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Market Abuse Regulation - Commentary and Annotated Guide edited by Ventoruzzo, Marco; Mock, Sebastian (30th November 2017)

Part A Annotated Guide, 3 The Concept of Market Manipulation

Sebastian Mock

From: Market Abuse Regulation: Commentary and Annotated Guide

Edited By: Marco Ventoruzzo, Sebastian Mock

Subject(s):
Capital markets — Insider dealing — Insider trading — Market abuse — Market Abuse Directive (MAD) — Regulated activities

(p. 33) The Concept of Market Manipulation

I.  Historical Development of the Prohibition of Market Manipulation

A.3.01  Market manipulation is the oldest form of market abuse. Insider trading and the unlawful disclosure of inside information are a rather new phenomenon, having only been developed in the twentieth century.1 In contrast, market manipulation can and did indeed occur on every market where the market prices are determined by supply and demand.2 From almost from every epoch of human history, market manipulations are reported as being mainly based on the publishing of false or misleading statements.3 While the problem of market manipulation was initially (p. 34) considered as a problem of contract law—especially in the context of an obligation of the contractual parties to share certain information—it only later became a general concern of the regulation of markets. The first regulation and, in particular, prohibition of market manipulation dates back to the late nineteenth century, when this phenomenon became a general problem. Since at this time market manipulation was considered as a type of fraud, many jurisdictions simply expanded the application of this criminal offence to stock markets, which still leads today to the question of whether market manipulation can (also) constitute criminal fraud.4

II.  Prohibition of Market Manipulation in European Capital Markets Law

A.3.02  In European law, the prohibition of market manipulation is a relatively new phenomenon. The Insider Trading Directive (1989/592/EEC) did not include this prohibition but focused instead only on insider trading.5 The first European piece of legislation regarding market manipulation was drafted by the Forum of European Securities Commission (FESCO) in 1999, which developed a first standard with a definition of market abuse.6 Also in 1999, the Commission published its action plan on ‘Implementing the Framework for Financial Markets’,7 discussing the enactment of a directive including—among other things—a prohibition of market manipulation. Moreover, the ‘Final Report of the Committee of Wise Men on the Regulation of European Securities Markets’ (the so-called Lamfalussy Report) of 20018 pointed out that the common market needed a clear and concise definition of market manipulation, especially since the prohibition of market manipulation was completely unknown to the national law of some Member States.

(Former) Market Abuse Directive

A.3.03  Based on these reports, the Commission published its first draft for a Market Abuse Directive in May 2001,9 which was later adopted as the (former) Market (p. 35) Abuse Directive (2003/6/EC).10 Pursuant to Article 5, Member States were obliged to prohibit any person from engaging in market manipulation. Article 1(2) of the (former) Market Abuse Directive (2003/6/EC) provided a general definition of market manipulation, following the general distinction between transaction-based market manipulation11 and information-based market manipulation.12,13 Although it included a detailed definition of market manipulation, (p. 36) taking into account all kinds of behaviour relating to market manipulation, the practical impact of the (former) Market Abuse Directive (2003/6/EC) was—in this regard—somewhat limited. However, particularly during the financial crises and owing to certain scandalous events that occurred in the capital markets of some Member States, it turned out that a number of behavioural and trading techniques were not covered by the definition. This applied principally to short selling14 and the manipulation of the rate in the so-called LIBOR scandal, where major European banks engaged in manipulation of the London Interbank Offered Rate (LIBOR), the interest rate that banks pay on money they borrow from one another, in order to increase the interest rate charges for borrowers.

Market Abuse Regulation and accompanying directions and regulations

A.3.04  Owing to problems with the implementation and application of the (former) Market Abuse Directive (2003/6/EC), in October 2011 the Commission published its first draft for a Market Abuse Regulation to replace the (former) Market Abuse Directive (2003/6/EC).15 This new draft Market Abuse Regulation also followed the general distinction between transaction-based market manipulation (Article 12(1)(a) and (b))16 and information-based market manipulation (Article 12(1)(c) and (d)).17

