The effectiveness of processes to identify suspicious trading behaviour depends to a large extent on the types and size of the parameters set. A list of suggested parameters is below:
(a) To detect orders/trades that are inconsistent with recent trading (not justified by assets, earnings, income yield or prospects) in the security or that would materially alter the market, such as:
(i) orders/trades more than x% or a number of price steps from the previous bid/offer/last traded or closing price;
(ii) several orders usually for small quantities placed close together at increasing or decreasing prices to create 'layering' of buy/sell orders in the market. Such orders may have a material impact on price but could potentially avoid detection by filters designed to pick up large one-time moves in price as the layering of orders results in many small price moves;
(iii) the excessive use of Force Key in entering orders. This may be indicative of a Trading Representative and/or customer or a group of Trading Representatives and/or customers working to move the price far beyond the current price; and/or
(iv) orders entered during pre-opening and pre-close at such a quantity and price that have the effect of creating a false or misleading appearance of the market for, or the price of, such securities.
(b) Orders/trades that result in no change in beneficial ownership of a security or that create a false or misleading appearance of active trading, for example:
(i) orders/trades arising from orders placed on both the buy and sell side of the market at a similar price and time by the same Trading Representative or customer or by a group of Trading Representatives and/or customers acting in concert.