Research On The Identification Of Spoofing Transactions In Securities And Futures Market

Spoofing is an illegal act in the securities and futures market that uses high-frequency trading to undermine the market in a disorderly manner..High-frequency trading has a high pursuit of reducing signal transmission delays,which has a positive impact in improving the efficiency of securities and futures market and improving the accuracy of market pricing.However,spoofing takes advantage of the algorithm’s "low delay" to place false orders and quickly withdraw orders,which not only dominates the price movements of the securities and futures markets and disrupts the order of market transactions,but also easily leads to the collapse of the trading system and "flash crashes",injecting instability into the market and causing a huge blow to investors’ confidence.Since the Securities Law was revised in 2019,China Securities Regulatory Commission has investigated and dealt with a total of 4 market manipulation cases involving false declarations.Due to the complexity and concealability of spoofing transactions,there is a lack of understanding of the legal attributes of spoofing crimes In practice,and an inconsistency in the criteria for identifying spoofing transactions.The clarification and improvement of the constituent elements will play a crucial role in the enforcement and judicial prosecution of spoofing,and the clarification of the illegality of the spoofing in the Securities Law and its subordinate administrative predecessor laws will provide a more adequate legal basis for criminal sanctions and civil litigation.Therefore,this paper starts with the judicial and regulatory cases of spoofing in the securities and futures market,mainly to solve the following problems:the boundary between spoofing and legal high-frequency trading,the special characteristics of spoofing as a new market manipulation behavior,the understanding and identification of the subjective and objective elements of spoofing,and the options for strengthening the regulatory capacity of Spoofing.To be specific:The first chapter analyzes the meaning and characteristics of spoofing based on the background and operation techniques of spoofing transactions;then reviews the differences between the judicial and theoretical aspects of the subjective and objective elements of spoofing,including the different understanding of the subjective elements,the different methods of identifying the behavioral elements,and the different positions of identifying the resultant elements,in light of the judicial practice of identifying the subjective and objective elements of spoofing..The final analysis shows the reasons for the differences,including the urgent need to change the recognition of spoofing and the need to strengthen the typology of spoofing manipulation.The second chapter discusses the review and reshaping of the path of determining spoofing transactions.First of all,the current price manipulation path in China is reflected in the determination of spoofing..It is difficult to apply the traditional market manipulation theory to regulate spoofing,which is a typical decision manipulation,and the fraudulent manipulation theory can provide the basis for spoofing to become a special type of manipulation in the securities and futures market;finally,the boundary between spoofing and high-frequency trading is clarified,including the identification of spoofing and legal high-frequency trading strategies as well as spoofing and other illegal high-frequency trading strategies.The third chapter summarizes and analyzes the judicial experience of the U.S.spoofing legislation,and summarizes the legislation and law enforcement practice on the subjective and objective elements of spoofing..Firstly,the transformation of regulatory ideas and the improvement of legislative technology are explored from the evolution process of the regulation laws of spoofing transactions in the United States.At the same time,the recognition points and judicial development of spoofing transactions are summarized in the judicial judgment cases of spoofing transactions.Finally,the experience and enlightenment related to the identification and supervision of the behavior of spoofing transactions in the United States are put forward.The fourth chapter proposes to complete the recommendations on the identification and regulation of fraud in the securities and futures market.Among them,the subjective element should be determined based on the principle of "fraudulent manipulation",and the importance of the subjective element in the proof of fraudulent trading should be increased.Moreover,the reference factors and validity of the subjective element should be improved,and the intention of the trader to "cancel the order" should be examined from multiple aspects.On the choice of objective elements of spoofing,"withdrawal" can be provided as an optional element,rather than as a necessary element of the determination of manipulative behavior.Furthermore,new regulatory rules should be formulated uniformly to clarify the criteria for determining "frequent or substantial" front trading at the national level,and to eliminate the "artificial price" proof element.In terms of evidence collection,real-time monitoring of transaction information should be strengthened,the role of the "whistleblower" system in the determination of fraud should be enhanced,and the advantages of civil litigation in the determination of fraud should be brought into effect.