Markets Assurance

In certain industries, market disturbance events (everything from large trading gains to losses inappropriately caused by both humans and algorithms), are becoming all-too common. The financial services sector has itself had its fair share of issues since the financial crisis, but one only has to look at issues in the automobile, energy, media, aviation and other industries to observe similar issues and risks. 

Drivers for such events, include misconduct, market manipulation, new technology emergence and operational risk related control issues. Their impact may be to cause disputes and litigation, regulatory enforcement and new regulation, or even the need to address issues related to governance and accountability. But whatever their cause or effect, the outcome is normally the same: increased scrutiny from both internal and external stakeholders across markets.

It’s why in this area of the market lifecycle, we have assisted clients by advising as part of litigation and disputes, acting as Expert Witnesses, as well as conducting investigations and root-cause analyses for both regulators and management. Much of our focus to date has been around issues that surface in the wholesale and retail banking markets, helping both financial and non-financial services firms.

Disturbances may cause markets to reform and evolve naturally, or they may be required to reform due to external intervention. Whatever the reason, when a market reforms, any business operating within it will most likely need to adjust their systems, processes and controls to comply with any new market norms or regulatory requirements. This is especially so, as some market disturbance may also reveal specific weaknesses in governance and control frameworks that require further risk assessment and remediation.

We have assisted clients with recent market reform events such as the implementation of new regulation including European Benchmarks Regulation and MiFID II, as well as responding to specific regulatory enforcement orders requiring enhancements to market conduct risk control frameworks. Our work often focuses on helping clients understand the changes required in both business and support functions. Because our work is often focused on helping clients understand the change that is required in their business and support functions, our mission is to always set this out clearly and transparently.

We have also focussed on the growing area of wholesale market codes of conduct (e.g. BIS FX Global Code of Conduct and FMSB Standards), and recent guidance and supervisory statements around algorithmic trading. Being market-focused, many of these topics cut across different industry sectors, and so our client outlook spans both financial services and corporate institutions.

The purpose of any market reform should be to restore confidence in the market and to demonstrate that the issues within it have been fully addressed. It’s why the key objective for many companies who have been through market disturbance and market reform events is to regain confidence in their systems, processes and controls to a level that is ‘fit for audit’.

We create confidence by undertaking specific reviews and analysis, either by working alongside management or as part of Internal Audit. In certain cases we’ll also work through the provision of third-party independent assurance – for example providing a Deloitte report under an internationally recognised framework such as International Standards for Assurance Engagements (ISAE).

In this area we can provide clients with independent assurance over benchmark control frameworks (both LIBOR and FX). We can also conduct thematic control reviews across areas including sales and trading conduct controls, conflicts of interest management, fraud controls, algorithmic trading controls and many others.