The Security and Exchange Commission of Pakistan (SECP) has ordered an investigation under Section 139 of the 2015 Securities Act against a few securities brokers for market manipulation through misleading trading activity.
The SECP chairman has directed the SECP officials to address this issue through aggressive policy measures and enforcement.
For a number of years, some market manipulators have been defrauding the public through deceptive trading practices. One such practice is entering bids and offers with the prior intent of cancelling them before trade execution, commonly known as spoofing. Another such practice is entering multiple bids or offers to create the appearance of false market activity.
These actions of the manipulators are responsible for creating large movements in prices of securities that cannot be justified by any economic logic. Such manipulation undermines investor confidence and distorts the perception of stock market as a rigged casino, which is clearly prohibited under the Part IX of the 2015 Securities Act.
Three months ago, the SECP had asked the stock market surveillance team with analysing index movement trends to identify those involved in market manipulation through deceptive activity. Detailed analysis of KSE-100 index movements and order placements during the period has highlighted that some securities brokers were most prominent in deceptive trading.
These securities brokers deliberately interfered with the workings of the market to defraud investors. They placed particularly large false buy and sell orders and created artificial market activity. During this time, significant volatility was observed in the prices of relevant securities.
