Firms are required under the Senior Management Arrangements, Systems and Controls (SYSC) manual of the Financial Conduct Authority Handbook to have in place robust governance arrangements and effective procedures which allow it to identify, manage, monitor and report the risks it is or might be exposed to.
Global Market Index Limited is authorised and regulated by the Financial Conduct Authority and this document sets out how the Firm complies with its obligations to identify, manage and mitigate risks.
The Capital Requirements Directive (‘CRD’) of the European Union created a regulatory capital framework across Europe governing how much capital financial services firms must retain. The rules are set out in the CRD under three pillars:
Future disclosures will be issued on an annual basis once they have been reviewed and approved by the Board. The disclosures are not subject to audit except where they are equivalent to those prepared under accounting requirements for inclusion in the financial statements.
The report and all future ones will be published on our Firm’s website.
Global Market Index Limited (GMIUK) is an Financial Conduct Authority “FCA” authorised execution only broker for elective professional clients and eligible counterparties.
The Board responsible for the Firm’s risk management governance structure and how the Firm’s risk exposure must be managed in line with the Firm’s overall business objectives and within its stated risk appetite. This includes the governance of the process for identifying, evaluating, managing and reporting the significant risks faced by the Firm.
The Board ultimately responsible for ensuring that the Firm maintains sufficient capital and liquidity resources to meet its regulatory capital and liquidity requirements and to support its growth and strategic objectives. Risk management is embedded throughout the business, with the overall risk appetite and risk management strategy approved by the Board propagated down throughout the business as appropriate.
The Governance Arrangements of the management body of Global Market Index Limited is illustrated below:
Board of Directors
The Firm has reviewed the number of directorships held by members of the Board/The Director has assessed the number of directorships held and are satisfied that the arrangements are such that the management body is able to commit sufficient time and resources to perform their obligations in the Firm. The number of directorships held is monitored on an ongoing basis.
The Firm’s overall approach to assessing the adequacy of its internal capital is documented in the Internal Capital Adequacy Assessment Process (“ICAAP”) and (“ICARA”).
The ICAAP and ICARA process includes an assessment of all material risks faced by the Firm and the controls in place to Identify, manage and mitigate these risks. The risks identified are stress-tested against various scenarios to determine the level of capital that needs to be held.
Where risks can be mitigated by capital, the Firm has adopted the EUCRR requirements for Pillar 1 where the Board considers that the Pillar 1 calculations do not adequately reflect the risk, additional capital is added on in Pillar 2.
Whilst the ICAAP and ICARA are formally reviewed by the Board once a year, Senior Management review risks and the required capital more frequently and will particularly do so when there is a planned change impacting risks and capital or when changes are expected in the business environment potentially impacting the ability to generate income.
As of 31/12/21 the firm’s CAR is of 61.09%.
The Firm is a Non-SNI (Non-Small and Non-Interconnected) firm.
A Non-SNI firm must maintain at all times a permanent minimum capital resources (PMR) equal to or in excess of the base requirement (£50k) for Year 2022, and over the next 5 years the PMR will transition to reach £750K. The Pillar 1 capital requirement for a Non-SNI firm is the higher of:
The Firm must maintain at all times capital resources equal to or in excess of the Pillar 1 requirement. During the 12-month accounting period to 31st December 2021, the Company complied fully with all capital requirements and operated well within regulatory requirements. As at 31st December 2021 the firm held Tier 1 capital resources of c. £ 1,266,663 comprised of ordinary share capital, share premium, and audited profit reserves. The Board are therefore comfortable that the Firm is, and has been throughout the financial year, adequately capitalised for Pillar 1 purposes. The Board are comfortable that this will ensure prudent capitalisation and cover for market downturns and other risks that may materialise in the short to medium term.
The Board constantly monitors the performance of the Firm and capital adequacy is regularly assessed by them. The Firm will also monitor risks throughout the year and decide if additional capital should be held against them. Additional risks that supplement the Pillar 1 requirements are detailed below and, where necessary, additional capital will be provided.
Global Market Index Limited has identified the following core risk categories: e.g. strategic, market, credit, liquidity, operational, legal, interest rate, excessive leverage and financial crime.
Global Market Index Limited’s profile of these risks is continually evolving and is generally driven by:
Global Market Index Limited will seek to generate positive returns through carefully considered risk taking and robust risk management. As such the effective management and control of both the upside of risk taking and its potential downside is a fundamental core competency of the Firm.
