Research On Market Manipulation Behavior In High Frequency Trading

With the rapid development of computer and information technology,Securities trading has changed to electronic trading.It spawned a generation of high-frequency trading.High-frequency trading is a combination of financial and computer technology.It increases market liquidity and trading opportunities,as well as reducing transaction costs.But at the same time,high-frequency trading has great uncertainty especially in China,some criminals attempt to use high-frequency trading system to manipulate the stock and securities market.In fact,the "flash cash" event in the US securities market has shown the huge risk in high-frequency trading.After five years of systematic investigation,the British futures trader Sarah was accused of using high-frequency trading to manipulate index and seek profit.The event has aroused great concern in the society,and since then the US government has introduced a series of measures to strengthen the regulation of market manipulation in high-frequency trading.Although China's high-frequency trading started very late,many of the securities and futures companies have started using high-frequency trading in recent years.A company called Easton which is suspected of using high-frequency transactions to operate the futures market in November 2015 has attracted great concern.It seems to reveal to people the bad side of today's financial globalization: As long as the capital market is open to the outside world,all regulators are actually faced with the same problem,if we lack the timely response to legislation and match the regulatory capacity of the upgrade,capital market integration will become a barrier to the protection of the wall one by one.High-frequency trading is the future development trend of the securities market,it will become some people's tools to illegally manipulate the market and seek illegal benefits without effective supervision,and this article will focus on high-frequency trading and market manipulation,introducing the concept and relationship of them,investigate suspected market manipulation of criteria to identify and punish the abuse of high-frequency trading attempting to manipulate the market,The first chapter mainly introduces the concept,characteristics,origin and development process of high frequency transaction and the positive and negative influence of high frequency trading.High frequency trading is an automated trading system which use hosting and other low-latency communications technology,highspeed information processing ect.to implement the program of frequent trading.It is the product of the development of information and computer technology,as well as the emergence of electronic trading platform,the transformation of traditional exchange and the development of financial derivatives,which is characterized by the characteristics of programming,low delay,high efficiency and quantity.Information and computer technology development make IT technology and finance integrate in depth,giving birth to electronic trading.Investors can therefore carry out securities trading automatically.Procedural transactions have spawned many electronic trading platforms,promoting the transformation and improvement of traditional company and the development of capital market and become the direction of the development of stock securities market.However,due to the current restrictions on high-frequency trading is limited,high-frequency transactions under the operation of the market frequently,not only damage the interests of investors,but also undermine the fair competition in the market order.The third chapter mainly introduce Easton case which is involved in market manipulation and high-frequency trading.It mainly tells the process and illegal points of the case.High-frequency trading has its negative side,but that does not mean it is connected with market manipulation.On the contrary,only by abusing the superiority of ‘temporary information' and speed characterized by high-frequency trading can it be suspect of rigging the market.The article introduces the new market manipulation under high frequency trading from its meaning,characteristics and main types.It emphasizes the determination criterion and main categories for this behavior.At present,our country prohibits market manipulation mainly through listing and establishing transparency provisions,instead of establishing a clear definition.Compared to the traditional one,new type of market manipulation has the characteristic of general subject,short-term process,various formations,concealed method and so on,which result to the difficulty of judgment.So the author lists several typical forms of newpattern market manipulation,including the strategies of disturbing or cheating in the transaction,abusing the market,employing trial order,Through combing and analyzing the above behaviors of market manipulation,can we identify the forms and characteristics of new-pattern market manipulation more clearly,which help us to judge such manipulation rapidly and accurately in the practice.The second chapter mainly introduce the high-frequency transactions under the regulation of the new market manipulation.The first section discusses the necessity of supervision from a theoretical point of view.The market effectiveness theory holds that the individual's pursuit of maximizing the utility of the individual can make the full price of the securities fully reflect the existing information,so as to realize the collective rationality.Noise trading theory says that information asymmetry and financial market uncertainty and other factors make the long-term noise,making the price of financial assets continue to deviate from its basic value,seriously reducing the effectiveness of the market,it should regulate the market manipulation to reduce noise transactions.Asymmetric information theory says that the existence of market manipulation will seriously interfere with the accuracy and effectiveness of information,so it is necessary to carry out supervision.The second section mainly analyzes the main problems existing in China's supervision from the relevant provisions of Chinese laws and regulations.The definition is ambiguous and it is difficult to define the market manipulation.The preventive mechanism is not perfect and does not meet the domestic demand.The distribution of the responsibility of supervision is not perfect.The third section is based on the experience of foreign regulatory agencies,it lists the practice of the United States,Britain,the European Union of the high-frequency trading market manipulation.First,it analyzes the legislation and supervision system adopted by the United States in the market manipulation of high frequency transactions.Second,we analyzed the British market manipulation and regulatory system,the British was a typical implementation of self-regulatory supervision of the country,but with the development of securities market,it began to gradually change from the full selfdiscipline supervision to self-regulatory and set up the UK Financial Services Authority to exercise its financial regulatory functions independently.The United Kingdom provides a more reasonable in the securities market manipulation of the legal responsibility of the distribution of industry,comprehensive and specific provisions of the criminal responsibility,civil liability and administrative responsibility.Finally,we analyzed the EU's regulatory attitude towards market manipulation and legislation,the EU's emphasis on improving the market manipulation of preventive measures.Chapter Three discusses the legal system of supervising market manipulation under new-pattern high-frequency trading.First,establish and perfect the legislation system of regulation.In order to coordinate this measurement,our country should issue relevant details as soon as possible,explaining and unifying the supervising measures of market manipulation scattered in the present laws and regulations.Secondly,our country should also perfect the supervision system of stock market manipulation,establish and improve a preventive mechanism of stock manipulation in terms of supervision,perfecting real-name system in stock trading account,big shareholder equity changes report system.When it comes to supervising subject,the authority and power of government regulators represented by Securities Regulatory Commission should be intensified,emphasize the function of self-regulatory organization,and play its role in supervision.At the meantime,the function of media and mass organizations should also be emphasized,making them perform their own functions and put their own effects into exertion.Finally,supervision and liability system of market manipulation in our stock market must be perfected.Given that the criminal and administrative responsibility for new-pattern market manipulation set by our government is relatively low,which cannot form enough deterrence.As a result,criminal and administrative responsibility of lawbreakers could be intensified,and establish and improve civil damages liability,which prompt the dispute to be resolved as soon as possible.The number of sufferers concerning with dispute of market manipulation is large,and the loss of every sufferer is usually not severe,while the litigation cost is high.Therefore,class action mode can be introduced.Along with the collective force,the doer who performed market manipulation should be punished.