat market abuse.
5 tips to prepare for the new rules on Direct Electronic Access:
- Suitability assessments and screening - proper assessments must be conducted before granting access and then annually to review the suitability of Direct Electronic Access for clients. Decide how and when this due diligence check will take place - eg, at onboarding and during the client lifecycle.
- DEA agreements - ascertain whether mandatory written agreements can be incorporated into pre-existing software, what questions you'll need to ask, what evidence you might need, etc.
- Determine what pre-set trading or credit thresholds apply - and be sure to apply appropriate measures and controls so that clients cannot exceed them.
- Monitor trading behaviour of DEA clients - how do you plan to monitor the trading behaviour of DEA clients? Do DEA clients receive unique identification numbers to identify those initiating orders, ensuring clear differentiation from your employees?
- Review systems and controls - what other systems and controls should you implement to prevent trading by DEA clients which may create risks to your firm or may create a disorderly market? Are there adequate systems in place to combat market abuse, spoofing, etc? What more can be done?
Want to learn more about FCA Compliance?
If you'd like to stay up to date with FCA best practices, industry insights and key trends across regulatory compliance, digital learning, EdTech and RegTech news, subscribe to the Skillcast Compliance Bulletin.
To help you navigate the compliance landscape we have collated searchable glossaries of key terms and definitions across complex topics including Equality, Financial Crime, GDPR and SMCR. We also regularly report key learnings from recent FCA fines.
You can follow our ongoing YouGov research into compliance issues, attitudes and risk perceptions in the UK workplace through our Compliance Insights blogs.
And if you're looking for a compliance training solution, why not visit our FCA Compliance Course Library?.
Last but not least, we have 60+ free compliance training aids, including assessments, best practice guides, checklists, desk-aids, eBooks, games, handouts, posters, training presentations and even e-learning modules!
If you've any questions or concerns about compliance or e-learning, please get in touch.
We are happy to help!