Specific (other) regulations of market manipulation

A.3.05  Market manipulation is not only a phenomenon of capital; it is also prohibited by regulations governing other markets. This is especially the case for the energy market, in respect of which there is a special prohibition of market manipulation (Article 5 Wholesale Energy Market Integrity and Transparency Regulation (1227/2011/EU)). Like Article 12 of the Market Abuse Regulation, the Wholesale Energy Market Integrity and Transparency Regulation (1227/2011/EU) also provides in its Article 2(2) a detailed definition of market manipulation.18

III.  Forms of Market Manipulation

A.3.06  In contrast to the prohibition of insider dealing, market manipulation is not a single act or a set of different behaviours but is more of a multi-layer phenomenon (p. 37) covering all kinds of behaviour generally not accepted in a market. In capital markets law, four different forms of market manipulation have developed, which can also be found in the Market Abuse Regulation (and other European legislation). These are information-based manipulation (see A.3.07), transaction-based manipulation (see A.3.08), short selling (see A.3.09), and other forms of manipulation (see A.3.10). However, the Market Abuse Regulation does not refer expressly to each of these forms of market manipulations but defines market manipulation in its Article 12 in general.

Information-based manipulation

A.3.07  The first form of market manipulation is the so-called information-based manipulation, where the person acting usually publishes false or misleading signals regarding financial instruments, knowing that the information being published is false or misleading. The motivation for information-based manipulation is to influence the market price of a financial instrument to place an order in advance or afterwards gaining some profit from this manipulation, owing to the creation of an artificial price level. Thus, the financial professional tries to persuade other participants in the market that the price or volume of a security or financial product is not at the actual or current value. Whether such an artificial price level exists or not can be very difficult to determine, since this requires a determination of the right market price for the financial instruments. However, in the case of information-based manipulation, this determination is usually less problematic, because only an abnormal increase or decrease in the market price of the financial instrument has to be deemed to be closely connected with the publication of the false or misleading signals or rumours. Since the publishing of false or misleading statements does not require large resources and is relatively simple, information-based manipulation is the most common form of market manipulation. Moreover, the numerous publication requirements (eg financial statements, disclosure of inside information, and transparency regarding major shareholdings and financial instruments pursuant to the Transparency Directive [(2013/50/EU)]) can easily lead to an unintended information-based manipulation by the issuer.19 Because it is based on the publication of false or misleading signals, information-based manipulation can constitute not only market manipulation but also insider dealing, raising the difficult question of whether the prohibition of these two forms of market conduct are related to each other.20 Typical forms of information-based manipulation are so-called painting the tape21 or scalping.22(p. 38) In the Market Abuse Regulation, information-based manipulation is considered as market manipulation pursuant to Article 12(1)(c) and (d) and Article 12(2)(d).

Transaction-based manipulation

A.3.08  Another form of market manipulation is the so-called transaction-based manipulation, where somebody enters in a transaction, placing an order to trade to influence the market price of a financial instrument. Here, the manipulator tries to create an—even if very short-lived23—artificial price level for the financial instruments. However, in contrast to the information-based manipulation,24 the determination of the right price level compared to the artificial price level can be extremely difficult and sometimes even impossible to establish. Nevertheless, it should be borne in mind that the determination of the right price level in contrast to the artificial price level is not usually necessary. Particularly with regard to administrative sanctions25 and criminal sanctions,26 it is sufficient that the manipulator committed a market manipulation in general. Only in the context of the civil liability of the manipulator27 will such a determination be mandatory, usually putting a severe burden of proof on the claimant. In contrast to the information-based manipulation,28 transaction-based manipulation usually concerns huge investments, since only large transactions have the potential to influence the market price of a financial instrument. Therefore, transaction-based manipulation can often be found in small markets regarding financial instruments with small daily trading volumes. Prominent examples of transaction-based manipulation are wash sales,29 marking the close,30 spoofing,31 or improper match orders.32(p. 39) A very common form of market manipulation involves stabilization measures undertaken during an initial or secondary offering of securities, since the issuer usually agrees with one or several financial institutions or investment firms to undertake the necessary volume of transactions to keep the price of the financial instruments for a fixed period up to a certain level, which is usually above the initial offer price. However, since these transactions are widely accepted in all modern capital markets, Article 5 of the Market Abuse Regulation provides a safe harbour exempting them from the prohibitions of Articles 14 and 15 of the Market Abuse Regulation.33 Even though the safe harbour provision of Article 5 of the Market Abuse Regulation also applies to buy-back-programmes for shares, this kind of transaction does not necessarily constitute a market manipulation, even though it creates an artificial price level for shares.34

The transaction-based market manipulations are covered by the Market Abuse Regulation in its Article 12(1)(a) and Article 12(2)(a) to (c) and (e). The definitions set out in Article 12(1)(a) of the Market Abuse Regulation are completed by a list of indicators in Annex I of the Market Abuse Regulation.

