Guideline for Standards of Market Conduct

Guideline for Standards of Market Conduct

Below is a non-exhaustive list of behaviours that would constitute market abuse, which may have a negative impact on the fair and effective operation of the markets, intended for guidance only. This high level guidance does not replace the need to be familiar with the requirements of laws, regulations and exchange rules.

MARKET ABUSE BEHAVIOURS

Manipulation of price of futures contract and Cornering

• ‘Cornering’ – Directly or indirectly, or attempt to corner the market of any commodity which is the subject of a futures contract in such volume that the manipulator gains a monopoly over it.
• ‘Bear raiding’ – An attempt to heavy selling or short sell futures contracts with the aim to drive the price down allowing the futures contracts to be bought back at a lower price and thus make a profit on the difference.

False Trading – False or Misleading Appearance

• ‘Pre- arranged trading’ – A trade that purports to have been executed in the exchange’s competitive trading system which is in fact pre-arranged by bilateral negotiation.
• ‘Wash sales’ – A trader carries out a pre-arranged trade that is essentially fictitious either with himself, or by arrangement with another trader. The trade aim to “wash-out” previous trade(s) to eliminate any profit or loss between the parties which does not involve a change in the beneficial owner.
• ‘Spoofing’– Submitting and cancelling single or multiple bids or offers in order to create a misleading impression of market depth or create (or attempt to create) an artificial price movement.
• ‘Layering’ – Submitting multiple bids or offers to create (or attempt to create) a misleading impression of buying or selling pressure in order to move the market price and allow the trader to buy or sell at a lower/higher price. The original ‘layered’ bids or offers are then cancelled.
• Any behaviour that misleads other market participants as to the supply of, demand for, or price of a financial instrument.
• Any behaviour which secures, or is likely to secure, the price of a financial instrument at an abnormal or artificial level.

Fraudulently inducing persons to trade in futures contracts

• Disseminating information (e.g. through the Bloomberg chat, the media) which is false, misleading or deceptive as to the supply of, demand for, or price of a financial instrument.
• Omitting to state or dishonest concealment of a material fact which is necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. For example, notifying market participants that there is a report on the spread of diseases which destroys major coffee plantations around the world which will result in a shortage of coffee beans, thereby causing the coffee prices to rise. However, the material fact that the report was made 10 years ago and modern day coffee beans are immune to such diseases was not made known.