Rule 5.12.2(f): Whether the order or orders for the purchase (or sale) of a security or futures contract is or are entered with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale (or purchase) of the security or futures contract has been or will be entered by or for the same or different parties (excluding Direct Business).
The time proximity of orders and the fact that they are for substantially the same price (particularly if the price is out-of-range) and quantity may suggest that the transaction is pre-arranged. Pre-arranged transactions have the effect of creating a false or misleading appearance of active trading, or improperly excluding other market participants from the transaction since the first bid or offer was not adequately exposed to the market.
Pre-arranged trading can create an unfair market as it is, in substance, executing risk-free transactions at pre-determined prices rather than at market prices. As the transfer of beneficial interest or market risk (if any) is only between persons who are acting in concert or collusion, there is essentially no legitimate commercial rationale behind pre-arranged transactions. Likewise, a Trading Representative who consistently matches his own buy and sell orders may be considered to have engaged in pre-arranged trading as the transactions are unlikely to be executed for a legitimate economic purpose.
The execution of crossings or transactions between the same parties for the same volumes, which are subsequently reversed at the same prices, also raises questions whether the transactions involve a change in beneficial ownership, or are for rollover of trades to extend settlement, or for a purpose of engaging in a circular trading scheme to create the impression of turnover.