Short selling

A.3.09  A specific form of market manipulation is short selling. While this trading technique was not addressed in the (former) Market Abuse Directive (2003/6/EC), especially during the financial crises of 2007/2008 an intense discussion started in Europe whether short selling should be considered as market manipulation or completely banned.35 This discussion came to an end when the Short Selling Regulation (236/2012/EU) was enacted in 2012, establishing reporting requirements for short positions and restrictions especially for uncovered short sales. Although having created a specific regulation for short selling, the European legislator failed to address the relation of these requirements and restrictions to the (former) Market Abuse Directive (2003/6/EC). Consequently, the relation of the Market Abuse Regulation—and especially its prohibition of market manipulation (Articles 12, 15)—to the Short Selling Regulation (236/2012/EU) remains unclear. However, according to the general principle of lex specialis derogat legi generali, an application of the Market Abuse Regulation is excluded when a transaction or a behaviour falls within the application of the Short Selling Regulation (236/2012/EU). Nevertheless, the extent of that principle remains untested in the current practice and is still open to debate.

(p. 40) Other forms of manipulation

A.3.10  Since market manipulation can already occur in many different forms, often being constantly improved and replaced by new forms, the (former) Market Abuse Directive (2003/6/EC) included a catch-all provision in its Article 5(2)(b) that transactions or orders to trade employing fictitious devices or any other form of deception or contrivance constitutes market manipulation. The Market Abuse Regulation follows that approach by stating the same principle in its Article 12(2)(b). The definition set out in Article 12(1)(b) of the Market Abuse Regulation is completed by a list of indicators in Annex I of the Market Abuse Regulation.

IV.  Market Manipulation and Insider Trading

A.3.11  Although the Market Abuse Regulation distinguishes explicitly between market manipulation and insider trading, these two forms of market abuse can overlap. This is especially the case for so-called scalping, where typically a person known to the public for a certain expertise in capital markets and investments publicly recommends the acquisition or the disposal of a certain financial instrument which he or she had previously acquired. After the public recommendation—typically based on incorrect information—this person realizes the profit based on the changed price of the financial instrument. The term scalping is based on the idea that this person scalps other market participants. Such behaviour combines elements of insider trading and market manipulation, since the person so acting gives a false statement to the public (information-based market manipulation) without disclosing that he or she owns a position of that financial instrument he or she wants to dispose of afterwards (insider trading). In some jurisdictions (eg Germany36), such behaviour is considered to amount to information-based market manipulation and not as insider trading because the information (acquiring financial instruments knowing that a personal recommendation will be published later) used to acquire the relevant financial instruments is only information about the person acting himself and not about the issuer or the financial instruments. Although this interpretation is generally doubted, to be considered as insider dealing, it is usually necessary to ascertain an obligation for the person acting to disclose his or her conflict of interest. This problem of an overlap between insider trading and market manipulation regarding scalping is also pointed out in the development of the Market Abuse Regulation itself. While the proposal for the Market Abuse Regulation considered scalping as insider trading (Article 8(3)(d) Market Abuse Regulation Proposal), pursuant to Article 12(2)(d) scalping is now (p. 41) considered as market manipulation. Although this problem is settled for scalping in Article 12(2)(d) of the Market Abuse Regulation, the general problem of distinguishing market manipulation and insider trading still remains under the new regime. However, it should be noted that such a clear and precise differentiation between these two forms of market abuse is relevant only for the criminal sanctions, since in criminal law the conviction must be based on a clearly defined criminal offence.

