Private investor crossings are independent transactions in which an investor enters a buy and a sell order for one and the same security in a timely manner and thus buys the security himself. Such crossings are bogus and prohibited, warns the Austrian Financial Market Authority (FMA).
Crossings are a form of market manipulation. Many private investors only realize that they have achieved a crossing when they receive mail from the FMA. They usually do not know that crossings are forbidden and see in their actions a negligible administrative offense, since they did not commit them “deliberately” and certainly not with the intention of misleading. Private investors are also mostly unfamiliar with the fact that it is technically possible on the stock exchange, but that the trading rules forbid people to buy a security from themselves.
But crossings are in the eyes of the EU lawmakers bogus deals that can represent a form of market manipulation. According to Art. 15 of the Market Abuse Regulation, they are prohibited throughout the EU and threatened with an administrative penalty of up to € 5 million.
Private investor crossings occur particularly in trading illiquid securities, i.e. those that have a particularly low trading volume. This is because, in the case of illiquid securities, there are no or hardly any other orders with which a matching can take place. The prices at which such transactions are processed therefore do not reflect the conditions that would result from business partners who are unrelated to each other.
One activity that often leads to private investor crossings as “collateral damage” is tax loss compensation towards the end of the year: income from securities is subject to capital gains tax (KESt) of 27.5%. It is possible under tax law to offset losses against profits from securities transactions in a tax-reducing manner, provided that these are realized within the same calendar year. The tax-relevant loss arises when the investor sells a security that he originally bought at a higher price at a currently lower price. However, if the investor wants to keep the security in his portfolio, he will promptly place a buy order in order to buy it back as quickly as possible.
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