The Dutch Authority for the Financial Markets has published the 13th edition of its Market Watch, using “wash trades” to illustrate how orders and transactions can generate signals that influence price formation, trading behaviour and the outcomes of trading algorithms. The note also sets out what actions market participants are expected to take in response to wash trades, including when to notify the supervisor. The AFM describes wash trades as transactions in which there is no transfer of economic interest or market risk because the trader’s position effectively remains unchanged, while still potentially affecting factors used by algorithms such as order book volume, price trends, market volatility and order book imbalance. Market participants are expected to analyse whether signals created by such orders or transactions may be incorrect or misleading and, when assessing whether a wash trade qualifies as market manipulation, to refer to the definition of market manipulation in the Market Abuse Regulation. Reporting is required on a case-by-case basis: firms do not need to report every wash trade, but must file a Suspicious Transaction and Order Report (STOR) with the AFM where wash trades give rise to a reasonable suspicion of market manipulation, or an attempt to manipulate the market.
Dutch Authority for the Financial Markets 2025-07-02
Dutch Authority for the Financial Markets explains how wash trades can mislead markets and when STOR reporting is required
The Dutch Authority for the Financial Markets (AFM) released the 13th edition of its Market Watch, highlighting the impact of "wash trades" on price formation and trading algorithms. The AFM expects market participants to assess whether such trades generate misleading signals and report suspicious activities under the Market Abuse Regulation. Firms must file a Suspicious Transaction and Order Report (STOR) with the AFM when wash trades suggest potential market manipulation.