What are crossings?
Crossings, “self-dealing” or “wash trades” may occur if you place buy and sell orders for the same security. A crossing occurs in the event that the same person remains the beneficial owner of a security once buy and sell orders have been settled.
Crossings are forbidden! Ensure in the case of securities transactions over stock exchanges that you are never simultaneously the buyer and seller of the same security.
Crossings are forbidden because they are able to artificially change the price of a security. This may constitute a forbidden market manipulation.
A forbidden market manipulation arises from transactions that give off “false or misleading signals”, or which artificially change the price, and therefore the value of a security. The price of a financial instrument may for example be manipulated either upwards or downwards, by executing crossed (high or low) limited buy and sell orders.
Crossing transactions can be used to simulate an increased trading volume that does not actually exist. This can mislead investors, especially in thinly traded stocks, about the actual demand and adversely affect their investment decision.
Crossings may constitute the activity of market manipulation pursuant to Article 154 para. 1 no. 3 BörseG 2018 in conjunction with Article 12 of the Market Abuse Regulation (MAR) and may be punished by means of an administrative penalty.
Administrative offences are to be punished by the FMA by means of a fine of up to EUR 5 million or upto three times the amount of the gain arising from the offence, or any loss avoided, where such an amount is able to be determined.
When making buy and sell orders, ensure among other things that:
- buy and sell orders made in close proximity to one another do not have crossed order limits (e.g. Identical limits or crossed orders in combination with the “Best” order code”) that might consequently lead to their crossed execution on the stock exchange.
attention is also paid in such cases to the average trading volume of the security. In the case of more illiquid securities the likelihood increases that in the case of crossed orders that the investor with execute to order with themselves.
- you also do not place any crossed orders after the close of trading on the exchange, that might result in self-dealing occurring in the opening auction of the following trading day.
- you check in advance whether a new securities order (e.g. a buy order) might under certain circumstances be executed against an order that was given at an earlier point in time, but had not yet been executed for the same security (e.g. a sell order).
In this context you should also consider stop orders that have not yet been executed that may potentially be cross orders.
No. Market manipulation and any tax-related matters are to be considered separately from one another.
Tax-related considerations do not constitute a justifying reason for market manipulation that would save you from a fine.
If there is no change in beneficial owner in the course of the transaction, then it is also forbidden to make crossing buy and sell orders between two custody accounts.
In the case that the beneficial owner changes, this might constitute a collusive transaction, which may also be considered market manipulation.
If you have further questions, inform yourself on the FMA website about the issue of market abuse, or contact your customer adviser.
More detailed links about the subject:
https://www.fma.gv.at/en/capital-markets/market-abuse/market-manipulation/
https://www.fma.gv.at/en/capital-markets/market-abuse/market-manipulation/crossings/