Preventing false markets: Brokers must now play bigger role

THE line dividing legitimate stock-market trading tactics and the creation and maintenance of a false market is admittedly a fine one. "Layering" for example, which is entering "buy" and "sell" prices at multiple levels, is reportedly a common practice in daily trading but might under certain circumstances be frowned upon by officialdom.

So it is that when Singapore Exchange (SGX) last August fined a Maybank Kim Eng (MKE) trading representative (TR) S$180,000 for layering trades in Informatics, IPCO and Mirach Energy, it sparked confusion and criticism within the industry because no one understood exactly what was the offence.

That should change following this week's regulatory announcements by SGX, when for the first time it outlined its criteria for deciding whether to investigate, intervene and punish. In addition to the MKE case, two others were presented involving five TRs from OCBC Securities and RHB Securities who had indulged in false market trading and were fined between S$35,000 and S$180,000.