It takes almost nothing to start: a single small order in a share that hardly anyone trades. That, according to South Africa's Financial Sector Conduct Authority, is the opening move in a scheme it is now chasing. In its latest enforcement report, published on 31 July, the regulator revealed it has three live investigations into the same tactic.
Here is how it works. A contract for difference, or CFD, is a side bet whose price simply tracks a share's live price. Some CFD providers set their prices straight off the best bid or offer showing in the share market, no matter how few shares are actually available at that level. So a manipulator places a tiny order in a barely-traded share to nudge that best price, then cashes a far larger CFD position pegged to it. Barely a ripple in one market; a real payday in another.
Why it is so hard to catch
The clever, frustrating part is that the evidence is split across two markets. On its own, a tiny share order looks pointless — it only makes sense once you see the much bigger bet sitting beside it. That is why the FSCA now assesses suspicious trades holistically, looking at the equity and derivative markets together. The JSE is helping, but as its market-regulation director Shaun Davies notes, the exchange cannot police off-market bets it cannot see.
The regulator has teeth
This is not just a theory. The report lays out two cases — Labat Africa and Texton Property Fund — where the FSCA fined both the client giving the orders and the trader placing them. In the Labat matter, a client and trader ran 10 trades to push the price down and were fined R2-million and R250,000; in Texton, small orders to nudge the price up drew fines of R2-million and R500,000. The evidence even included the client's own words: "I am trying to drop it now." It all lands alongside record enforcement — R2.8-billion in penalties across 76 people and firms, up from R119.8-million a year earlier. The regulator has not yet named the providers or shares in its three open probes, so the real question is who turns up when it does.
