According to the Bank of Russia, proprietary trading companies are becoming increasingly active in on-exchange trading. A proprietary trading company is a legal entity whose core operations involve on-exchange trading with the involvement of traders to manage its own capital and conclude transactions on its behalf. The Bank of Russia is taking additional measures to monitor and investigate the trading activity of such entities.
Based on investigation findings, the Bank of Russia has established facts of market manipulation in transactions with futures contracts and shares in on-exchange trading involving proprietary trading companies.
Between 13 September 2022 and 2 March 2023, D.V. Sychikov, a developer of trading strategies pursuant to a civil law contract with the proprietary trading company LLC Lite-invest, carried out transactions with futures contracts on behalf and at the expense of LLC Lite-invest from the brokerage account of the proprietary trading company and from his own brokerage account as an individual, acting simultaneously as a seller and a buyer.
Between 15 June 2020 and 4 January 2022, A.S. Dobrovolskaya, S.M. Ovchinnikov, A.V. Desinov, and N.L. Vecherya concluded transactions with shares on behalf and at the expense of the proprietary trading company LLC VATAGA following the same plan.
Between 2 May 2023 and 12 May 2023, D.M. Kuznetsov, a developer of trading strategies pursuant to civil law contracts with LLC Lite-invest and LLC Grigoryan Invest, used the brokerage accounts of both proprietary trading companies to perform transactions with futures contracts simultaneously submitting various applications on behalf and at the expense of LLC Lite-invest and LLC Grigoryan Invest.
The above transactions resulted in significant deviations in prices, demand, supply, and trading volumes. These actions are qualified as market manipulation pursuant to Clause 2 of Part 1 of Article 5 of Federal Law No. 224-FZ.
Thus, D.V. Sychikov, D.M. Kuznetsov, LLC Lite-invest, LLC Grigoryan Invest, A.S. Dobrovolskaya, S.M. Ovchinnikov, A.V. Desinov, N.L. Vecherya, and LLC VATAGA violated the prohibition established by Part 2 of Article 6 of Federal Law No. 224-FZ. The Bank of Russia sent binding orders to these individuals and companies to cease and desist from similar violations in the future.
D.V. Sychikov, D.M. Kuznetsov, LLC Lite-invest, and LLC Grigoryan Invest are subject to an administrative fine for market manipulation.
The Bank of Russia warns proprietary trading companies carrying out on-exchange transactions on their own behalf that they should exercise internal control over the activity of parties performing transactions on their behalf including developers of trading strategies. These measures will help timely prevent or identify violations under Federal Law No. 224-FZ.
The Bank also urges parties performing transactions for proprietary trading companies not to carry out transactions between corporate and personal brokerage accounts anonymously.
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