MSCI Raises Concerns: Where Is the Line Between Trading Strategy and Market Manipulation?
On 15 October 2026, Morgan Stanley Capital International (“MSCI”) released a consultation on a proposal to change the classification of Indonesia from an Emerging Market to a Standalone Market. The proposal comes amid concerns about the transparency of share ownership, coordinated trading and consistency of law enforcement in the Indonesian capital market. No final decision has been made by MSCI, the consultation period ends 30 April 2027 with a final decision expected on 30 June 2027. These statements raise important questions for businesses and market participants about when unusual trading activity rises to the level of market manipulation, how such conduct can be proven, and what measures may reduce associated legal risks.
Unusual trading activity may not necessarily be indicative of market manipulation but may raise questions as to whether securities prices reflect genuine market activity. Such matters may take various forms, including but not limited to deceptive practices or false or undisclosed material information intended to influence investment decisions or benefit certain parties; conduct that creates a misleading picture of trading activity, market conditions or securities prices; transactions that create securities prices that do not reflect genuine market conditions, with the aim of benefiting oneself or another party, as addressed under Articles 90 to 92 of Law No. 8 of 1995 concerning Capital Markets, as amended by Law No. 4 of 2023 concerning Development and Strengthening of the Financial Sector (“Capital Market Law”). Article 93 of the Capital Market Law also prohibits false or misleading statements affecting securities prices when the party making them knew or should have known they were inaccurate or failed to exercise sufficient care in verifying their accuracy. Together, these provisions help distinguish legitimate trading activity from conduct that may violate the law and undermine market integrity.
The difference rarely reflected in price changes or trade volumes. A quick price increase may be the result of real demand or fresh information, but it may also require additional inspection together with time and pattern of transactions, and the parties involved along with their relationships. The question is whether the information provided indicates that investors were misled, or that the trading activity generates a false image of the market or of securities prices.
Proving alleged market manipulation requires a careful assessment, beyond price movements and trading volumes. Useful evidence may include order and transaction records, trading patterns, relationships between parties, information on beneficial ownership, sources of funds, and communications or trading instructions which may indicate coordination or the purpose of the transactions. Public disclosures and prevailing market conditions should also be examined to determine whether price movements have a reasonable economic explanation. But affiliation or similar trading patterns do not automatically imply collusion or manipulation. This evidence must be tested in accordance with the applicable legal elements, the framework of examination and investigation under the Capital Market Law and the relevant regulations of the Financial Services Authority (Otoritas Jasa Keuangan).
Public companies and issuers should improve transparency of ownership, satisfy all relevant disclosure obligations, and implement internal procedures to verify material information and respond to inquiries from regulators to reduce legal risks. Controlling shareholders and investors should maintain clear documentation of the economic rationale and decision-making process for significant transactions, particularly those involving affiliated parties, while ensuring compliance with ownership reporting requirements.
In conclusion, a careful assessment of the relevant facts and legal considerations is needed to distinguish legitimate trading from market manipulation to preserve the integrity of the market without sacrificing legal certainty for market participants.
For further information or consultation, please contact:
Ferry F. Rajagukguk
Partner
Ziva Gentasangkara
Associate
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