Screen-based trading and price manipulation: higher buy orders alone do not prove fraud without collusion or other manipulative conduct.

In screen-based trading, a buy order placed above the last traded price does not by itself prove price manipulation or a fraudulent trade practice violation. The SAT held that higher buy orders and contribution to volume in an illiquid scrip may reflect legitimate commercial conduct and price discovery through demand and supply. Artificial price formation requires proof of collusion between buyer and seller, or comparable manipulative conduct. As the record showed no allegation or proof of collusion with the counterparty seller or broker, and the scrip price was otherwise moving upward on days when the trader did not transact, the manipulation charge was not sustained.

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Issues: Whether the appellant's buy orders placed above the last traded price, in the absence of evidence of collusion with the counterparty seller or broker, established manipulation of the scrip price and violation of the fraudulent and unfair trade practice regulations.

Analysis: The impugned finding rested mainly on the circumstance that the appellant repeatedly placed buy orders at prices higher than the last traded price and that his trades contributed to market volumes in an illiquid scrip. The Tribunal held that such conduct, by itself, does not prove manipulation, because a buyer may place higher orders for legitimate commercial reasons and screen-based trading operates through price discovery based on demand and supply. It further held that, for an artificial price or artificial trade to be established, collusion between buyer and seller is necessary. Since the record did not show any allegation or proof of collusion with the counterparty or broker, and the material also indicated that the scrip price was generally moving upward on days when the appellant did not trade, the charge of manipulation was not sustained.

Conclusion: The allegation of price manipulation was not proved and the finding of violation under the fraudulent and unfair trade practice regulations could not stand.

Ratio Decidendi: In screen-based trading, a buy order placed above the last traded price does not by itself establish artificial price manipulation unless collusion or comparable manipulative conduct is shown.

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