Market Abuse Regulation (MAR) — Regulation (EU) No 596/2014, applied in the UK in onshored form — is the primary legal framework prohibiting the conduct that undermines market integrity: insider dealing, unlawful disclosure of inside information, and market manipulation. MAR replaced the earlier Market Abuse Directive and substantially expanded the scope of prohibited behaviours, the range of instruments covered, and the obligations on firms and individuals to prevent, detect, and report market abuse. Understanding MAR is essential for anyone operating in or around capital markets — the consequences of breach range from civil fines and disgorgement to criminal prosecution.

Inside Information

The concept of inside information is central to two of MAR's three main prohibitions. MAR Article 7 defines inside information as information of a precise nature, which has not been made public, relating directly or indirectly to one or more issuers or financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or related instruments.

Each element of this definition matters:

  • Precise: The information must be specific enough to allow a conclusion to be drawn about its potential price effect. A rumour that a company "might" be acquired is less likely to be precise inside information than a draft acquisition agreement.
  • Not made public: Once information is disclosed to the market (through a regulatory announcement, press release, or other means that gives equal access to all investors), it loses its inside information character.
  • Price-sensitive: The information must be the kind that a reasonable investor would be likely to use as part of the basis of their investment decision — a test known as the reasonable investor test.

Inside information arises in many contexts in a capital markets bank: M&A advisory mandates, debt capital markets transactions before announcement, a corporate client sharing its earnings guidance with its relationship bank, a government informing its primary dealers of an upcoming issuance before the public announcement. All of these create an obligation on the bank to manage the information appropriately and to prevent it from being used to trade.

Insider Dealing

MAR Article 8 prohibits any person who possesses inside information from using that information to acquire or dispose of financial instruments to which the information relates, to cancel or amend an existing order, or to attempt any of these acts. The prohibition applies regardless of whether the person is an insider (with a direct relationship to the issuer) or a secondary insider (who has received the information from an insider).

The FCA's enforcement approach to insider dealing has evolved from relatively straightforward trading-ahead-of-announcement cases to more sophisticated investigations involving complex trading patterns across related instruments, offshore accounts, and multiple personal relationships. Criminal prosecution under FSMA 2000 section 52 remains available alongside MAR's civil enforcement powers — the FCA has successfully prosecuted criminal insider dealing cases resulting in custodial sentences.

Market Manipulation

MAR Article 12 prohibits three broad categories of market manipulation:

Transactions and Orders Creating False or Misleading Signals

Any behaviour that actually gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of a financial instrument is prohibited. This includes wash trading (buying and selling the same instrument between related parties to create the appearance of active trading), ramping (a series of transactions designed to push a price higher, allowing the manipulator to sell at an artificially elevated level), and painting the tape (creating the appearance of liquidity in a thinly traded instrument through circular transactions).

Securing a Dominant Position

Securing a dominant position over the supply of, or demand for, a financial instrument and using that position to fix the price of that instrument is prohibited. Cornering a market — acquiring such a large position that other participants must deal with you on your terms — is the classic form of this manipulation.

Fictitious Devices and Deception

Any transaction, order, or behaviour that employs fictitious devices or other forms of deception to affect prices is prohibited. This category captures more creative manipulation schemes including algorithmic strategies designed to create artificial price signals.

Spoofing and Layering

MAR's Annex I provides an indicative list of manipulative behaviours that regulators use to guide their interpretation. Spoofing and layering — placing orders with the intention of cancelling them before execution, to create a misleading impression of supply or demand — are explicitly listed. The FCA and European NCAs have taken multiple enforcement actions against spoofing, particularly in equity and fixed income markets. The presence of intent — placing orders with the intention of cancellation, not as a legitimate risk management activity — is the key element that distinguishes spoofing from legitimate market making.

The STOR Obligation

MAR Article 16 imposes on investment firms and market operators an obligation to report suspicious transactions and orders. Firms that reasonably suspect that a transaction or order constitutes or may constitute market abuse must report this to the competent authority — the FCA in the UK — without delay. This is the Suspicious Transaction and Order Report (STOR).

The STOR obligation is not limited to transactions in the firm's own name. A broker that executes an order on behalf of a client must report if it reasonably suspects the order constitutes market abuse — even though the firm itself is not the potential abuser. The "reasonable suspicion" threshold is intentionally low: firms should err on the side of reporting rather than waiting for certainty. The FCA has been explicit that failure to submit a STOR where reasonable suspicion exists is itself a regulatory breach.

STORs are a significant source of intelligence for the FCA. The volume of STORs received annually runs into the thousands; the FCA cross-references them with its own market data analysis (comparing STOR subjects with trading patterns around corporate events) to identify cases warranting investigation. A STOR does not guarantee investigation — most are assessed and closed without further action — but it is the starting point for many market abuse cases.

The Market Soundings Regime

A market sounding is the communication by a would-be issuer (or its bank) to one or more potential investors before the announcement of a transaction — typically a bond issuance, equity placing, or M&A-related transaction — to gauge investor appetite. Market soundings frequently involve the disclosure of inside information: the recipient is told about the potential transaction before it is publicly announced.

MAR Article 11 establishes a safe harbour for market soundings conducted in accordance with a prescribed procedure. The disclosing party must: assess whether the sounding involves inside information; inform the recipient that the information is inside information and that trading restrictions apply; keep records of the sounding; obtain the recipient's consent; and notify the recipient when the information ceases to be inside information (typically upon announcement). Firms that follow this procedure are protected from insider dealing liability for the disclosure itself — though the recipient remains restricted from trading until the information becomes public.

Accepted Market Practices

MAR provides a further safe harbour — Accepted Market Practices (AMPs) — for conduct that would otherwise appear to create artificial price signals but is recognised as legitimate for specific market purposes. The primary example is stabilisation: following a new issue of securities, the issuer's bank may support the price of the securities in the secondary market by buying them, to prevent a disorderly fall that would undermine the issuance. Without a safe harbour, such buying would appear to be manipulative price support. AMPs, established through a formal regulatory process, protect legitimate stabilisation activity within defined parameters (a maximum price, a defined period, notification requirements).

MAR vs COBS: The Regulatory Interaction

MAR operates alongside the FCA's Conduct of Business Sourcebook (COBS), which governs how firms treat their clients. The two frameworks address different aspects of conduct: MAR focuses on market integrity (trading behaviour and information use); COBS focuses on client treatment (suitability, disclosure, best execution). A firm can breach COBS without breaching MAR (for example, by giving unsuitable advice without any element of market abuse) and vice versa (by engaging in market manipulation that does not involve client harm). Both frameworks apply simultaneously; a significant conduct failure may trigger enforcement under both.