Flying prices

Definition

Flying involves a firm communicating to its clients, or other market participants, via screen, instant message, voice or other method, that it has bids or offers when they are not supported by, or sometimes not even derived from, an order or a trader’s actual instruction.

Context

If false prices and/or trading activity are advertised to the market, then there is a risk that trading decisions may be made based on misleading information. This could cause market participants financial harm, and would undermine the integrity of the market.

Firms should have appropriate oversight and systems and controls in place to ensure that the instructions which employees place on trading venues, or share via persistent chat systems and trades which they publicly report, do not give false or misleading impressions of the market. This includes the supply of, or the demand for, or the price or value of the instrument in question.

Surveillance

Effective implementation of surveillance alerts for flying prices requires capturing the following trade data:

  • quote and order data, including unexecuted quotes / orders

  • communication data capturing all incoming and outgoing client instructions, orders and quotes

It is critical that timestamps are accurate to allow for reconstruction of pre-trade behaviour.

Risk taxonomy

Regulatory source

FCA Market Watch 57