Market integrity frameworks prevent bad actors from distorting prices and undermining public trust in financial systems. In the European Union, these rules are codified under the Market Abuse Regulation (MAR). In the United States, they are enforced by the SEC and CFTC under the Securities Exchange Act of 1934.
Primary Prohibited Market Behaviors
  1. Insider Dealing: Occurs when an individual possesses inside information—information of a precise nature that has not been made public and, if made public, would likely have a significant effect on the price of financial instruments—and uses that information to trade or amend orders for their own account or a third party.
  2. Market Manipulation Typologies:
    • Spoofing: Entering non-bona fide orders into the public limit order book with the intent to cancel them before execution. This practice creates a false impression of market supply or demand, allowing the trader to execute a real trade on the opposite side of the market at an artificial price.
    • Wash Trading: Executing transactions where the beneficial ownership of the asset does not change, or where different accounts controlled by the same entity trade with each other. This creates a false impression of active trading volume.

 
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