HOW DOES LAYERING WORK?

Q.WHAT IS LAYERING?

A.Layering is a form of share price manipulation where traders place large block orders on a stock to drive its price up or down. They then take advantage of the manipulated prices to buy or sell the stock before cancelling the original order. It is also known as spoofing.

Q.HOW DID THE COMPANIES CARRY OUT THE TRADES?

A.The companies are accused of using direct market access accounts to book the block orders. These cut out the stockbroker role and allow investors to trade directly onto whichever platform they want to access – in this case both the London Stock Exchange and various multilateral trading facilities. Similar to high-frequency trading, it relies on a superfast data connection to keep track of and take advantage of up-to-date prices.

Q.HOW MUCH HAVE THEY MADE?

A.The FSA estimates that the investors involved have made a combined profit of more than £1m.