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The Problem of Churning Detection in Derivatives
[Problematika zjišťování churningu u termínových kontraktů]

Author

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  • Jaroslav Brada

Abstract

The paper shows the way you can in forensic practice solve problem of proving the existence of excessive trading (churning) in client securities account held by securities dealer. Mentioned securities account held derivatives also. Derivatives are especially futures, options and ETF funds that invest a substantial portion of its own assets in futures and options. Furthermore, the work describe how it is possible in the forensic practice prove the "control of trader over customer account". It is also discussed the issue of calculation of indicators (esp. Cost to Equity) and the absence of clear algorithms that describe how the calculations of indicators of churning should be done and not only for portfolios (client accounts) containing derivatives. Special attention is paid to the determination of the size of property damage (loss) calculation by churning to the client.

Suggested Citation

  • Jaroslav Brada, 2014. "The Problem of Churning Detection in Derivatives [Problematika zjišťování churningu u termínových kontraktů]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2014(3), pages 59-74.
    • Handle: RePEc:prg:jnlcfu:v:2014:y:2014:i:3:id:409:p:59-74
    DOI: 10.18267/j.cfuc.409
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    References listed on IDEAS

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    1. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
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    More about this item

    Keywords

    Churning; Derivatives; Cost to Equity; Deriváty;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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