The Regulation of Market Manipulation of Securities Exchange Act in Taiwan—Investment Perspective
Date Issued
2011
Date
2011
Author(s)
Ke, Ruei-Yuan
Abstract
Section 155 of the Securities Exchange Act in Taiwan prohibits manipulations in stock market, including manipulative activities like “wash sales” or “matched orders”. Manipulations could be deemed as deceptions since they create false or misleading transactions and information. They could also be regarded as interference in market because of price distortion. Either way, there is no satisfactory definition of manipulation. Many disputes still exist. The main problem lies in how to discern manipulators from investors.
Similar regulations concerning manipulative activities could be found in United States and European Union. However, identical disputes are still unsolved. As a result, this thesis would like to take a different approach in viewing the manipulation issue in stock market. This thesis considers that the problem comes from the lack of knowing about market and investors. The standard is also established on an overly simplified and idealized hypothesis. Therefore, an investment perspective should be adopted in dealing with the disputes.
The main methods to securities analysis are technical analysis and fundamental analysis. Investors therefore could be divided into technicians, fundamental analysts and irrational investors. Different manipulative activities affect different investors. The types of manipulations include trade-based manipulations and information-based manipulations.
Trade-based manipulations create volume or price. The purpose of creating volume is inducing other investors to trade, and then making profits from the difference between buying and selling price. Technicians or irrational investors could be affected in this circumstance. The purpose of creating price may lead to two different possibilities. One is inducing investors to trade, and another is triggering contractual right.
Information-based manipulation induces other investors to trade. Different kinds of information affect different investors. Basically only disseminating undisclosed fundamental information could fundamentally change the trends in market. However, manipulators may use transaction data, disclosed fundamental information or opinion to justify manipulative behaviors.
In the last part, the thesis would like to turn its focus on several cases in Taiwan and analyze the legal structure of the cases by applying abovementioned methods. Clear suggestions would be made as well.
Subjects
Security Exchange Act
Market Manipulation
Wash Sale
Match Order
Type
thesis
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