3.4 Trading Practices and Conduct Rules of Members, Approved Traders and Registered Representatives

3.4.1 Market Manipulation

A Member, Approved Trader or Registered Representative shall not manipulate or attempt to manipulate the price of a contract or of any underlying, or corner, or attempt to corner, any underlying.

3.4.2 Churning

A Member, Approved Trader or Registered Representative is prohibited from churning or generating commissions through creating excessive transactions in a Customer's Account.

3.4.3 False Trading, Bucketing, Fraudulent Inducement to Trade and Employment of Fraudulent Device

A Member, Approved Trader or Registered Representative shall not:

(a) engage in, or knowingly act with any other Person in, any act or practice that will or is likely to create a false or misleading appearance of active trading in any contract or a false or misleading appearance with respect to the price of any contract;

(b) knowingly execute, or hold out as having executed, an order for the purchase or sale of a contract, without having effected a bona fide purchase or sale of the contract in accordance with this Rules;

(c) induce or attempt to induce another person to trade in a contract:

(i) by making or publishing any statement, promise or forecast that it knows or ought reasonably to know to be false, misleading or deceptive;

(ii) by any dishonest concealment of material facts;

(iii) by the reckless making or publishing of any statement, promise or forecast that is false, misleading or deceptive; or

(iv) by recording or storing in any mechanical, electronic or other device information that is knowingly false or materially misleading;

or

(d) directly or indirectly in connection with any trading in a contract:

(i) employ any device, scheme or artifice to defraud;

(ii) engage in any act, practice or course of business which operates as a fraud or deception, or is likely to operate as a fraud or deception upon any Person;

(iii) make any false statement of a material fact; or

(iv) omit to state a material fact necessary in order to make any statements made, in the light of the circumstances under which they were made, not misleading.

3.4.3A Duty to Monitor for Trading Misconduct

A Member must have in place processes to review orders and trades for the purpose of detecting suspicious trading behaviour.

Refer to Practice Note 3.4.3A.

Added on 15 March 2013 15 March 2013.

3.4.4 Duty to Inform Exchange of Prohibited Trading Practices

A Member, Approved Trader or Registered Representative shall immediately inform the Exchange if it reasonably suspects, or knows of, any commission or attempted commission of the acts prohibited under Rules 3.4.1, 3.4.2 and 3.4.3.

3.4.5 Dissemination of False or Misleading Information

A Member, Approved Trader or Registered Representative shall not disseminate false or misleading reports concerning market information or conditions that may affect the price of any contract, if the Member, Approved Trader or Registered Representative:

(a) knows or ought reasonably to know that the information is false or misleading; or

(b) is reckless about the truth of the information.

This prohibition includes circulation or aiding in the circulation in any manner of rumours which cast doubt on the integrity of any contract or underlying.

3.4.6 Professional Misconduct

A Member, Approved Trader or Registered Representative shall not:

(a) permit the use of the Member's facilities or Membership privileges by another Member, Approved Trader or Registered Representative or non-Member in a manner that impairs the dignity or degrades the good name of the Exchange, or creates a market or other situation detrimental to the Exchange, or effectuates manipulations or cornerings or attempts at either, or to itself do any of the foregoing;

(b) engage in any conduct which impairs or tends to impair the dignity or the good name of the Exchange;

(c) commit an act which is substantially detrimental to the interest of the Exchange;

(d) refuse to comply with an order of the Exchange, the Disciplinary Committee or the Appeals Committee;

(e) refuse to comply with a final arbitration award;

(f) fail to answer Customers' complaints promptly and in appropriate detail;

(g) commit any fraudulent or dishonest act or any act of bad faith;

(h) act in a dishonourable or uncommercial manner;

(i) make a material mis-statement to the Exchange, the Disciplinary Committee or the Appeals Committee, or in any information supplied to the Exchange or its officers;

(j) make, or cause to be made, a false or misleading entry in any books, records, reports, slips, documents or statements relating to the business, affairs, transactions, conditions, assets or accounts of the Member;

(k) omit from making, for whatever reason, a material entry in any books, records, reports, slips, documents or statements relating to the business, affairs, transactions, conditions, assets or accounts of the Member;

(l) alter or destroy any books, records, reports, slips, documents or statements relating to the business, affairs, transactions, conditions, assets or accounts of the Member without a valid reason;

(m) make use of or reveal any confidential information obtained by reason of participating in any investigative proceeding or hearing;

(n) refuse to appear before the Exchange, the Disciplinary Committee or the Appeals Committee at a duly convened hearing or in connection with any investigation; or

(o) refuse to fully answer all questions or produce all books and records in relation to any audit, hearing or investigation.

3.4.7 Disclosing Orders Prohibited

A Member, Approved Trader or Registered Representative shall not disclose an order to any Person, except to the following for official purposes:

(a) an officer of the Exchange;

(b) an employee or agent of the Member for the purpose of executing the order;

(c) the Member's sponsoring Clearing Member for the purpose of clearing the order; or

(d) such other Persons as required by law.

3.4.8 Good Faith Bids and Offers.

A Member or an Approved Trader shall not knowingly enter, or cause to be entered, bids or offers into the Trading System other than in good faith for the purpose of executing bona fide transactions.

Refer to Practice Note 3.4.8.

