TRADERS should pay more attention when handling large orders to prevent market manipulation, according to the Singapore Exchange (SGX) yesterday.

The bourse operator said trading members and representatives should query clients on orders that may 'adversely impact the market'.

'Trading members and trading representatives are free to employ different trading strategies,' said the SGX in a note posted on its Regulator's Column yesterday.

'However, large orders entered within a short span of time, especially at prices above or below the prevailing spread, have a greater potential to create price dislocation.'

When carrying out a large order, traders should consider whether the transaction will distort prices, particularly if the size is unusual in relation to the stock's average daily volume.

It said that traders should bear in mind their market obligations when carrying out trading strategies.

'They are expected to know their customers and satisfy themselves that the trades are commercially legitimate,' said SGX.

They should also take more care not to unnecessarily hold back a large interest for a particular stock until near the end of a day's trading.

And if traders find that executing a client's order could disrupt the market or facilitate a breach of SGX rules, then they must refuse the transaction.

The Securities and Futures Act rules that no one should create a false or misleading appearance of active trading.

Section 198 also states that a trader should not carry out, 'directly or indirectly, two or more transactions that have or are likely to have the effect of market manipulation'.

While money-making scams like insider trading and share market manipulation are uncommon here, industry players say there is still no foolproof method to ensure that they do not occur.

Besides adhering to principles of good business practice and ensuring adequate controls to manage orders and spot potentially disruptive transactions that may cause unwarranted market volatility, SGX wants traders to help educate clients.

'Trading members are strongly advised to educate their clients on the proper handling of large orders, especially at or near the close (of trading),' it said.

'This applies especially to overseas clients who may be less familiar with local market conditions.'