| The crime of market manipulation has the most complicated behavioral structureand is the most difficult criminal behavioral type to be interpreted and determined intheory and practice, which belongs to the whole behavioral system of capital marketcrime. Not only does capital market crime, such as market manipulation, cause andcatalyze capital market frauds and irrational exuberance, crisis and periodical crash,but it also constitutes the necessary consequence of the inherent risk and marketparticipants’ cognitive bias in the financial market. The deep and intensive evaluationof functional efficiency of the regulatory institution, which is targeted on the crime ofmarket manipulation, certainly contributes to the theoretical supports and practicalstrategic recommendations on the legal and institutional level for Chinese capitalmarket competing in the global financial market against the background ofaccelerating development of the global financial integration.This dissertation analyzed the behavioral essence and regulatory doctrine of themarket manipulation, which focused on the substantial criminal law interpretation andfunctional efficiency evaluation of the criminal behavior of market manipulation. Thisdissertation also crossed the boundary of market and regulation, finance and law,securities law (including futures and derivatives market law) and criminal law,deconstructed the behavioral mechanism of market manipulation and reasonable routeto regulate this type of market behavior through legal and institutional intervene,understood the whole capital market operation and regulatory responsive mechanics,and explored the rational boundary of institutional arrangement to efficiently promote capital market functions, based on the behavioral analysis of market manipulation.Introduction revealed the current situation, trend, achievements, defects and thepossibility of theoretical and practical innovation on the research field of the crime ofmarket manipulation based upon a thorough literature review, and established the coremethodology and logical access. This dissertation utilized the legal and financialinterpretative methodology on the crime of market manipulation, absorbing thereasonable kernels of efficient capital market theory and behavioral finance theorywhich try to explain the financial market behavior, and concentrating on the coreproblem of the mechanism of market manipulation, to uncover the essence, forms andcore characteristics of criminal market manipulation, from the manipulative strategiesand trading addressed on the specific purpose to realize profits or transfer risks for theinvestors or speculators in the capital market, as well as the inner operative measuresand their connections and functions among the elements of these manipulativeschemes. Based on this, the author designed targeted crime control polices andregulatory principles for market manipulation, and explored the systematicgovernance policies of capital market crime especially market manipulation, theoptimizing routes of enforcement actions and judicial rules, legislative improvements,and the blue print of the institutional reactions conformed to the trend of financialmarket development.Chapter1directly analyzed the substantial problem of criminal marketmanipulation. After the comprehensive analysis of the financial practice and thetheoretical and practitioners’ views on market manipulation across the major capitalmarkets around the world, chapter one provided bran-new and practical opinions onthe essence of market manipulation which could reflect the real operative mechanicsin the capital market. The essence of the crime of market manipulation is the impropercontrol of securities, futures contracts and other financial instruments or the decisionsof capital allocation by financial market investors from which the profits are exploited.The crime of market manipulation is the independent action of financial commoditymanipulation or market capital manipulation, or the combination of these two. Theactors can choose one manipulative type between price and volume manipulation anddecision manipulation for the purpose of manipulating the capital market, as well asoperate both of these manipulative forms to enhance the manipulative power towardsfinancial market. The manipulators directly influence market price or trade volume ofrelevant financial commodity by transmitting misleading signals such as information, trading or market power, or indirectly exert the influence to capital market bycontrolling market participants in relevant financial commodity trading market,meanwhile they carry out their own corresponding financial trades or investments andmake profits from the price differences between market price and real supply anddemand relation or intrinsic value of the relevant financial commodity. Themanipulative profits realized by the criminal behavior of market manipulation comefrom the improper control of the fundamental elements of capital markets, that isfinancial commodity and market capital.Chapter2creatively proposed the new concept of the mechanism of the crime ofmarket manipulation, which interpreted the substantial content of marketmanipulation in depth. The mechanism of financial commodity manipulation or priceand volume manipulation manifests that the financial trading such