Market Manipulation

Question 1

which are 2 examples of transactions/order giving misleading information?

Answer 1

1) transactions whose only scope is to face activity/liquidity where the instrument doesn’t actually change ownership (wash sales)
2) transactions where buy and sell order are placed at the same time with the same price by colluding parties

Question 2

which operations qualify as price positioning?

Answer 2

• organised trades to gain a dominant position of the supply/ demand for an instrument to raise/drop the price (pump and dump)
• buying/selling close to open/close in order to manipulate closing and opening prices

Question 3

what are the 3 types of transactions that constitute market manipulation?

Answer 3

• trades giving misleading signals: give false signals on the supply/demand/price of an instrument
• price positioning: fix the price at an artificial level
• fictitious devices: entering orders which affect the price but are fictitious in nature (quote stuffing)

Question 4

what is dissemination?

Answer 4

spreading info with the purpose of giving false or misleading info on the supply/demand/price of an instrument.

Question 5

what is information based manipulation?

Answer 5

when you use access to standard media to voice an opinion about an instrument in which you have taken a position accordingly without disclosing the conflict of interest.

Question 6

is disclosure or dissemination in the context of journalism illegal?

Answer 6

they are not illegal as long as its done with genuine reporting purposes and respects freedom of media expression. However, it is unlawful if
1) the person or someone close to them gains as a result of disclosure
2) the disclosure is done with the intent to mislead the market

Question 7

what are non exhaustive indicators?

Answer 7

actions that raise suspect of market manipulation. E.G when a person takes part in transactions before disseminating info or recommendations about that same instrument with the intention of misleading or simply due to material interest. THEY DO NOT BY THEMSELVES AMOUNT TO MARKET MANIPULATION

Question 8

what are examples of non exhaustive indicators?

Answer 8

-orders that make up a large part of daily volume and cause a notable price change
- when people with large positions in an instrument place large orders that affect the price
- when transaction happens without change of ownership (wash sale)
- sudden changes in large volume of positions (from buy to sell)
- trades that happen in a short time frame to momentarily distort the price
- orders which change the representation of the best bid/offer prices but are reversed before execution
- orders that distort the price right before official valuations