V.  The ‘Missing’ Intent Requirement for Market Manipulation

A.3.12  One remaining puzzle of the new market abuse regime of the Market Abuse Regulation is the requirement for intention to commit market manipulation. Neither the (former) Market Abuse Directive (2003/6/EC)37 nor the Market Abuse Regulation clearly states whether an act, trade, or behaviour must be committed intentionally to constitute a market manipulation as defined in Article 12 of the Market Abuse Regulation. Apart from the fact that the definition of intent in the (criminal and civil) law of the Member States is far from homogenous and is also not harmonized in other areas of the Capital Market Union (CMU), the question of whether intention to commit market manipulation is necessary or not becomes even more puzzling when considering the requirements set out in the Market Abuse Directive on Criminal Sanctions (2014/57/EU). Pursuant to Article 5(1) of the Market Abuse Directive on Criminal Sanctions (2014/57/EU), Member States are only obliged to ensure that market manipulation is treated as a criminal offence only for serious cases and when they are committed intentionally. Although it could be argued with an argumentum e contrario that the intention to commit a crime is not required for committing market manipulation under Article 5(1) of the Market Abuse Directive on Criminal Sanctions (2014/57/EU), where intention is expressly required for criminal offences, it must be doubted that—outside the scope of criminal sanctions—intention is generally not necessary. This is the case since, in the end, every act, trade, or behaviour requires at least some kind of intent.

A.3.13  The problem of the intent requirement for market manipulation must be solved within the context of the respective sanction. For administrative sanctions,38 the Market Abuse Regulation does not require intent, instead leaving this question to be resolved by the national administrative laws of the Member States. The same (p. 42) applies for civil liability for committing market manipulation,39 since usually the national tort laws of the Member States provide that not only must the tort itself be committed intentionally but that the person committing the market manipulation had some form of intent regarding the damage caused by his or her act. For criminal sanctions, this problem is addressed in Article 5(1) of the Market Abuse Directive on Criminal Sanctions (2014/57/EU), leaving the regulation of the intent requirement itself for criminal sanctions to the Member States.40

VI.  Enforcement of the Prohibition of Market Manipulation

A.3.14  In its current state, the Market Abuse Regulation and the accompanying directives focus on criminal sanctions (see A.3.15) and administrative sanctions (see A.3.20). In contrast, civil liability for the violation of the prohibition of market manipulation is completely omitted from the Market Abuse Regulation (see A.3.21).

Criminal sanction

A.3.15  The regime of the Market Abuse Regulation is mainly based on criminal sanctions for the violation of the prohibition of market manipulation. However, criminal sanctions are not directly set out by the Market Abuse Regulation itself but by the Market Abuse Directive on Criminal Sanctions (2014/57/EU). By choosing a directive instead of a regulation in this context, the European legislator deviated from the general idea of the new market abuse regime as part of the Capital Market Union (CMU) to govern it directly by regulations. However, the detailed characteristics of market manipulation set out in the Market Abuse Directive on Criminal Sanctions (2014/57/EU) state that market manipulation is a criminal offence, providing general principles for the penalties for committing market manipulation and dealing with the jurisdiction over these offences. Hence, the Market Abuse Directive on Criminal Sanctions (2014/57/EU) sets out solid and common ground regarding criminal sanctions under the European market abuse regime. In this regard, the new market abuse regime takes a giant step further than the (former) Market Abuse Directive (2003/6/EC), since the latter directive did not impose any obligation for the Member States to impose criminal sanctions.

A.3.16  The basic characteristics are that the Member States must ensure that a serious case of market manipulation committed intentionally constitutes a criminal offence (Article 5 Market Abuse Directive on Criminal Sanctions (2014/57/EU)). It is worth noting that the Market Abuse Directive on Criminal Sanctions (2014/(p. 43) 57/EU) provides a specific definition for market manipulation, and does not refer to Article 12 of the Market Abuse Regulation. Moreover, inciting, aiding, and abetting engagement in market manipulation and attempting to commit market manipulation must be punishable as a criminal offence under national law (Article 6 Market Abuse Directive on Criminal Sanctions (2014/57/EU)).

