SGX to issue surveillance handbook to brokers
Singapore Exchange (SGX) will soon issue a surveillance
handbook to brokers containing case studies involving market rigging and
manipulation in an effort to educate brokers on trading activities that are
allowed and those that are not.
Comments
R Sivanithy
05 September 2016
Singapore Exchange (SGX) will soon issue a surveillance handbook to brokers containing case studies involving market rigging and manipulation in an effort to educate brokers on trading activities that are allowed and those that are not.
BT understands that the book will be ready within the next few weeks and is the result of a collaborative effort between the exchange and brokers for several months now.
Its release is also believed to be in line with SGX's strategy of engaging brokers as part of the market's governance framework, and it is hoped that greater understanding of its contents will lead to a reduction in market misconduct.
When contacted, an SGX spokesman said the exchange is working closely with industry to increase awareness of what is legitimate trading activity and what isn't. "High volumes and price jumps are not by themselves indicative of manipulation," said the spokesman.
"In the same vein, the fact that the trader bears some theoretical market risk does not necessarily legitimise his or her trading, particularly if he or she is taking steps to minimise the chances of their orders being hit.
"Genuine speculation is entirely permissible, as long as it does not cross the line into interfering with the natural forces of supply and demand. An artificial and false market, as we have learnt, is never sustainable and should be curbed sooner rather than later."
The book is expected to cover subjects such as "layering", "marking the close" and "spoofing" which are illegal activities that fall under the broad umbrella of the creation of a false market.
Some of these activities were dealt with in an Aug 29 SGX disciplinary announcement involving a Maybank Kim Eng trading representative (TR), who was fined S$180,000 and suspended for six months for illegal trades in the shares of Informatics Education, IPCO International and Mirach Energy in April last year.
In the Aug 29 announcement, the exchange's Disciplinary Committee (DC) said the TR first initiated aggressive buy trades in the stocks within a short span of time, then layered large buy orders at a minimum of four price levels below the prevailing best buy price so as to create the impression of a large imbalance between demand and supply, then repeatedly increased the quantity of those layered buy orders to make it appear as if demand was increasing, drawing other market participants in.
After selling at prices that would not have been possible had the layered buys not been entered, the dealer then deleted those orders. The DC said these actions amounted to a breach of SGX's Rule 13.8.1 (2) (c) which states that a false market is one in which " manipulative or fictitious orders, transactions or other devices have been employed".
According to sources, the book's contents will be regularly revised as and when new methods of market manipulation or breaches of the rules are detected.