2B.3 Market conduct for derivatives
The derivatives application of the market-conduct rules — the same prohibitions as RES 1B, plus derivatives-specific conduct (bucketing, hunting for stops, cornering) and trading-practice rules.
3.1 Scope
Section titled “3.1 Scope”Rules apply extraterritorially to derivatives listed/quoted outside Singapore when the act occurs in Singapore, and to derivatives listed/quoted in Singapore when the act occurs abroad.
3.2 Securities-based derivatives
Section titled “3.2 Securities-based derivatives”Securities-based derivatives include derivatives on securities or securities indices — equity-index futures/options, leverage certificates and structured warrants — so the securities-market rules reach them.
3.3 False trading and market rigging
Section titled “3.3 False trading and market rigging”Do not create artificial activity, trade without beneficial ownership, act recklessly to create a false market, or use transactions to mislead. Derivatives examples include hunting for stops — pushing bids/offers to trigger stop orders — and wash trades with no economic value, including coordinated accounts or same contract/strike/expiry trades.
3.4 Manipulating derivatives prices and cornering
Section titled “3.4 Manipulating derivatives prices and cornering”Do not manipulate or attempt to manipulate a derivatives price or its underlying, and do not corner or attempt to corner the underlying. Cornering means acquiring enough of the underlying to control price and force short sellers to cover at inflated prices.
3.5 Securities and securities-based derivatives manipulation
Section titled “3.5 Securities and securities-based derivatives manipulation”Do not effect two or more transactions that raise, lower, maintain or stabilise the price of securities or securities-based derivatives with an intention to induce others to deal.
3.6 False or misleading statements
Section titled “3.6 False or misleading statements”False/misleading statements may be distributed through reports, media, electronic means or word of mouth and may induce buying/selling or affect price.
3.7 Bucketing
Section titled “3.7 Bucketing”Bucketing is taking the opposite side of a customer’s derivatives order, or pretending to execute it, without a bona fide market purchase/sale. It denies competitive execution and is prohibited. Taking the opposite side requires prior consent and compliance with market rules.
3.8 Fraudulent inducement
Section titled “3.8 Fraudulent inducement”Do not induce trading through knowingly false statements, dishonest concealment, reckless false/deceptive statements or false recorded information.
3.9 Deceptive devices
Section titled “3.9 Deceptive devices”Section 201 catches schemes, fraud, material false statements and material omissions.
3.10 Insider trading
Section titled “3.10 Insider trading”Inside information, general availability, connected/non-connected persons, the no-intention rule, exceptions and parity-of-information defences apply to derivatives and securities-based derivatives. Do not trade, procure trading or communicate inside information.
3.11 Illegal-transaction information
Section titled “3.11 Illegal-transaction information”Do not circulate information about illegal transactions to benefit from their price effect.
3.12 Non-disclosure of orders
Section titled “3.12 Non-disclosure of orders”Order information stays confidential except for execution, market/clearing rules, or MAS.
3.13 Withdrawal or withholding of orders
Section titled “3.13 Withdrawal or withholding of orders”Do not withhold or withdraw a customer order for your own or another’s benefit.
3.14 Trading against customer orders
Section titled “3.14 Trading against customer orders”Do not trade against a customer’s futures order for the firm, an associate/connected person or an interested account unless prior consent and market-rule conditions are met.
3.15 Front running and priority
Section titled “3.15 Front running and priority”Do not trade personally before a customer’s same-class order; comply with customer priority.
3.16 Cross trades
Section titled “3.16 Cross trades”Simultaneous buy/sell orders for different accounts must be exposed/executed through the approved electronic system or according to market rules. Test questions often ask which side should be exposed first when prices differ in attractiveness.
3.17 Churning
Section titled “3.17 Churning”Excessive trades to generate commissions without sound opportunities.
3.18 Overtrading
Section titled “3.18 Overtrading”Positions must stay within firm, sponsor, exchange, clearing-house and regulatory limits; excess positions must be reduced.
3.19 Pre-arranged trades
Section titled “3.19 Pre-arranged trades”Agreed or predetermined prices/trades between dealers/brokers undermine fair and transparent markets.
3.20 Penalties
Section titled “3.20 Penalties”Report suspected manipulation, false trading or insider trading promptly to MAS and the relevant exchange. Breach may lead to criminal/civil penalties, compensation, suspension/loss of licence or registration, and reputation loss.
Exam cues
Section titled “Exam cues”- Bucketing is the derivatives-specific trap: taking the opposite side, or pretending to execute, without a bona fide market trade — prior consent is required.
- Hunting for stops and wash trades are the false-trading examples; cornering is the manipulation of the underlying.
- Section 201 is again the broad anti-fraud catch-all.
- Trading-practice rules: non-disclosure, no withholding/withdrawal, no trading against, no front running, cross trades exposed through the approved system, no churning, no overtrading, no pre-arranged trades.
- Trap: prior consent makes taking the opposite side permissible; without it, it is bucketing.