Amended on 14 November 2016 14 November 2016.

3.4.9 Fictitious Transactions Without Change In Ownership

The creation of fictitious transactions or the placing of orders which do not involve any change in ownership, or the execution of such an order with knowledge of its character by a Member, Approved Trader or Registered Representative is prohibited. A Member, Approved Trader or Registered Representative shall not accept buying and selling orders at the same time and price from a Customer for the same contract month of the same futures contract or in the case of option contracts, a put or call option contract with the same class of options, the same strike price and expiration month. This Rule does not apply if orders are entered in the following circumstances:

(a) the orders are from a fund manager whose instructions are intended to switch the contract from one (1) sub-account to another for legitimate commercial reasons;

(b) the orders will be booked out finally to different beneficial owners; or

(c) if the Member or the Approved Trader establishes to the Exchange that it was not a purpose of the orders to create a false market.

Refer to Practice Note 3.4.9.

3.4.10 Overtrading by a Member, Approved Trader or Customer

The following provisions apply in relation to overtrading:

(a) a Member shall not execute any trade beyond any limits imposed by that Member's sponsoring Clearing Member, the Exchange, the Clearing House or MAS. A Member shall ensure that its Customers do not trade beyond any limits. A Member shall be guilty of overtrading if such Member or its Approved Trader enters into any trade or trades beyond any limits imposed from time to time by its sponsoring Clearing Member, the Exchange or MAS. If a Member is charged with violating this Rule:

(i) the Exchange may at its discretion suspend that Member from trading until such time as the Disciplinary Committee or the Appeals Committee has completed the hearing in respect of such charge against such Member;

(ii) its sponsoring Clearing Member shall, upon being notified by the Exchange or the Clearing House as the case may be, withhold any profits due or owing to such Member from the transaction that resulted in overtrading, or such monies due or owing to such Member as directed by the Exchange or the Clearing House, and shall not release any such profits or monies until the Disciplinary Committee or the Appeals Committee has completed the hearing in respect of the charge against the Member; and

(iii) without prejudice to the foregoing, the Exchange may, in any case of overtrading, direct the Clearing House to withhold any profits due or owing to any Clearing Member from the transaction that resulted in overtrading, or such monies due or owing to such Member, until the Disciplinary Committee or the Appeals Committee has completed the hearing in respect of the charge against the Member; and

(b) [deleted]

(c) each trade entered into beyond any limits imposed by a sponsoring Clearing Member, the Exchange, the Clearing House or MAS shall be deemed to be a distinct and separate violation of this Rule and shall be punishable as such. If a Member is charged by the Exchange for overtrading, it is not necessary for the Exchange to show that the Member intended to overtrade. The act of overtrading is sufficient to constitute an offence under this Rules.

Amended on 15 March 2013 15 March 2013.

3.4.11 Knowingly Taking Advantage of an Error Prohibited

A Member, Approved Trader or Registered Representative shall not knowingly take advantage of a situation arising from:

(a) a breakdown or malfunction in any Exchange Systems; or

(b) error entries made by the Exchange on the Trading System.

Amended on 14 November 2016 14 November 2016.

3.4.12 Deemed Rule Violations

A Member, Approved Trader or Registered Representative shall be deemed to be in violation of this Rules if it is convicted of any offence relating to fraud, any act of bad faith, dishonest conduct, dishonorable conduct or uncommercial conduct before any court of law.

3.4.13 Front Running — Priority of Customers' Orders

A Member, Approved Trader or Registered Representative shall not trade in contracts for its own accounts or for an account associated with or connected to that Member, Approved Trader or Registered Representative, if that Member, Approved Trader or Registered Representative also has in hand Customers' orders (including discretion orders) to do the same at the prevailing market price or at the same price. This Rule does not apply if:

(a) that Member, Approved Trader or Registered Representative has no access to the Customer's order flow information;

(b) the Customer has prescribed that the order be executed under specified conditions and the order cannot be executed by reason of those conditions; or

(c) the transaction is entered into in circumstances prescribed by MAS.

"Customer" as used in this Rule 3.4.13 does not include the Member's Approved Traders, Registered Representatives or Persons associated with or connected to the Member, Approved Trader or Registered Representative.

3.4.14 Trading Against Customers' Orders Prohibited

A Member, Approved Trader or Registered Representative shall not knowingly effect a transaction to buy from or sell to a Customer any contract for:

(a) an account in which the Member, Approved Trader or Registered Representative has an interest; or

(b) the account of any Person associated with or connected to the Member, Approved Trader or Registered Representative.

This Rule does not apply if the Member, Approved Trader or Registered Representative has first entered the Customer's order into the Trading System and waited at least 10 seconds before entering an opposite order, or if the Member, Approved Trader or Registered Representative has obtained the Customer's prior written consent. "Customer" as used in this Rule 3.4.14 does not include the Member's Approved Traders, Registered Representatives or Persons associated with or connected to the Member, Approved Trader or Registered Representative.

Amended on 14 November 2016 14 November 2016.

3.4.15 Prohibited Conduct

A Member, a Registered Representative or an Approved Trader shall not participate in any prohibited market conduct or in any insider trading, or knowingly assist a person in such conduct.

Added on 16 July 2012 16 July 2012.