Facts of manipulation in markets for certain securities established
The Bank of Russia established facts of market manipulation in on-exchange trading for 34 financial instruments in
These financial instruments included the following:
— bonds of Digital Invest LLC, Region Invest LLC, Stroyzhilinvest LLC, O1 Group Finance LLC, O1 Properties Finance JSC, Prime Finance LLC, Veil Finance LLC, and Archer Finance LLC;
— ordinary shares of PJSC RPC UWC, PJSC Credit Bank of Moscow, PJSC OC RussNeft, PJSC M.video, PJSC SAFMAR Financial Investments, shares of foreign issuer United Company RUSAL Plc, global depositary receipts of foreign issuer Citibank N.A. (NYC) for the shares of EN+ GROUP PLC;
— mortgage participation certificates managed by JSC EFG Asset Management (renamed to JSC IQG Asset Management), LLC MC BIN FINAM Group (renamed to LLC MC Investment Management), LLC MC GeoKapital.
Market manipulation represented a regular performance of mutual transactions series across the accounts of established pairs of counterparties — individuals through highly coordinated mutual bids with identical prices and comparable volumes. Moreover, these bids were practically simultaneous, with less than a second difference. The share of such transactions often reached 100% in the daily trading volume and on several occasions they led to significant deviations in the trading parameters in financial instruments. The pairs of counterparties changed over time; the investigation established that the scheme involved the accounts of 31 persons over the period under consideration.1 Moreover, there is no economic feasibility for these persons to perform the said transactions in on-exchange trading.
Market manipulation in the trades in the said financial instruments created conditions which allowed the trade organiser to calculate indicative values for assessing the cost of financial investments in securities at the current market price (‘Market price (2)’2 and ‘Market price (3)’3). Moreover, market manipulation helped achieve criteria required to include shares in the 1st quotation level of securities accepted for organised trading, i.e. they qualified as instruments for investing pension savings and insurance reserves of a non-governmental pension fund over the period under consideration.
Such transactions with financial instruments across accounts of individuals which have caused significant deviations in the price , supply, demand and volume of trades, are qualified as market manipulation under Clauses 2 and 6 of Part 1 of Article 5 of Federal Law No.
Thereby, these individuals, whose accounts were used for market manipulation, violated the ban imposed by Part 2 of Article 6 of the Federal Law.
The Bank of Russia has sent orders to the individuals to cease and desist from similar violations in the future.
At the same time, the investigation established facts of a predetermined organisation of market manipulation scheme and a centralised management of the involved individuals’ accounts by third parties belonging to a ‘single decision-making centre’. The Bank of Russia recommends that professional securities market participants strengthen control in order to prevent situations when clients open trade accounts or grant them for further use to unidentified persons, coordinate clients’ actions aimed at deliberate distortion/creation of activities in the markets of financial instruments, and also pay close attention to systemic performance of knowingly economically unprofitable operations in organised trading.
1 Pavel N. Sapozhnikov, Oksana I. Polishchuk, Oleg A. Gromov, Vladislav V. Leonov, Andrey V. Lyapin, Tatyana Yu. Shevlyakova, Tatyana A. Nikolaeva, Nadezhda P. Karakina, Nadezhda V. Krabova, Nikolay M. Chadin, Yana A. Trufanova, Mariya A. Chalykh, Rinat M. Miftakhov, Nikolay I. Demin, Evgeniy S. Nikitin, Albert R. Bagatov, Albert N. Bedelov, Alexander A. Tarasov, Nikolay D. Koryshov, Maksim A. Kuryanov, Denis A. Rtishchev, Oleg M. Shevchenko, Sergey V. Egorov, Alexander S. Kosilov, Irina A. Savelova, Daniil V. Belyayev, Vladimir S. Drozdov, Anton I. Markelov, Alexandra E. Zakharchenko, Pavel N. Komov, Yekaterina A. Belova.
2 It was determined, among other things, in accordance with the Procedure for Calculating the Market Value of Assets and Net Assets Value Used to Invest Pension Savings approved by FFMS of Russia Order No. 06-155/pz-n, dated 26 December 2006 (has been null and void since 1 January 2018).
3 It was determined, among other things, in accordance with the Procedure for Determining the Market Value of Securities, Estimated Price of Securities, as well as the Maximum Limit of Fluctuations of the Market Price of Securities under Chapter 23 of the Tax Code of the Russian Federation, approved by FFMS of Russia Order No. 10-65/pz-n, dated 9 November 2010.
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