A.3.17  In addition to the requirement to establish market manipulation as a criminal offence, the Market Abuse Directive on Criminal Sanctions (2014/57/EU) also determines the general framework for the penalties for committing the offence of market manipulation, which must be effective, proportionate, and dissuasive (Article 7(1) Market Abuse Directive on Criminal Sanctions (2014/57/EU)). This means that the criminal offence of committing market manipulation must be punishable by a maximum term of imprisonment of at least four years (Article 7(1) Market Abuse Directive on Criminal Sanctions (2014/57/EU)).

A.3.18  In addition, Member States must also take the measures necessary to ensure that both legal natural persons can be held liable for offences committed for their benefit by any person, acting either individually or as part of an organ of the legal person (Article 8(1) Market Abuse Directive on Criminal Sanctions (2014/57/EU)). In this regard, the Market Abuse Directive on Criminal Sanctions (2014/57/EU) not only addresses natural but also legal persons. Pursuant to Article 8(1) of the Market Abuse Directive on Criminal Sanctions (2014/57/EU), legal persons can be held liable for offences committed for their benefit by any person, acting either individually or as part of an organ of the legal person.

A.3.19  Finally, Article 10 of the Market Abuse Directive on Criminal Sanctions (2014/57/EU) states that the Member State shall have jurisdiction over an offence when this offence has been committed in whole or in part within that Member State’s territory or by one of its nationals, at least in cases where the act is an offence where it was committed.

Administrative sanctions

A.3.20  Like the (former) Market Abuse Directive (2003/6/EC), the Market Abuse Regulation also addresses administrative sanctions. However, in this regard the administrative sanctions governed by Article 30 onwards of the Market Abuse Regulation are more far-reaching than those of the (former) Market Abuse Directive (2003/6/EC). The Member States must ensure that the competent authority shall: order the person responsible for the infringement to cease the conduct and to desist from any repetition of that conduct; ensure that the person responsible for the infringement reimburses any illegal profits or losses avoided owing to the infringement; warn the public by identifying the person responsible for the infringement and the nature of the infringement; withdraw or suspend the authorization of an investment firm; discharge a person from managerial responsibilities within an investment firm; and order administrative pecuniary (p. 44) sanctions of at least three times the amount of the profits gained or losses avoided because of the infringement (Article 30(2) Market Abuse Regulation).41 Also, the European legislator introduced a naming-and-shaming-mechanism under which the identity of the person subject to the decision of the competent authority is published, together with the decision imposing the administrative sanction (Article 34 Market Abuse Regulation).42 See also in general Part A—Chapter 6 for further details on the public enforcement of the Market Abuse Regulation.

Civil liability

A.3.21  In contrast to criminal and administrative sanctions, the new market abuse regime does not deal at all with the problem of civil liability for committing market manipulation. Therefore, in this regard the national laws of the Member States apply, which are mostly based on tort law or some tort law-related principles especially developed for capital markets law. However, it should be noted that the international jurisdiction for these claims being based on market manipulation is governed neither by the Market Abuse Regulation nor by the national laws of the Member States but by the Brussels I bis Regulation (2012/1215/EU). Although, the Brussels I bis Regulation does provide a specific regulation for the determination of the international jurisdictions for these claims, its general rule for tort law in Article 7(2) of the Brussels I bis Regulation (2012/1215/EU) applies in this context. Therefore, the national courts of the Member States have jurisdiction where market manipulation has occurred. However, it is still not settled whether this is the place where the market manipulation is committed or where the loss of the affected market participants originates.

A.3.22  The lack of regulation of civil liability for market manipulation in the Market Abuse Regulation constitutes one of its major weak spots. This is especially the case since, in the last decade or so, market manipulation has occurred in a number of Member States,43 thus raising the question of whether the investors being harmed by such market manipulation can claim damages from the person or persons committing market manipulation. Since these developments are not based on European capital markets law and usually deviate from Member State to Member State, a competition for the most investor (=claimant)-friendly capital markets tort law could develop, thereby questioning the general purpose of the Market Abuse Regulation to establish a common regulatory framework on market manipulation (Article 1 Market Abuse Regulation).

