transactions carried out as a result of the entering of buy and sell orders to trade at or nearly at the same time, with very similar quantity and similar price, by the same party or different but colluding parties. 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 setting a market price when the liquidity or the depth of the order book is not sufficient to fix a price within the session;
unusual concentration of transactions and/or orders to trade, whether generally, or by only one person using one or different accounts, or by a limited number of persons;
unusual repetition of a transaction among a small number of parties over a certain period of time;
transactions or orders to trade which modify, or are likely to modify, the valuation of a position while not decreasing/increasing the size of the position;
Effective implementation of surveillance alerts for improper matched orders 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.
Improper matched orders can be related to wash trades and they can be used to paint the tape. They can also be part of colluding after an IPO.
According to the SEC’s complaint, Eric Landis of Charlottesville, Virginia, falsely claimed to third-party media buyers for microcap companies that he would distribute promotional materials for the stocks via email lists with tens of thousands of subscribers. In reality, his distribution lists were a sham. To generate trading volume and create the false impression that he was drumming up investor interest, the SEC alleges that Landis traded thousands of microcap shares himself using brokerage accounts in his own name, in the name of an entity he controlled, Ridgeview Capital Partners LLC, and in the names of several third parties. Altogether, the SEC alleges that Landis placed thousands of manipulative trades over three years, including approximately 1,300 “matched trades,” which involved simultaneously selling and buying stocks in the microcap companies he was paid to promote.
SEC Charges Self-Described Promoter With Microcap Market Manipulation Scheme
Transactions carried out as a result of the entering of buy and sell orders to trade at or nearly at the same time, with very similar quantity and similar price, by the same party or different but colluding parties — usually known as ‘improper matched orders’. 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 setting a market price when the liquidity or the depth of the order book is not sufficient to fix a price within the session;
(ii) the indicators set out in Points 1(a)(i), 3(a)(i) and 3(a)(ii) of this Section.
COMMISSION DELEGATED REGULATION (EU) 2016/522, Annex II, Section I, 3 (c)