Excessive bid-offer spreads

Definition

moving the bid-offer spread to and/or maintaining it at artificial levels, by abusing of market power, usually known as excessive bid-offer spreads. This practice may also be illustrated by the following additional indicators of market manipulation:

  • transactions or orders to trade which have the effect of, or are likely to have the effect of bypassing the trading safeguards of the market (e.g. price limits, volume limits, bid/offer spread parameters, etc.);

  • execution of a transaction, changing the bid-offer prices, when the spread between the bid and offer prices is a factor in the determination of the price of any other transaction whether or not on the same trading venue;

Surveillance

Effective implementation of surveillance alerts for excessive bid-offer spreads requires capturing the following trade data:

  • order and quote data including unexecuted quotes and orders

  • trade data

Surveillance alerts to detect excessive bid offer spreads can also consider specific venue rules defining maximum bid-offer spreads for market makers and compare them against own market making activity.

Regulatory source

Moving the bid-offer spread to and/or maintaining it at artificial levels, by abusing of market power, usually known as excessive bid-offer spreads. This practice may also be illustrated by the following additional indicators of market manipulation:

(i) transactions or orders to trade which have the effect of, or are likely to have the effect of bypassing the trading safeguards of the market (e.g. price limits, volume limits, bid/offer spread parameters, etc.);

(ii) the indicator set out in Point 2(c)(i) of this Section.

COMMISSION DELEGATED REGULATION (EU) 2016/522, Annex II, Section I, 6 (c)