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April 13, 2018

ESMA published an article on its approach toward the assessment of operational risk in its first Trends, Risks, Vulnerabilities (TRV) Report in 2018. In this article, ESMA underlines the importance of operational resilience of market participants in its remit, such as central counterparties (CCPs), central securities depositories (CSDs), or trading venues.

The article introduces the new systematic and comprehensive analytical approach of ESMA to the operational-risk monitoring in EU markets. ESMA will take a wide range of quantitative indicators into consideration, complemented by in-depth market intelligence. In doing so, ESMA focuses on three priority risk areas:

  • Market misconduct, including market abuse, fraud, investor detriment and impairment of market data
  • Infrastructure disruptions, such as outages or unavailability of systems
  • Cyber-attacks, which may lead to system outages, discontinuity in financial system operations, and impaired integrity of client data

On this basis, ESMA will cover its operational risk assessment in its semi-annual Trends, Risks, Vulnerabilities Reports. Developments such as the recent surges in cyber-attacks on financial firms, or technical glitches leading to flash crashes on trading venues, have heightened the sensitivity of market participants and regulators to potential disruptions in financial services providers’ operations.

 

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Keywords: Europe, EU, Securities, Operational Risk, Market Conduct, Cyber Risk, ESMA

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