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Cross-commodity manipulation

Published on April 6, 2021 by Market Abuse Centre

Market manipulation is prohibited. Therefore, it has to be prevented and detected. For that matter it is crucial to know what it concerns.

 

Market manipulation can be committed in many ways. There are various schemes. Cross-market manipulation concerns one type of scheme, although it has many forms.

 

Basically, cross-market manipulation concerns trading in one market to improperly position the price of a product in another market. The latter market concerns a market that is related somehow, so that if the price changes in one market, for instance due to manipulation, the price in the other market is impacted.

 

Cross-market manipulation involves undertaking trading in one market with a view to improperly influencing the price of the same or a related product in another market. A manipulator could transact (or place an order to transact) in one market to influence the behaviour of market participants in another market, so that the manipulator can profit from the impact in the other market.

 

It is rather arbitrary whether cross-market manipulation is classified as an order-related or a transaction-related form of manipulation, because this crime can be committed by order submission, as well as by actual deals.

 

Cross-market manipulation can also be classified as a form of price positioning. After all, manipulation of markets involves actions undertaken by persons that artificially cause prices to be at a level not justified by market forces of supply and demand. Price positioning concerns to either, drive the price up or down, or to keep it at its current level. The latter is also called ’freezing’ the price, which concerns a technique whereby one tries to keep the price at its current level.

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Entrima and Market Abuse Centre (MAC) are the two labels we operate to provide learning services for professionals in the commodity & energy markets.
 
 


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Entrima’s mission is to transfer knowledge regarding the business, controls & operations of parties in (or relating to) the wholesale markets.

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MAC’s mission is to facilitate the prevention & detection of misconduct and to foster proper behaviour in organisations. This is achieved via training, periodic updates and increased awareness.

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