(p. 45) VII.  Market Manipulation and General Criminal Law

A.3.23  Market manipulation can also be relevant in the context of general criminal law, especially regarding the criminal offence of fraud. In the criminal law of some Member States, market abuse—especially insider trading and market manipulation—does not constitute a criminal fraud, since the monetary benefit of the person committing the market abuse does not necessarily equate to the damage that the other market participants suffer. However, it is worth noting that, in some legal systems, market manipulation is nevertheless considered as fraud,44 which has a tremendous influence on the problem of civil liability, since most legal systems provide civil claims for the victim of a fraud. Also, the intention necessary to commit a fraud could be problematic since, in the case of insider trading and market manipulation, the perpetrator does not necessarily intend to defraud a certain person suffering from the market abuse but only the market itself and therefore all (other) market participants in general. Since this problem is neither covered by the Market Abuse Regulation nor by the Market Abuse Directive on Criminal Sanctions (2014/57/EU), the Member States are not limited by European law to sanction market manipulation with the criminal offence of fraud.(p. 46)

Footnotes:

1  See Part A—The Concept of Insider Dealing n 6 ff.

2  For the general phenomenon of market manipulation see Franklin Allen and Douglas Gale, ‘Stock Price Manipulation’ (1992) 5 Review of Financial Studies 503; Daniel R Fischel and David J Ross, ‘Should the Law Prohibit “Manipulation” in Financial Markets?’ (1991–1992) 105 Harvard Law Review 503; Emilios Avgouleas, ‘The Mechanism and Regulation of Market Abuse’ (OUP 2005).

3  See Jerry W Markham, Law Enforcement and the History of Market Manipulation (Sharpe 2014) giving an overview of market manipulations from ancient history to the present day.

4  Case C-445/09 IMC Securities BV gegen Stichting Autoriteit Financiële Markten [2011] ECR I-5917, stating that the (former) Market Abuse Directive (2003/6/EC) did not state a duration requirement and that even a single abusive transaction is captured.

5  Klaus J Hopt, ‘The European Insider Dealing Directive’ (1990) 27 Common Market Law Review 51, 80 ff.

6  FESCO, ‘Market Abuse’—FESCO’s response to the call for views from the Securities Regulators under the EU’s Action Plan for Financial Services.

7  Commission, ‘Implementing the Framework for Financial Markets: Actions Plan’ COM(1999) 232 final. For further details see Jesper Lau Hansen, ‘MAD in a Hurry: The Swift and Promising Adoption of the EU Market Abuse Directive’ (2004) 15 European Business Law Review 183; Niamh Moloney, ‘New Frontiers in EC Capital Market Law: From Market Construction to Market Regulation’ (2003) 40 Common Market Law Review 809, 813 ff.

9  ‘Proposal for a Directive of the European Parliament and of the Council on insider dealing and market manipulation (market abuse)’ COM(2001) 281 final.

10  Helena Bolina, ‘Market Manipulation and Insider Dealing in the New Market Abuse Directive (2003/6/EC)’ (2001–2002) 4 Revue Européenne de Droit Bancaire et Financier 555 ff; Guido A Ferrarini, ‘The European Market Abuse Directive’ (2004) 41 Common Market Law Review 711 ff.

11  Article 1(2) of the (former) Market Abuse Directive (2003/6/EC) stated:

‘Market manipulation’ shall mean:

(a)  transactions or orders to trade:

  • –  which give, or are likely to give, false or misleading signals as to the supply of, demand for or price of financial instruments, or

  • –  which secure, by a person, or persons acting in collaboration, the price of one or several financial instruments at an abnormal or artificial level, unless the person who entered into the transactions or issued the orders to trade establishes that his reasons for so doing are legitimate and that these transactions or orders to trade conform to accepted market practices on the regulated market concerned;

(b)  transactions or orders to trade which employ fictitious devices or any other form of deception or contrivance;

12  Article 1(2) of the (former) Market Abuse Directive (2003/6/EC) stated:

‘Market manipulation’ shall mean:

(c)  dissemination of information through the media, including the Internet, or by any other means, which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news, where the person who made the dissemination knew, or ought to have known, that the information was false or misleading. In respect of journalists when they act in their professional capacity such dissemination of information is to be assessed, without prejudice to Article 11, taking into account the rules governing their profession, unless those persons derive, directly or indirectly, an advantage or profits from the dissemination of the information in question.

