MAR 1 Annex 3 Requirement for operators of trading venues to inform the FCA immediately

1

Signals that may indicate significant infringements of the rules of a trading venue or disorderly trading conditions or system disruptions in relation to a financial instrument

Significant infringements of the rules of a trading venue

(1)

Market participants infringe rules of the trading venue which aim to protect the market integrity, the orderly functioning of the market or the significant interests of the other market participants. 

(2)

A trading venue considers that an infringement is of sufficient severity or impact to justify consideration of disciplinary action.

Disorderly trading conditions

(3)

The price discovery process is interfered with over a significant period of time.

(4)

The capacities of the trading system are reached or exceeded.

(5)

(6)

Breakdown or failure of critical mechanisms under paragraphs 3 to 3F of the Schedule to the Recognition Requirements Regulations, and MAR 5.3A and MAR 5.5A, which are designed to protect the trading venue against the risks of algorithmic trading.

System disruptions

(7)

Any major malfunction or breakdown of the system for market access that results in participants losing their ability to enter, adjust or cancel their orders.

(8)

Any major malfunction or breakdown of the system for the matching of transactions that results in participants losing certainty over the status of completed transactions or live orders as well as unavailability of information indispensable for trading (eg, index value dissemination for trading certain derivatives on that index).

(9)

Any major malfunction or breakdown of the systems for the dissemination of pre- and post-trade transparency and other relevant data published by trading venues.

(10)

Any major malfunction or breakdown of the systems of the trading venue to monitor and control the trading activities of the market participants; and any major malfunction or breakdown in the sphere of other interrelated services providers, in particular central counterparties and central securities depositories that has repercussions on the trading system.

2

Signals that may indicate abusive behaviour under the Market Abuse Regulation

Signals of possible insider dealing or market manipulation

(1)

Unusual concentration of transactions and/or orders to trade in a particular financial instrument with one member or participant or between certain members or participants.

(2)

Unusual repetition of a transaction among a small number of members or participants over a certain period of time.

Signals of possible insider dealing

(3)

Unusual and significant trading or submission of orders to trade in the financial instruments of a company by certain members or participants before the announcement of important corporate events or of price sensitive information relating to the company, and orders to trade or transactions resulting in sudden and unusual changes in the volume of orders or transactions and/or prices before public announcements regarding the financial instrument in question.

(4)

Orders to trade are given or transactions are undertaken by a market member or participant before or immediately after that member or participant or persons publicly known as linked to that member or participant produce or disseminate research or investment recommendations that are made publicly available.

Signals of possible market manipulation

The signals described in (18) to (23) are particularly relevant in an automated trading environment.

(5)

Orders to trade given or transactions undertaken which represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the trading venue concerned, in particular when these activities lead to a significant change in the price of the financial instruments.

(6)

Orders to trade given or transactions undertaken by a member or participant with a significant buying or selling interest in a financial instrument which lead to significant changes in the price of the financial instrument on a trading venue.

(7)

Orders to trade given or transactions undertaken which are concentrated within a short time span in the trading session and lead to a price change which is subsequently reversed.

(8)

Orders to trade given which change the representation of the best bid or offer prices in a financial instrument admitted to trading or traded on a trading venue, or more generally the representation of the order book available to market participants, and are removed before they are executed.

(9)

Transactions or orders to trade by a market participant with no other apparent justification than to increase or decrease the price or value of, or to have a significant impact on the supply of, or demand for, a financial instrument, namely near the reference point during the trading day, eg, at the opening or near the close.

(10)

Buying or selling of a financial instrument at the reference time of the trading session (eg, opening, closing, settlement) in an effort to increase, to decrease or to maintain the reference price (eg, opening price, closing price, settlement price) at a specific level (usually known as ‘marking the close’).

(11)

Transactions or orders to trade which have the effect of, or are likely to have the effect of, increasing or decreasing the weighted average price of the day or of a period during the session.

(12)

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 of the financial instrument or the depth of the order book is not sufficient to fix a price within the session.

(13)

In the case of execution of a transaction, changing the bid-offer prices when this spread is a factor in the determination of the price of another transaction whether or not on the same trading venue.

