Market manipulation is one of the two pillars of the market abuse regime, alongside insider dealing. It is defined in Article 12 of the UK Market Abuse Regulation (UK MAR) and prohibited by Article 15, which bans both engaging in and attempting to engage in manipulation. The prohibition protects market integrity by ensuring prices reflect genuine supply and demand rather than artificial or deceptive activity.
The main types of manipulation
Article 12 sets out several categories. Trade-based manipulation covers transactions or orders that give, or are likely to give, false or misleading signals as to supply, demand or price, or that secure the price at an abnormal or artificial level, including practices such as wash trades, marking the close and spoofing. Fictitious-device manipulation involves transactions employing deception or contrivance. Information-based manipulation covers the dissemination of false or misleading information through any medium, including the internet. Benchmark manipulation, captured at Article 12(1)(d), covers conduct that distorts the calculation of a benchmark.
Why it matters
Market manipulation can attract unlimited financial penalties imposed by the FCA, public censure and, where the criminal offences under the Financial Services Act 2012 apply, prosecution and imprisonment. Firms must operate surveillance systems and submit Suspicious Transaction and Order Reports (STORs) where they have reasonable suspicion of manipulation, so the regime imposes a detection-and-reporting duty as well as a prohibition on the conduct itself.
Who it applies to
Anyone trading or facilitating trading in financial instruments admitted to UK trading venues, including investment banks, brokers, trading firms, asset managers and individual traders.
Related terms
MAR, STOR and inside information.