In particular, the following instances are derived from the core definition given in points (a), (b) and (c) above:

  • –  conduct by a person, or persons acting in collaboration, to secure a dominant position over the supply of or demand for a financial instrument which has the effect of fixing, directly or indirectly, purchase or sale prices or creating other unfair trading conditions,

  • –  the buying or selling of financial instruments at the close of the market with the effect of misleading investors acting on the basis of closing prices,

  • –  taking advantage of occasional or regular access to the traditional or electronic media by voicing an opinion about a financial instrument (or indirectly about its issuer) while having previously taken positions on that financial instrument and profiting subsequently from the impact of the opinions voiced on the price of that instrument, without having simultaneously disclosed that conflict of interest to the public in a proper and effective way.

13  For this general distinction see n 6 ff.

14  See n 9.

16  See art 12 n 3 ff.

17  ibid.

18  See also art 1 n 12 for a further discussion of the relation of the prohibition of market manipulation in art 5 Wholesale Energy Market Integrity and Transparency Regulation (1227/2011/EU) to the Market Abuse Regulation in general.

19  For the intent requirement for committing market manipulation see n 12 ff.

20  See n 11 for further details.

21  Painting the tape usually means presenting non-existent orders on the price tape to feign (non-existent) strong demand (see eg Lars Teigelack, ‘Market Manipulation’ in Rüdiger Veil (ed), European Capital Markets Law (1st edn, Hart Publishing 2012) para 14 n 16).

22  See n 11.

23  Case C-445/09 IMC Securities BV gegen Stichting Autoriteit Financiële Markten [2011] ECR I-5917, stating that the (former) Market Abuse Directive (2003/6/EC) did not state a duration requirement and that even a single abusive transaction is captured.

24  See n 7.

26  See art 15 n 8 ff.

28  See n 7.

29  In a wash sale, the seller and the buyer of financial instruments are—from an economic point of view—the same person. In this case, the buyer or seller is usually a company wholly owned by the seller or buyer.

30  Marking the close focuses on the close of trading in a market by influencing the closing price by executing purchase or sales orders immediately prior to the market closing, since orders are often executed at the closing price. See also art 12(2)(b) Market Abuse Regulation.

31  Spoofing describes a technique where a manipulator who is holding a long position submits several orders, signalling to the market that there is an increase in demand. As soon as the market price for the financial instruments increases, the orders are cancelled prior to execution. The concept of this manipulation technique is that other market participants also submit orders for these financial instruments owing to the increasing demand and market price. See also art 12(2)(c)(iii) Market Abuse Regulation.

32  By using improper matched orders several persons place a huge amount of orders at identical conditions. This usually gives a signal to the market that there is a higher demand, although the trades actually executed are not based on market conditions but on agreements between these persons. Also in this case, the manipulators hope that other market participants also place buy orders, resulting in an increase of the market price of the financial instruments involved.

33  See art 5 n 3.

34  See art 5 n 5.

35  See Jennifer Payne, ‘The Regulation of Short Selling and Its Reform in Europe’ (2012) 13 European Business Organization Law Review 413, 421 ff.

36  See German Federal Court of Justice of 6 November 2003, 1 StR 24/03 (Sascha Opel), BGHSt 48, 373 = NJW 2004, 202; affirmed by German Federal Court of Justice of 4 December 2013, 1 StR 106/13, BGHSt 59, 105 = NJW 2014, 1896.

37  Article 1(1)(1)(2)(c) of the (former) Market Abuse Directive (2003/6/EC) stated that for an information-based manipulation the manipulator who made the dissemination knew, or ought to have known, that the information was false or misleading. Therefore, intent at least was required for this form of market manipulation.

40  See art 15 n 8 ff.

41  For further details see art 30 Market Abuse Regulation n 10 ff.

42  For further details see art 34 Market Abuse Regulation n 7 ff.

43  See eg the Porsche-Volkswagen-Takeover involving the failed takeover of Volkswagen by Porsche, causing huge losses for investors with short positions (for further details see eg Teigelack, ‘Market Manipulation’ (n 21) n 17).

44  See eg the old case law of the Swiss Federal Court of Justice of 27 September 1996, BGE 122 II, 422 later abandoned by Swiss Federal Court of Justice of 18 January 2010, BGE 134 IV, 210 requiring that the benefit equals the damage (so-called Stoffgleichheit).