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The Eastern Magistracy today convicted Mr Lee Lam Chong of manipulating a Callable Bull Bear Contract (CBBC) during a pre-opening session. Lee pleaded guilty to the offence (Note 1).
Magistrate Bina Chainrai sentenced Lee to one month imprisonment, suspended for 12 months and fined him $67,000. He was also ordered to pay the Securities and Futures Commission’s investigation costs.
The court heard that Lee placed contradictory buy and sell orders for a CBBC linked to Hang Seng Index during the pre-opening session on 20 April 2010, enabling the final equilibrium price to be fixed at a higher price at the end of the session (Note 2).
Lee placed an at-auction bid order for one million contracts two seconds before the end of the pre-order matching period, pushing up the indicative equilibrium price by over 25% against the previous day’s final equilibrium price.
He made a notional profit of $66,970 from selling two million contracts which he had placed earlier. The fine will strip Lee of this profit.
Notes:
- The pre-opening session commences at 9:30 am on each trading day and comprises four periods:
- Order Input Period (9:30 am to 9:44:59 am)
- Pre-order Matching Period (9:45 am to 9:49:59 am)
- Order Matching Period (9:50 am to 9:57:59 am)
- Blocking Period (9:58 am to 10:00 am)
- The CBBC was KC#HSI PR1004A
