Directive 22 SIX Swiss Exchange Implementing provisions governing the prohibition of market manipulation

Transcription

1 Page Directive 22 SIX Swiss Exchange Implementing provisions governing the prohibition of market manipulation 3.01, Version: Date of entry into force:

2 Directive 22 SIX Swiss Exchange Page i TABLE OF CONTENTS 1. General Market Manipulation Fictitious bids and fictitious trades (basic principle) Prohibited cross trades Prohibited nostro-nostro crosses Prohibited agent-agent crosses Wash trades Improperly matched orders and daisy chains Spoofing Customer compensation orders Ramping, capping, pegging Squeeze, corner Other forms of market manipulation Internal technical connection structure Parameters Strategy codes "S1 = delta trading S2 = basket trading S3 = market making S4 = electronic eye S5 = arbitrage S6 = other strategies Quotes Changes to the connection structure Trade reversal...3

3 Directive 22 SIX Swiss Exchange Page 1 1. GENERAL This Directive sets out the details of the principles that are contained in sections 1.18 and 1.19 of the General Conditions of SIX Swiss Exchange AG ("SIX Swiss Exchange"). 2. MARKET MANIPULATION 2.1 Fictitious bids and fictitious trades (basic principle) Fictitious trades are trades that have no economic relevance. They are conducted with the sole aim of manipulating the market. Fictitious bids/asks are entries made directly or indirectly into the Exchange System for the sole purpose of manipulating the market and are not aimed primarily at bringing about a trade. 2.2 Prohibited cross trades A prohibited cross trade involves the simultaneous buying and selling of a security in which the beneficial owner does not change Prohibited nostronostro crosses A prohibited nostro-nostro cross trade involves the simultaneous buying and selling of a security for the securities trader's own trading (nostro) account. Prohibited on order book nostro-nostro cross trades are flagged by the Exchange System. The transactions appear in the Exchange System. Prohibited off order book nostro-nostro cross trades are denied by the Exchange System. In justified cases (e.g., back-to-back transactions in the context of a reorganisation) and subject to prior approval from SIX, nostro-nostro cross trades may be flagged accordingly. The transactions are not published and do not appear in the Exchange System. The contact unit within SIX Swiss Exchange is the Markets Supervision & Investigations department Prohibited agentagent crosses 2.3 Wash trades A prohibited agent-agent cross trade involves the simultaneous buying and selling of a security for the same customer. Wash trades are trades in which the (natural or legal) person who is the beneficial owner of the traded securities does not change, even though this is the impression conveyed to the public. Usually, a series of trades is conducted in an attempt to lead other market participants into thinking that securities trading is

4 Directive 22 SIX Swiss Exchange Page 2 taking place. In reality, however, the beneficial owner has not changed. 2.4 Improper matched orders and daisy chains Improper matched orders are pre-arranged entries of equal but opposite buy and sell orders in the same security made with the intention to distort the public impression of actual liquidity or prices. When several parties coordinate this form of market manipulation, the practice is referred to as a daisy chain. 2.5 Spoofing Spoofing refers to the entry of fictitious orders for large blocks with the intent to cancel them immediately. 2.6 Customer compensation orders Customer compensation orders are buy and sell orders leading to a trade that are placed by the same securities trader between his own customers. They are forbidden if the customers concerned constitute the same beneficial owner (e.g. securities are booked out of one safekeeping account and booked into another held by the same customer). 2.7 Ramping, capping, pegging 2.8 Squeeze, corner Ramping, capping and pegging refer to the distortion of liquidity or prices by creating an overhang of buy or sell orders. In a squeeze or corner, a large position is established with the intention of constricting the market. 2.9 Other forms of market manipulation The foregoing list of manipulative practices is not all-inclusive. SIX Swiss Exchange can qualify other circumstances as constituting market manipulation. 3. INTERNAL TECHNICAL CONNECTION STRUCTURE The internal technical connection structure with regard to nostro activities may be disclosed. The form that must be used for such disclosure can be obtained from SIX Swiss Exchange upon request. 3.1 Parameters The written presentation of the internal technical connection structure comprises the following parameters: 1. Safekeeping account no. 2. Trader ID 3. Member ID 4. Department/desk 5. Room (location) 6. Note on whether trades are entered automatically or manually

5 Directive 22 SIX Swiss Exchange Page 3 7. Strategy code 3.2 Strategy codes The strategy code is used for monitoring purposes and must be entered via trade type codes in every order that is transmitted to SIX. Participants may use the following Strategy codes: "S1 = delta trading Participants must label transactions with the strategy code S1 if derivatives positions are taken in order to minimise or neutralise the price risk associated with a position in an underlying security (delta hedging) S2 = basket trading Participants must label securities transactions with the strategy code "S2" if the transaction involves a basket (e.g., if adjustments have to be made in terms of the underlying securities due to customer purchases/sales) S3 = market making Participants must label transactions with the strategy code "S3" if they operate as market makers S4 = electronic eye Participants must label transactions with the strategy code "S4" in cases where the transaction is generated by electronic eyes. Electronic eyes are computer programs that scan and analyse market prices disseminated by SIX. They generate an order for execution on SIX Swiss Exchange if current market prices are fluctuating within a corridor defined by the participant S5 = arbitrage Participants must label transactions with the strategy code "S5" if targeted simultaneous transactions are used to benefit from the price differences between two products S6 = other strategies Quotes Participants must label transactions with the strategy code "S6" in cases where strategy codes "S1" through "S5" do not apply. In the quote-driven Part of the Exchange System, quotes will be automatically considered by SIX Swiss Exchange to have strategy code S Changes to the connection structure Changes to the internal technical connection structure must be reported immediately in writing. The form that must be used for such disclosure can be obtained from SIX Swiss Exchange upon request. 4. TRADE REVERSAL Trades that are in breach of sections 1.18 and 1.19 of the General Conditions must be cancelled immediately using the

6 Directive 22 SIX Swiss Exchange Page 4 "Trade Reversal" function. This cancellation must be made by the trader concerned and/or using the securities trader's technical Trader ID. The cancellation of a trade using Trade Reversal may result in more lenient sanctions being imposed, provided the trades were not conducted deliberately. Resolution of the Management Committee of 16 October 2008, in effect since 1 January 2009