Market Conduct - Prevention and Detection of Market Abuse PDF

Market Conduct -------------- ### Prevention and Detection of Market Abuse Section 7.50 of the IRC Rules state that: - A trading member must consider the circumstances of orders placed by clients before entering such orders in the JSE trading system and must take reasonable steps to sat...

Market Conduct -------------- ### Prevention and Detection of Market Abuse Section 7.50 of the IRC Rules state that: - A trading member must consider the circumstances of orders placed by clients before entering such orders in the JSE trading system and must take reasonable steps to satisfy itself that such orders and any resultant trades will not result in a breach of the provisions of section 80 of the Act (Prohibited trading practices). - A trading member must ensure that all of its employees who are involved in the receipt of orders from clients and the execution of transactions in IRC securities on the JSE trading system are familiar with the market abuse provisions in sections 77 to 80 of the Act and that those employees receive adequate training and guidance to enable them to recognise and avoid entering into any transaction on behalf of the trading member or its clients which will result in, or is likely to result in, a breach of those provisions. - A trading member's compliance monitoring procedures must specifically include procedures to monitor orders entered into, and transactions executed on, the JSE trading system by the trading member and its employees, with the objective of identifying and taking appropriate action in relation to orders or trades that, in the reasonable opinion of the trading member, may constitute a breach of the provisions of sections 78 and 80 of the Act. - In formulating and implementing the compliance monitoring procedures, a trading member is not expected to monitor every order entered into and every trade executed on the JSE trading system by the trading member, for the purpose of identifying potential market abuse. Nevertheless, whilst trading members are encouraged to implement monitoring procedures to detect any activity undertaken by the trading member's employees or its clients which may constitute a breach of the provisions of sections 78 and 80 of the Act, the procedures should, as a minimum, aim to detect activity which, to a reasonable person observing or reviewing such activity, would constitute a blatant breach of the provisions of sections 78 and 80 of the Act taking into account all relevant factors such as: - the identity of the parties to the transaction; - the perceived intention of the parties to the transaction; - the timing of the transaction; - the frequency and pattern of transactions over a period of time; - the effect of the transaction on market prices or volumes; or - a combination of two or more of these factors.