Market Integrity, Manipulative and Deceptive Trading Practices
Prohibited conduct
Know the core abuses: insider dealing, unlawful disclosure of inside information, market manipulation (including wash trades, marking the close, spoofing and layering, pump-and-dump, and ramping), and misleading conduct. Understand that manipulation can occur without any executed trade - placing and cancelling orders to create a false impression is spoofing. Know the concepts of inside information (precise, non-public, price-sensitive) and the market abuse offence of attempting to manipulate.
Surveillance and controls
Firms must have surveillance, escalation and suspicious activity reporting. Understand that intent matters for some offences but that reckless conduct can suffice, and that creating a false or misleading impression is prohibited even if no one relied on it.
Traps
- Assuming a trade must execute to be manipulative - spoofing and layering involve cancelled orders.
- Treating a large legitimate order as manipulation; size alone is not the test.
- Confusing insider dealing (trading on inside information) with unlawful disclosure (tipping).
- Missing that client orders can be manipulative and must be escalated, not just executed.
- Forgetting that market abuse rules apply to attempted as well as completed conduct.
Worked example
A trader places large buy orders on one venue, cancels them once the price ticks up, and sells on another venue. No buy order executed, but the conduct created a false impression of demand: that is layering. Rule of thumb: ask whether the pattern would look misleading to an observer who saw only the order book.