An article co-authored by principals Michael Cragg and Shaun Ledgerwood was featured in the May 2014 issue of Financier Worldwide.
The article, “How to think about market manipulation,” addresses how enforcement settlements in recent years have resulted in uncertainty about what sort of behavior is considered “manipulative”. The authors present an economic framework through which to analyze manipulation cases, arguing that without such a framework, the requirements for proving manipulation will remain uncertain.
The framework describes a necessary, but not sufficient, series of three elements for describing a particular trading pattern to be manipulative: a “trigger,” a “nexus” and a “target.” According to the framework, proof of a manipulation requires “the demonstration that the manipulator intentionally acted in a manner designed to cause (trigger) a change in some market mechanism (nexus) to alter the value of one or more positions (target) that benefit from the change.” These elements must be combined with objective elements of proof, offered through emails, IMs or voice recordings, which overcome the presumption of transactional legitimacy that must accompany open market trades. This framework is adopted because the clarity it provides reduces regulatory, litigation, and compliance costs.
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