Collusion and Price-Rigging REMIT SHIELD
As part of our series on REMIT, we discussed wash trades, layering and spoofing, as well as transactions involving fictitious devices or deception. We now turn our attention to two more forms of market abuse – collusion and price-rigging – that can have a notable negative impact on markets. In this article, we’ll define these forms of abuse, and explain how while they do overlap, collusion isn’t simply about just price-setting, and price-setting doesn’t always involve collusion.
The Significance of Collusion! Collusion refers to different people or companies working together to manipulate prices or markets. For example, in a wash trades market, participants enter into fraudulent arrangements regarding the sale or purchase of a wholesale energy product so as to benefit only parties who are acting in collusion. Collusion does not benefit customers at large. Collusion is usually intended to affect the price of markets (hence the crossover with price-rigging or fixing). However, this is not always the case. It may also be for purposes such as to earn traders bonuses in scenarios where they are remunerated according to trade volume. Collusion of course, must have at least two different actors and parties colluding while price setting can be a sole trader.
Price-Fixing in Action Price-fixing or rigging covers any actions that seek to fix the price of a market at a certain level. This could involve misleading claims or the hiding of certain facts in a way that manipulates the market through concealing information. This type of market manipulation may involve disseminating information through media channels that are false or misleading. Price-fixing is illegal for the same reason that monopolies are banned under antitrust laws: in a competitive market environment, prices cannot be dictated by a small number of actors.
Invest in the Right Tools for the Job More than ever, authorities are clamping down on the kinds of abusive behavior covered both by collusion and price-rigging/fixing. A growing number of fines being handed out show that authorities are keen to make an example of bad actors. For that reason, companies must ensure that they have the right surveillance tools in place. As a result, more than ever it is important to watch out for collusion and price-rigging/setting in action — and to stamp it out wherever it’s discovered. If companies don’t do it, you can be sure that regulators certainly will.
https://www.shieldfc.com/