Market manipulation can occur in various forms. On the one hand, executing transactions under certain conditions can be an act of manipulation, while in other cases even the placing of orders of the execution of transactions under false pretences, as well as the mere dissemination of incorrect or misleading information, or input data for the calculation of a benchmark may all constitute manipulation.
Definition of Market Manipulation
Pursuant to Article 12 (1) a) of the Market Abuse Regulation (MAR), market manipulation refers to transactions or buy or sell orders, which
- give, or are likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument; or
- influence the price of one or several financial instruments in such a way that a price level is secured at an abnormal or artificial level.
It is possible that there may be legitimate reasons for this, and that no breach of accepted market practice has occurred.
Transactions or orders to buy or sell that employ a fictitious device or any other form of deception or contrivance are also considered as market manipulation.
Furthermore, the dissemination of information, rumours or news through the media that gives false or misleading signals with regard to a financial instrument in the market, also constitutes market manipulation.
The submission of false or misleading information as well as the provision of false or misleading input data with regard to a benchmark or other activities by which the calculation of a benchmark may be manipulated are also classified as market manipulation.
Practices that constitute market manipulation
Practices that in particular are considered as market manipulation are listed in Article 12 MAR, Annex I MAR and Annex II of Delegated Regulation (EU) 2016/522:
- The securing of a dominant position with the effect of directly or indirectly fixing purchase or sale prices or other unfair trading conditions
- The buying and selling of financial instruments at the closing of the market, with the effect that investors acting on the basis of the closing price are mislead
- Exploiting access to the media by making a statement about a financial instrument and then subsequently taking advantage of the effects of the statement on the price of this financial instrument
In the case of there being a well-grounded suspicion of a breach of market abuse provisions, pursuant to Article 167 para. 1 BörseG 2018 the Financial Market Authority is required, provided that the breach lies within the competence of the courts, to notify the Public Prosecutor’s Office, and may be appointed by the Public Prosecutor’s Office to conduct further investigations.
In transposing the provisions set out in the Market Abuse Regulation or the Market Abuse Directive, depending on which criteria are met, market manipulation shall either be punished through administrative penal proceedings or through criminal proceedings in court. Market manipulation is prosecuted as an administrative offence pursuant to Article 154 para. 1 no. 3 BörseG 2018 in conjunction with Article 15 MAR and may be punished by the Financial Market Authority with a fine of up to Euro 5 000 000 or up to three times the amount gained by the breach, including an avoided loss, where such a gain is able to be determined. In addition any realised financial benefit is to be declared as forfeited. Within the framework regarding the competence of the courts pursuant to Article 164 BörseG 2018, custodial penalties of between six months up to five years may be imposed.
In any case, i.e. regardless of whether courts are competent or administrative penal law, the legal person may be held to account (up to EUR 15 million or 15% of the net total annual turnover).
Compliance with Trading Rules
Reporting of Suspicious Transactions and Orders