Market Surveillance & Manipulation Flashcards

What is 'front running' in securities markets?

Answer: Trading securities for one's own account before executing a large client order, benefiting from the price movement that the client order will cause

Front running is the prohibited practice where a broker or trader executes trades in their own account knowing that a large client order is about to move the market price, allowing them to profit at the client's expense.

What is 'wash trading'?

Answer: Simultaneous buying and selling of the same security to create an artificial appearance of trading activity without a genuine change in ownership

Wash trading involves a party simultaneously buying and selling the same security, creating false impressions of trading volume and activity without any real transfer of ownership. It is a form of market manipulation prohibited by UAE law.

What is 'pump and dump' market manipulation?

Answer: Artificially inflating a stock's price through false statements/hype (pump), then selling at the inflated price (dump), leaving other investors with losses

Pump and dump involves artificially inflating a stock's price through misleading or false promotional statements, then selling shares at the inflated price. When the promoters sell, the price collapses, leaving other investors with losses.

What is 'spoofing' in financial markets?

Answer: Placing large orders with the intention of canceling them before execution to create a false impression of supply/demand and move prices

Spoofing involves placing large buy or sell orders to create a false impression of market demand or supply, then canceling the orders before execution. It manipulates other traders into reacting to false signals.

How does the SCA detect market manipulation?

Answer: Through automated surveillance systems that monitor trading patterns, unusual volume, price movements, and flagged transactions

The SCA employs sophisticated market surveillance systems that continuously monitor trading activity for suspicious patterns, unusual volumes, price movements, and relationships between traders — triggering investigations when anomalies are detected.

What is 'layering' in market manipulation?

Answer: Placing multiple orders at different price levels that are not intended to be executed, to create a false appearance of market depth

Layering involves placing multiple non-bona fide orders at various price levels to create an illusion of market depth and interest, then canceling them after other traders react. It is a form of spoofing and is prohibited.