(14)

Entering orders representing significant volumes in the central order book of the trading system a few minutes before the price determination phase of the auction and cancelling these orders a few seconds before the order book is frozen for computing the auction price so that the theoretical opening price might look higher or lower than it otherwise would do.

(15)

Engaging in a transaction or series of transactions which are shown on a public display facility to give the impression of activity or price movement in a financial instrument (usually known as ‘painting the tape’).

(16)

Transactions carried out as a result of the entering of buy and sell orders to trade at, or nearly at, the same time, with a very similar quantity and similar price, by the same or different but colluding market members or participants (usually known as ‘improper matched orders’).

(17)

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 (eg, as regards volume limits, price limits, bid/offer spread parameters, etc).

(18)

Entering of orders to trade or a series of orders to trade, executing transactions or series of transactions likely to start or exacerbate a trend and to encourage other participants to accelerate or extend the trend in order to create an opportunity to close out or open a position at a favourable price (usually known as ‘momentum ignition’).

(19)

Submitting multiple or large orders to trade often away from the touch on one side of the order book in order to execute a trade on the other side of the order book. Once that trade has taken place, the manipulative orders will be removed (usually known as ‘layering and spoofing’).

(20)

Entry of small orders to trade in order to ascertain the level of hidden orders and particularly used to assess what is resting on a dark platform (usually know as a ‘ping order’).

(21)

Entry of large numbers of orders to trade and/or cancellations and/or updates to orders to trade so as to create uncertainty for other participants, slowing down their process and to camouflage their own strategy (usually known as ‘quote stuffing’).

(22)

Posting of orders to trade, to attract other market members or participants employing traditional trading techniques (‘slow traders’), that are then rapidly revised onto less generous terms, hoping to execute profitably against the incoming flow of ‘slow traders’ orders to trade (usually known as ‘smoking’).

(23)

Executing orders to trade or a series of orders to trade, in order to uncover orders of other participants, and then entering an order to trade to take advantage of the information obtained (usually known as ‘phishing’).

(24)

The extent to which, to the best knowledge of the operator of a trading venue, orders to trade given or transactions undertaken show evidence of position reversals in a short period and represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the trading venue concerned, and might be associated with significant changes in the price of a financial instrument admitted to trading or traded on the trading venue.

Signals for cross-product market manipulation, including across trading venues 

The signals described below are particularly relevant to the operator of a trading venue where both a financial instrument and related financial instruments are admitted to trading or traded or where the above-mentioned instruments are traded on several trading venues operated by the same operator.

(25)

Transactions or orders to trade which have the effect of, or are likely to have the effect of increasing, decreasing or maintaining the price of a financial instrument during the days preceding the issue, optional redemption or expiry of a related derivative or convertible.

(26)

Transactions or orders to trade which have the effect of, or are likely to have the effect of, maintaining the price of the underlying financial instrument below or above the strike price, or other element used to determine the pay-out (eg, barrier) of a related derivative at expiration date.

(27)

Transactions which have the effect of, or are likely to have the effect of, modifying the price of the underlying financial instrument so that it surpasses or does not reach the strike price, or other element used to determine the pay-out (eg, barrier) of a related derivative at expiration date.

(28)

Transactions which have the effect of, or are likely to have the effect of, modifying the settlement price of a financial instrument when this price is used as a reference or determinant, namely, in the calculation of margins requirements.

(29)

Orders to trade given or transactions undertaken by a member or participant with a significant buying or selling interest in a financial instrument which lead to significant changes in the price of the related derivative or underlying asset admitted to trading on a trading venue.

(30)

Undertaking trading or entering orders to trade in one trading venue or outside a trading venue (including entering indications of interest) with a view to improperly influencing the price of a related financial instrument in another or in the same trading venue or outside a trading venue (usually known as ‘cross-product manipulation’).

(31)

Creating or enhancing arbitrage possibilities between a financial instrument and another related financial instrument by influencing reference prices of one of the financial instruments can be carried out with different financial instruments (eg, rights or shares, cash markets or derivatives markets, warrants or shares, etc). In the context of rights issues, it could be achieved by influencing the (theoretical) opening or (theoretical) closing price of the rights.