as securities orfutures transactions control the market prices and trade volumes by acting on thespecific financial commodity. But the mechanism of market capital manipulation ordecision manipulation based on market information control is totally different, whichinfluences capital market participants’ financial trading and manipulates their capitalallocations by transmitting controlled information to the capital market. From thedifferent forms of financial commodity manipulation and market capital manipulationwhich lead to the same material nature of market manipulation, the criminal behaviorof market manipulation can be specifically interpreted into transaction behavior whichdirectly influences financial commodity price and information behavior which directlytrigger the capital allocation decisions of investors or speculators. Normally in the realworld of capital market crime, the manipulative transaction and information behaviorare alternatively and simultaneously employed by the manipulators and persons actingin concert. The manipulative transaction behavior causes the fluctuates of marketprice and trading volume, and this price and volume signal can further leads to capitalcontrolled by market participants intervening into or evacuating from specificfinancial commodity trading. The manipulative information behavior produces anddelivers the information which has the capacity to influence the market price ofrelevant financial commodity to the capital market. Market investors or speculatorsreact to the trading objects and directions to which the information points. And thetransactions stimulated by the rapid capital flows contribute to financial commodity’smarket price movements or even boost the future price trend. Based upon thesubstantial exploration and mechanism analysis of the crime of market manipulation, chapter two deepened the systematic and typed deconstruction of market manipulation.The criminal measures of market manipulation are price and trading volumemanipulation and decision manipulation, the core behavioral contents aretransaction-typed manipulation and information-typed manipulation. The formerincludes false trading, such as wash sale and matched orders, and material trading, forinstance, continuous purchases, while the later includes information misleading(compiling and spreading false information) and conflict of interests (scalping). Adeep and intensive analysis of the fundamental types, economic functionalmechanisms and the essence of criminal illegality of market manipulation, as well asthe extended legal constitutes constructed on this analysis, provided effective policyinspirations on procedural position of evidence directions and substantive constitutiveelements for the crime of market manipulation.Chapter3proposed the fundamental principles to regulate the crime of marketmanipulation as well as the specific regulatory policy compatible to the substantivecharacteristics of transaction-typed manipulation and information-typed manipulation,after criminal behavioral analysis of the essence, mechanism and forms of marketmanipulation which is accord with financial theory and the functional mechanics ofcapital market. Oriented by the protection of efficient market and information, capitalmarket criminal law should tolerant the inherent risks and speculative behaviors in thecapital market but emphasis on the information monitoring of systematic risks. Therapid development of trading technology, strategy and capital competition in thecapital market not only knocks out most of traditional criminal behavior of marketmanipulation such as wash sale and matched orders, but also shapes the characteristicof self-restrain of the crime of market manipulation. The criminal regulation oftransaction-typed manipulation needs to focus on the price-related or cross-marketmanipulation which significantly harms the information efficiency of the capitalmarket. The new information technology such as cloud computing, mobile internetand social media pushes forward to the efficiency of market information as well as thelow costs and large influence of false market information, therefore theanti-manipulation regulatory system should allocate the enforcement resources, whichis saved in the control of transaction-typed manipulation, to the prevention, detectionand deterrence of information-typed manipulation. Conflict of interests is thesubstantive illegality of the crime of scalping. The optimization and reinforcement ofinformation disclosure should be effectively utilized to limit conflict of interests for the purpose of preventing investors from being harmed by scalping. The creativevalue of the regulatory policies for the crime of market manipulation mentioned aboveis: The legislators and regulators should be aware of the fact that it is actuallyimpossible to control the systematic risks by structurally utilizing the legal rules toregulate the crime of market manipulation. Because it will not only bring about theproblem of blurring the regulatory focus and wasting the regulatory resources, ifcapital market crimes such as market manipulation is condemned by the legalinstitution in isolation and takes the full responsibility of infringing the rights ofmarket investors, but also impede the legitimate capital market competition and fuzzup the crucial causes