The illegal practice of placing and canceling orders to trick others into buying or selling stocks at artificial prices.
An example of layering comees from an SEC case against Nathan Fayyer and Sergey Pustelnik who the SEC claimed used their trading firm, Avalon FA Ltd., to manipulate the market for various securities. The SEC won a jury verdict against the defendants, alleging that they engaged in a layering scheme, a trading practice which involved placing and canceling orders to trick others into buying or selling stocks at artificial prices. The SEC also alleged that they engaged in cross-market manipulation, which involved buying or selling stocks to artificially impact options prices. These schemes generated more than $25 million in ill-gotten profit for Avalon. Fayyer was Avalon’s named owner, and Pustelnik kept his controlling interest in Avalon undisclosed while embedding himself as a registered representative at Lek Securities Corp., a New-York based brokerage firm, in order to facilitate Avalon’s trading. Lek Securities and its Chief Executive Officer, Sam Lek, who settled with the SEC prior to trial last month, admitted that the trading occurred and was manipulative.
See:
SEC Obtains Final Judgments Against Lek Securities and CEO in Layering, Manipulation Case
SEC Charges Firms Involved in Layering, Manipulation Schemes
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