entering into arrangements for the sale or purchase of a financial instrument, a related spot commodity contract, or an auctioned product based on emission allowances, where there is no change in beneficial interests or market risk or where beneficial interest or market risk is transferred between parties who are acting in concert or collusion
Effective implementation of surveillance alerts for Wash trades 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 trade can be used to paint the tape
Entering into arrangements for the sale or purchase of a financial instrument, a related spot commodity contract, or an auctioned product based on emission allowances, where there is no change in beneficial interests or market risk or where beneficial interest or market risk is transferred between parties who are acting in concert or collusion — usually known as ‘wash trades’. This practice may also be illustrated by the following additional indicators of market manipulation:
(i) unusual repetition of a transaction among a small number of parties over a certain period of time;
(ii) 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;
(iii) 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.
COMMISSION DELEGATED REGULATION (EU) 2016/522, Annex II, Section I, 3 (a)