Bank of Russia notes surge in market manipulation cases
Higher investment activity in on-exchange trades led to an increase in cases of misuse of insider information and market manipulation. The Bank of Russia has registered a number of unfair transactions conducted in collusion, which caused considerable deviations in on-exchange trading parameters. These transactions have been recognised as market manipulation.
Bids for such transactions indicate the same prices and volumes of financial assets and are placed almost simultaneously from the same IP-addresses.
Most typical schemes and collusive practices are as follows:
- assets are transferred to a person known in advance in the main trading mode;
- a trading activity does not have any economic sense: as a result of mutual arrangements, one party incurs loss and the other one makes a profit;
- the value of an investment portfolio is increased over a certain period of time in order to win an investor competition;
- parties learn to trade by conducting transactions in low-liquid instruments with a counterparty known in advance;
- parties test various services and trade strategies (including algorithmic ones) with a counterparty known in advance.
The Bank of Russia stresses that such actions may be classified as market manipulation pursuant to current legislation. Whenever such facts are established, the regulator may make a decision to suspend on-exchange trades (block trading accounts) and hold an investor liable.
Insider trading (i.e. transactions based on information that has not been disseminated but has become known to an investor, while the dissemination of such information may seriously influence prices for traded instruments) is also deemed to be misconduct.
The Bank of Russia recommends that investors obtain more detailed clarifications from their brokers in order to avoid violations.