Europe: the Market Abuse Directive - transactions and orders giving misleading signals

The Court of Justice of the European Union gave its opinion last month in IMC Securities BV v Stichting Autoriteit Financiële Markten (Case C-445/09). The case concerned a reference for a preliminary ruling from the College van Beroep voor het bedrijfsleven (Netherlands) with regard to interpretation of Article 1(2)(a), second indent, of the Market Abuse Directive (2003/6/EC).

Article 1(2) provides definitions of market manipulation, including, in subsection (a), transactions or orders to trade which - to quote directly from the Directive - "give, or are likely to give, false or misleading signals as to the supply of, demand for or price of financial instruments [the first indent], or which secure, by a person, or persons acting in collaboration, the price of one or several financial instruments at an abnormal or artificial level [the second indent], unless the person who entered into the transactions or issued the orders to trade establishes that his reasons for so doing are legitimate and that these transactions or orders to trade conform to accepted market practices on the regulated market concerned".

In answer to the referred question, the Court of Justice stated that the second indent must be interpreted as not requiring, in order for the price of one or more financial instruments to be considered to have been fixed at an abnormal or artificial level, that that price must maintain an abnormal or artificial level for more than a certain duration.