Last Updated: June 11, 2019
Bitfinex (including the entities owning and operating the platform at and on Bitfinex.com, and the platform at and on Bitfinex.com itself, collectively, the “Exchange”) is committed to offering a free and fair market for users of the Bitfinex.com platform (the “Platform”), where the prices of digital tokens are determined by an open market and consumers through supply and demand. To help users find the best market prices for tokens, the Exchange’s trade surveillance program is introducing this Trading Rule Book to set out the compliance procedures that the Exchange will use to perform market surveillance functions for trades executed on the Platform. These market surveillance functions are intended to detect, address, and restrict market manipulation as defined in this Trading Rule Book. This Trading Rule Book is subject to change at any time, at the Exchange’s sole discretion, as circumstances develop and warrant. New rules may come into effect at any time, with notice.
This Trading Rule Book does not supersede the Bitfinex Terms of Service.
2.0 Market Manipulation
Digital tokens, (also known as digital assets, virtual assets, tokens, and virtual currency), are a nascent asset class for which clearly defined regulations related to market manipulation are currently unavailable. As part of the Exchange’s efforts to operate a free and fair market, Bitfinex is adopting existing rules from some of the world’s largest regulated markets to create and enforce best market practices within the Platform.
According to the U.S. Commodities Futures and Trade Commission (“CFTC”), manipulation is any planned operation, transaction, or practice that causes or maintains an artificial price. Specific types of manipulative activity include corners and squeezes as well as unusually large purchases or sales of a commodity in a short period of time in order to distort prices as well as putting out false information in order to distort prices.
Manipulation can involve various techniques to affect the supply of or demand for an asset. Such techniques can include spreading false or misleading information, and rigging quotes, prices, or trades to create a false or deceptive picture of the demand for an asset.
In the European Union , similar market manipulation techniques are described under Article 12 of the Market Abuse Regulation (“MAR”). The MAR states that placing an order to trade, or any other behaviour employing a fictitious device or any other form of deception or contrivance can be considered manipulation. For the purposes of this Trading Rule Book, market manipulation can generally be defined as actions that are intended to:
Specific rules in this Trading Rule Book, can be found below in Section 5—Potential Trade Practice Violations.
3.0 The Trade Surveillance Program
The Exchange’s trade surveillance program is focused on enforcing compliance with market anti-manipulation and other trade practice rules and monitoring the orderly trading of digital tokens. The Exchange has implemented a new automated trade surveillance system that is used by trained compliance personnel to oversee markets, profile participants, and generate alerts that identify high-risk areas and unusual market activities. Alerts, proactive analysis, audit trail queries, and referred complaints are used by Exchange personnel to identify and review potential trade practice rule violations.
4.0 The Responsibilities of all Exchange Users
When trading on the Exchange, users are required to:
5.0 Potential Trade Practice Violations
Trade practice violations are a principal focus of trade surveillance investigations. These violations include conduct that: (i) results in harm to Platform users; (ii) prevents open and competitive trading on the Platform; and/or (iii) generates prices and volumes that do not reflect valid market forces and conditions. Sections 5.1-5.7 list and provide descriptions of specific trade practice violations that are considered major violations. This list is not exhaustive and other forms of trade practice violations may be identified by Exchange personnel. For the purpose of this section:
Trade means a filled order, whether it is partially or completely filled, for both the buy and sell legs; and Order, bid and/or offer means any unfilled portion of an order placed on an orderbook.
5.1 Abusive Squeeze
Any position, wallet balance, or accumulated financing, where a user has a significant influence over the supply of, or demand for a digital token, which is used with the intent to artificially influence the circulating supply, funding supply, demand, or price of a digital token, by engaging in behaviour, including techniques that artificially influence the price, volume, supply or demand of a trading pair, is defined by the Exchange as an abusive squeeze or cornering the market. Large positions, wallet balances, or accumulated margin funding are not by themselves considered to be market abuse, but care must be taken with these assets, particularly large margin positions, to avoid accidentally pressuring the markets.
5.2 Momentum Ignition
Any position, wallet balance, or accumulated financing where a user has the intent to adversely influence the market price by starting or exacerbating a short-term trend in price action or rate action or to encourage others to participate in this trend, by engaging in behaviour including techniques that quickly and significantly influence the price or volume of a trading pair, in order to, shortly thereafter, close the position or wallet balance at a better price, or enter an opposite side of financing provisions to achieve a better rate is defined by the Exchange as Momentum Ignition. Large orders to trade, large transactions or large accumulations of orders to trade or transactions over a short period of time, in relation to average volumes for a trading pair, are not by themselves considered to be market abuse, but care must be taken that large and sudden spikes in price are not artificially created for the purpose of closing a trade at a favourable price.
5.3 Painting the Tape
Any order or trade made (including currency pairs and financing) with the intent to artificially influence the price of a trading pair by creating an appearance or illusion, on a public display, such as time and sales, of more volume than normal for a trading pair is defined by the Exchange as Painting the Tape. Large transactions or large accumulations of transactions over a short period of time, in relation to average volumes for a trading pair, are not by themselves considered to be market abuse, but care must be taken that spikes in volume are not artificially created for the purpose of influencing or attracting traders with a purpose of closing or initiating a trade at a favourable price.
Any order or trade made with the intent to discover hidden orders or to discover patterns of other traders with the intent to take advantage of the hidden order or patterns of other traders is defined by the Exchange to be Phishing.
Similar to Momentum Ignition, any order or series of orders sent with the intent of moving the best bid or ask without a genuine intent of having that subsequent resting order be filled is defined by the Exchange to be Ramping. The distinction between Ramping and Momentum Ignition is that ramping desires a change in price that may be held constant whereas Momentum Ignition desires a change in price that will continue to move in a trend.
Any order (both for currency pairs and margin funding) sent that is intended to be canceled before execution and may give the impression that there is more liquidity available than is genuine, is defined by the Exchange as Spoofing or Layering. These non-genuine orders may be paired with genuine orders with the desired effect of generating a trade for the genuine order that may not have occurred without the additional non-genuine order. Regardless of whether or not a trade is consummated, the non-genuine order is considered to be market abuse.
5.7 Wash Trading
Any order or series of orders sent with the intent to transact with another order with no change in beneficial ownership (i.e., self trading or trading between accounts under common beneficial ownership) is defined by the Exchange to be Wash Trading. Special care must be given by market makers to avoid trading with themselves and be seen as generating wash trades.
6.0 Investigation and Resolution Procedures
If it appears that more information is required due to a review of an alert, observation of the market, or one or more customer complaints, Exchange personnel will gather additional information, including requesting information from users. Users are required to provide the information requested by Exchange personnel and cooperate with the investigation. Cooperation with an investigation may include winding-down, altering or closing a specific trade or position. Failure by a user to provide information to, or comply with, Exchange personnel can result in formal actions taken in respect of that user. Upon conclusion of an investigation, an investigative summary is produced detailing the rule(s) in question, or other observed abusive behaviour, and the findings that may evidence a rule violation. The Exchange then determines if formal action to address the identified violation(s) is required.
6.2 Formal Actions
Should the Exchange find that a user has, or users have, been conducting strategies and/or trades that meet the definition of the trade practice violations outlined in Section 5, the following actions may be taken, at the sole discretion of the Exchange;
Users who have been identified as conducting potentially abusive behaviour may at any time elect to withdraw their assets if they do not feel that the Exchange meets their trading needs.