Futures trader convicted of false trading 

The Hong Kong Securities and Futures Commission (SFC), an independent statutory body set up to regulate the securities and futures markets in Hong Kong, has issued a press release informing that the Eastern Magistrates’ Court convicted a futures trader Mr Ernest Fan Kwong Hung of six offences of manipulating the final calculated opening prices (COP) of index futures contracts (Notes 1 & 2).

Fan was charged with the six offences following an investigation by the Securities and Futures Commission (SFC) of Fan manipulating the final COP of Mini-Hang Seng Index futures contracts during the morning Pre-Market Opening Period on six trading days between 25 January 2010 and 31 March 2010 (Note 3).

The SFC alleged that Fan made a total notional profit of $67,030 in these trades.
The case is adjourned to 14 May 2014 for sentencing pending background and community services reports.
Notes:

1. Fan has been a licensed representative to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities under the Securities and Futures Ordinance and was accredited to Sanfull Securities Limited and Sanfull Futures Limited respectively since 20 November 2008.
2. A COP is calculated during the Pre-Market Opening Period and serves as the market opening price for the corresponding product. A COP will be calculated only if the highest bid price of the limit orders entered into the Automated Trading System of the Exchange (HKATS) is greater than or equal to the lowest ask price of the limit orders. If more than one price satisfies this criterion, the COP will be calculated according to the established formula set forth in Rule 4.8.4 of Trading Procedures for Stock Index Futures and Stock Index Options Traded on HKATS.
3. Before normal trading in the morning session begins, there is a 30-minute period which, before 7 March 2011, was between 9:15:00 and 9:44:59 allocated for the traders to place orders and for those orders to be matched in accordance with certain rules laid down by the Hong Kong Futures Exchange Limited. The 30-minute period is known as a Pre-Market Opening Period and it is divided into three sessions: (i) a Pre-Opening Session which runs from 09:15:00 to 09:40:59 (and from 14:00:00 to 14:25:59); (ii) a Pre-Open Allocation Session which runs from 09:41:00 to 09:42:59 (and from 14:26:00 to 14:27:59); and (iii) an Open Allocation Session which runs from 09:43:00 to 09:44:59 (and from 14:28:00 to 14:29:59).

Source: SFC

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