Automated „trap“ for violators to register abuse cases within securities market
The staffs of the Bank of Lithuania have developed an automated system for generating abuse alerts in the securities market, which will help to identify suspicious and allegedly abusive cases in the huge flow of transactions and payment orders concluded at and submitted to AB Nasdaq OMX Vilnius Exchange and outside it.
The new system for generating market abuse alerts is able to identify 11 attributes of unfair dealing in securities such as marking the closing price, trading with yourself, submitting payment orders knowing that they will not be executed, creating a misleading impression of active dealing, insider trading, etc. Special attention is given to the insider trading (trading in securities by persons who have material information that is not publicly available to the general public) – the problem which is highly detrimental to the confidence in securities market.
“The monitoring of securities trading now will be more effective due to a more rapid response to identified cases of unfair trading, reduction of manual handling, and consequently, lower error probability. The system will detect all suspicious transactions, and we will have to make sure, if the system-generated suspicions are justified and an investigation must be opened,” Vaidas Cibas, the head of the Regulated Market Supervision Unit within the Department of Financial Services and Market Supervision under the Supervision Service of the Bank of Lithuania, said. “Moreover, we expect to boost the number of alerts generated by the new system this year and further improve alerts which have been already generated and which may help to identify unfair trading.”
The staffs of the Bank of Lithuania have also developed a graphic system for the securities trading analysis, to be used along with the automated system for generating abuse alerts in the securities market. The system for generating alerts identifies unusual cases of trading in securities, while the graphic system analyses by applying graphic analysis tools suspicious trading cases, and helps to adequately assess the situation in the securities market and find out, if certain market abuse cases meet the market abuse criteria.
Market abuse is split into two different aspects: market manipulation and insider dealing. Market abuse is prohibited under Articles 62 and 63 of the Law of the Republic of Lithuania on Markets in Financial Instruments. Legal acts have set forth strict administrative responsibility for violating the market abuse concerning ban: the penalty for natural entities is up to LTL 60 thousands for natural entities, and for legal entities it is up to LTL 200 thousands or up to three times the amount of illegal benefit, avoided losses, or damage done.