2. False Trading and Market Rigging
Rule 5.12.1 states that a Trading Member or a Trading Representative must not engage in any course of conduct that is likely to create a false or misleading appearance:(a) of active trading in any securities or futures contracts; or(b) with respect to the market for, or the price of, any security or futures contract.
Rule 5.12.1 prohibits false trading and market rigging. This trading misconduct involves an intentional interference with the free forces of supply and demand, such that a distortive effect is created vis-à-vis the market for, or the price of, the security or futures contract traded. This distortive effect occurs as a result of any trading strategy or practice that may be employed in order to artificially manage the market for, or the price of, the security or futures contract concerned.
SGX-ST's determination of whether a course of conduct is likely to create a false or misleading appearance will be made on an objective basis. In other words, the Rule does not require the Trading Member or Trading Representative to have intended to create the false or misleading appearance, or knew that it or he was in fact creating a false or misleading appearance. Rule 5.12.2 identifies the factors that SGX-ST may take into account when making the said determination.
The Rule does not prevent Trading Members and Trading Representatives from carrying out legitimate trading strategies that reflect the forces of genuine supply and demand. However, Trading Members and Trading Representatives must do so bearing in mind their obligations to maintain an orderly market, and to conduct their trading activities with an appropriate degree of care.
Trading Representatives (as licensed professionals) must not act as mere order takers and accept their customers' instructions blindly, without conducting any due diligence.