Whole Section

  • 3.4

    Rule 5.12.2(d): Whether the execution of the transaction is likely to coincide with or is likely to influence the calculation of reference prices, settlement prices and valuations.

    Added on 3 June 20193 June 2019.

    • 3.4.1

      A Trading Member or Trading Representative should consider carefully any orders placed with instructions to execute them in or near the Closing Routine, particularly if a price target is set. A Trading Member or Trading Representative should also be alert to orders placed in or near the Closing Routine on the last trading day of the month, quarter or year, or on the expiry dates of options, warrants or futures contracts, which will move the price when executed.

      Added on 3 June 20193 June 2019 and 3 June 20193 June 2019.

    • 3.4.2

      A customer who, to the knowledge of the Trading Member or Trading Representative, declines the opportunity to obtain a better price during the day and prefers to pay a higher (or lower) price in or near the Closing Routine should be queried as to the strategy. This is important if the order is to buy (or sell) a small volume of the security or futures contract, which is likely to move the price and possibly fix the closing price. Further, if the Trading Member or Trading Representative received a series of similar orders over a number of days, each of which generated a price movement in or near the Closing Routine, the Trading Member or Trading Representative should be satisfied that the customer is not attempting to create a false or misleading appearance with respect to the price of the security or futures contract.

      Added on 3 June 20193 June 2019 and 3 June 20193 June 2019.

    • 3.4.3

      Examples:

      (a) A fund manager's quarterly performance will improve if the valuation of his portfolio at the end of the quarter in question is higher. By placing a large order to buy relatively illiquid securities and/or futures contracts, which are also components of his portfolio, to be executed in or just before the Closing Routine, his purpose might be to distort the price in his favour.
      (b) The expiry of futures contracts may require a timed unwinding of the countervailing security position. In these circumstances, price impact in some securities may be inevitable, particularly in less liquid securities. However, a Trading Member or Trading Representative should be alert to a customer seeking to cause unnecessary price impact to improperly generate a profit or move the index.

      Added on 3 June 20193 June 2019 and 3 June 20193 June 2019.