The Board responsible for setting the Firm’s risk appetite, defining the type and level of risk that the Firm is willing to accept in pursuit of its business objectives.
The Firm’s governance structure is designed such that the business is the first line of defence, the compliance function is the second line of defence with the Board representing the third line of defence.
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First line of Defence Business |
Strategies and goals | Firm Values | Risk Appetites | |
| Identification, control and management of risks. Operating requirements: roles and responsibilities, supervision, procedures, systems and controls | ||||
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| Control and Management of Risks | ||||
| Second line of Defence | Risk Management Framework | |||
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First line of Defence Business |
Strategies and goals | Firm Values | Risk Appetites | |
| Identification, control and management of risks. Operating requirements: roles and responsibilities, supervision, procedures, systems and controls | ||||
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| Control and Management of Risks | ||||
| Second line of Defence | Risk Management Framework | |||
| Policies and Procedures, Guidance and Training | ||||
| Monitoring | ||||
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Third Line of Defence Senior Management/Board | Governance | |||
| Full accountability for the management of risks | ||||
The Board responsible for approving the Risk Assessment Framework, which is used to ensure that the Firm has a comprehensive understanding of its risk profile, including both existing and emerging risks facing the Firm, and to enable it to assess the adequacy of its risk management in the context of the Firm’s risk appetite.
| Principal Risks | Appetite | Key Drivers | Mitigation | |||
| Strategic Risk | ||||||
| The risk that arises decisions that fail to reflect the full business operating environment and the impact of failing to adequately identify changes to the business model. | The Firm will remain competitive by identifying opportunities and assessing the risks, rewards and costs associated with them before proceeding | Regulatory landscape impacting the business. Commercial/market conditions Internal business/operating model | Due diligence is carried out prior to any new business opportunity and a full assessment of the potential and actual risks taken into account. Appointment of external compliance consultants | |||
| Counterparty Credit Risk | ||||||
| The risk of financial loss due to the failure of a customer to meet their obligations to settle outstanding amounts | The Firm will only engage in activities where customers have adequate collateral deposited | Market conditions Counterparty credit worthiness | The Firm uses the standardised method of calculating Credit Risk. The firm also has also employed a risk specialist to monitor the risk. | |||
| Market Risk | ||||||
| Risk of losses in on and off balance sheet positions arising from adverse movements in market prices | The Firm does not engage in propriety trading and does not actively seek market exposure. The firm acts on a matched principle basis only. | Volume and complexity of trading Market movements Liquidity | Risk department monitors market conditions | |||
| Liquidity Risk | ||||||
| The risk that the Firm does not have sufficient liquid resources or is unable to deploy such resources to meet its actual or potential obligations in a timely manner as they fall due | The Firm will have sufficient and accessible financial resources as to meet any financial obligations as they fall due. The firm has always held significantly more than its minimum requirement. | Operational risk Credit risk events Internal business operating model | Daily reviews of financial resources Contingency funding arrangements in place | |||
| Operational Risk | ||||||
| The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events | The Firm will actively identify and manage the risk of its people, processes or systems failing. Operational risk is inherent in any business however the Firm will take steps to prevent such risks from increasing operating costs | Internal business operating model External threats Market conditions | Employees provided training and guidance on their obligations Timely escalation and mitigation of identified risks BCP is updated regularly | |||
| Risk of Excessive Leverage | ||||||
| The potential increase in risk caused by a reduction in the Firm’s own funds through expected or realised losses. | The Firm will only engage in activities where collateral is held The Firm will have adequate financial resources in place | Operational risk Market conditions Liquidity | Collateral is monitored and trading margin managed Regular reviews of financial resources Excessive leverage is not offered. | |||
| Financial Crime Risk | ||||||
| The risk that the Firm fails to prevent its involvement in or use by other parties to commit financial crime | The Firm has no appetite for any breaches or lapses occurring that result in financial crime taking place | External threats Internal controls | Training is provided to all employees regularly Financial crime procedures and regular monitoring | |||
Global Market Index Limited’s Remuneration Policy complies with the Remuneration Code in relation to its size, nature, scope and complexity of our activities.
The Policy is aligned to the Firms’ business strategy, objectives, values and long term interests in respect of performance and effective risk management in line with the Firm’s risk appetite.
A copy of the Firm’s Remuneration Policy is available on request.