Concealing ownership

Definition

transaction or series of transactions designed to conceal the ownership of a financial instrument, related spot commodity contract, or an auctioned product based on emission allowances via the breach of disclosure requirements through the holding of the financial instrument, related spot commodity contract, or an auctioned product based on emission allowances in the name of a colluding party or parties. The disclosures are misleading in respect of the true underlying holding of the financial instrument, related spot commodity contract, or an auctioned product based on emission allowances. This practice may also be illustrated by unusual repetition of a transaction among a small number of parties over a certain period of time.

Surveillance

Effective implementation of surveillance alerts for concealing ownership requires capturing the following trade data:

  • trade data

  • counterparty data

Effective surveillance alerts should monitor for trades with counterparties belonging to the same group as well as they should allow for small variations in price and quantity. Looking for an exact match in price and / or quantity as part of the alerting logic makes it easy to avoid detection by creating small imbalances between the legs of a wash trade.

Wash trades can be an indicator of concealing ownership.

Regulatory source

Transaction or series of transactions designed to conceal the ownership of a financial instrument, related spot commodity contract, or an auctioned product based on emission allowances via the breach of disclosure requirements through the holding of the financial instrument, related spot commodity contract, or an auctioned product based on emission allowances in the name of a colluding party or parties. The disclosures are misleading in respect of the true underlying holding of the financial instrument, related spot commodity contract, or an auctioned product based on emission allowances — usually known as ‘concealing ownership’. This practice may also be illustrated by the indicator described in Point 3(a)(i) of this Section.

COMMISSION DELEGATED REGULATION (EU) 2016/522, Annex II, Section I, 3 (d)