RES 2B chapter 3 lists the derivatives misconduct a dealer must never commit and must report when seen. False trading and stop-hunting, price manipulation and cornering, bucketing, withholding orders, trading against customers, front running, improper cross trades, churning, overtrading and pre-arranged trades are covered. Each has its own SFA section or SFR(LCB) regulation. The topic also covers who runs Singapore's derivatives exchanges and clearing houses, and the SFA Part VIA OTC reforms.
9 sections·~3 min read
✓Checked against the IBF RES 2B Study Guide v1.0 (6 Jun 2024) 1.3.1.8–1.3.1.11, 3.3, 3.4, 3.7, 3.13–3.20, ch.4, 2026-09-22. Unofficial prep, not endorsed by MAS or SCI.
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Must-know for the exam
✓False trading and market rigging — SFA s.197: creating a false appearance of active trading or of price, including trades with no change in beneficial ownership. Hunting for stops and wash trades are the common forms.
✓Manipulation of derivatives prices and cornering — SFA s.201B: manipulating the price of a derivatives contract or its underlying, or cornering the underlying.
✓Bucketing — SFA s.201A: executing, or holding out as executed, a derivatives order without a bona fide trade on an organised market; the broker takes the other side.
✓Withholding or withdrawing customer orders — SFR(LCB) reg 47(1).
✓Trading against customers — SFR(LCB) reg 47C(1): only with the customer's prior consent and under exchange rules.
✓Priority of customers' orders (front running) — SFR(LCB) reg 44.
✓Cross trades — SFR(LCB) reg 47D: only through the electronic trading system or under exchange rules; expose the more attractive side first.
✓Churning = excessive trades for commission; overtrading = breaching position limits; pre-arranged trades = matched at an agreed price off the open market.
✓Suspected manipulation, false trading or insider trading must be reported immediately to MAS and the exchange.
✓Consequences: criminal penalties (fine, prison or both), MAS civil penalty action (s.232), civil liability to people who traded at the time (s.234), and suspension or revocation of licence.
✓Exchanges and clearing houses: SGX-DT and SGX-DC; ICE Futures Singapore with ICE Clear Singapore (ICE bought the Singapore Mercantile Exchange in Feb 2014 for US$150m); APEX, the third approved exchange, with APEX Clear.
Why this matters in the exam
•Most items give a short scenario and ask which offence it is. The offences overlap: bucketing also breaches the withholding rule, and stop-hunting is a form of false trading. So learn what defines each one and the section that creates it.
False trading, stop-hunting and wash trades (SFA s.197)
•False trading is any transaction without a genuine investment purpose, made to create an impression of activity or to move the price. It includes trades with no change in beneficial ownership, such as shares moved to a nominee who holds them in trust for the seller.
•Hunting for stops: a trader keeps raising bids (or lowering offers) to push the price to where stop-loss orders trigger. The trader then profits from the momentum. Wash trades: buying and selling through collaborators or own accounts at the same price, with no economic value, only to show volume.
•Trap: stop-hunting is taught as false trading under s.197, not as cornering.
→Do not confuse this with legitimate internal crossing done under exchange rules with proper reporting — the offence is the deception that a market trade occurred when it did not.
→Front running and churning are conduct/agency offences, not the supply-squeeze described here.
→Hedging and arbitrage are lawful risk/price activities, not manipulation.
→The other options are legitimate primary-market activities, not manipulation.
→Watch the swapped definitions in the distractors — bucketing is about non-execution, not inside information.
→Bucketing is a deceptive dealing practice, not legitimate principal trading with disclosure.
→Cornering distorts supply to force inflated prices; it is manipulation, not a legitimate corporate action.
→Repository = record keeper for OTC derivatives.
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