of the inefficiency of capital allocation. Meanwhile thecomplexity in the behavioral structure of the crime of market manipulation should berealized by the regulators that is, the transaction-typed manipulation andinformation-typed manipulation, as well as all the patterns underlying these two formsof market manipulation, have totally different operational measures, which improperlycontrol financial commodity and market capital through differentiating economicmechanisms. It is beneficial for designing pertinent legal rules of anti-marketmanipulation crime if a systematic and refined behavioral structure of the crime ofmarket manipulation could be established by the regulatory policy.Chapter4analyzed the difficulties of legal application targeting on differentbehavioral patterns of market manipulation, such as false transaction manipulation,material transaction manipulation, conflicting interests manipulation and falseinformation manipulation, incorporating the practical problems of marketmanipulation in the capital market, after a deep interpretation and overallargumentation of the essence, behavioral mechanism and technical difficulties of thecrime of market manipulation. It provided suggestions of legal rules to determineevery specific behavioral of the crime of market manipulation, which includes washsale, matched orders, actual purchases, scalping and deluding trading. Mainly locatingat the legal institutions of Chinese capital market crimes, chapter four concentrated onthe normative interpretation of the crime of market manipulation, presented the legalinterpretation of the practice for the purpose of controlling capital market crimeswhich is accord with the doctrine of legality and protection of capital marketefficiency. Those controlling rules for the legal practice to regulate the crime ofmarket manipulation were designed to enhance the theoretical supports, which arecompatibly organized by legal and financial doctrines, for solving the practical difficulties of the market manipulation case enforcement.Chapter5looked forward to the future blue print and long term programming oflegal doctrines, regulatory philosophy and technology, and the core institutionalprotection mechanism of market efficiency, in the process of regulating capital marketcrimes, especially market manipulation, based on the mechanism analysis, regulatorypolicy and judicial rules of market manipulation deduced above. The legal regulationtrend will focus on prudential intervening, coordinate legislature and risks control,directed by the idea of constraining over-speculative assets bubble in the financialmarket. The legislative technology and judicial interpretation structure of capitalmarket crimes should be optimized, especially for the anti-manipulation regulatoryframework to be expended to the derivatives market and primary market. A clearboundary of high frequency trading and market manipulation should be establishedagainst the background of the prevailing algorithm trading. On the level ofenforcement and judicial practice, the contract risk and liquidity risk in the capitalmarket must be eliminated from the liability of market manipulation, and the moralrisk needs to be impartially evaluated to determine whether there is a foundation tothe accusation of criminal market manipulation. For the capital market credit risk withthe possibility of covering civil, administrative or criminal liability, the legalresponsibility cannot be directly determined by the economic losses of marketparticipants. Only the most severe credit risk that violates the rules of informationdisclosure should be treated as market manipulation. For the legislators, theadvantages of laws and regulation on the different levels need to be coordinated toaccurately determine the applicable boundary between financial law and criminal law.More attentions should be paid on the suspected criminal cases or problems of pricemanipulation in the IPO and other types of primary markets. Legal rules focusing onenhancing the regulatory power and technology of futures market manipulationshould be created to control the market manipulation schemes in the futures tradingfields. The responsive mechanics should be established to regulate the manipulationviolation in the derivatives market, meanwhile the administrative liability ofderivatives market manipulation needs to be created first in the securities law. Afteraccumulating ample regulatory experiences in the securities legal system, thepossibility and legal standard of criminal liability of derivatives market manipulationshould be analyzed for the purpose of evaluating the efficiency of criminalizing thebehavior of derivatives market manipulation in order to provide sufficient legal protection to the fair trading and sustain the market functions of risk distribution andhedging.In conclusion, this dissertation summarized the core value of its argumentationsand methodology. Not only did it explore the institutional space to enhance theefficiency of capital market with the specific view of anti-market manipulation, butalso rethought some deep and intensive problems, such as the reinforcement of theresearch of financial crime and financial market regulation, on the methodology level,and brought about some reform schemes. |
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