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New water markets obligations and prohibitions
New laws came into effect on 1 July 2026 that make certain market activity illegal.
They include market manipulation and insider trading.
The new laws include obligations on water markets decision-makers to communicate decisions and keep detailed records.
Conduct that is prohibited
From 1 July 2026, new laws make it illegal to:
- manipulate or distort the price of eligible tradeable water rights
- fake trading activity to mislead others
- make false offers, trades or transfers that affect market prices
- spread information about these activities.
These prohibitions apply to the trade or transfer of eligible tradeable water rights.
‘Eligible tradeable water rights’ are rights related to the taking or use of water in the Murray-Darling Basin that are able to be traded or transferred. These include but are not limited to water access rights and water delivery rights.
Further details on conduct that constitutes prohibited market manipulation are set out in the (Water Act).
Common signs of water market manipulation
Water market manipulation can take many forms. Some common signs it might be happening may include:
- unusual price movements that don’t reflect changes in market supply or demand, particularly where traders that caused the price change also benefit from it
- trading behaviour that is different from the rest of the market
- trading behaviour that is not typical for a genuine buyer or seller, or is unusual for a particular trader
- a series of trades that shifts particular water rights back and forth among a small group of traders
- a consistent pattern of any of these behaviours over time.
Market manipulation
There are 4 market manipulation prohibitions in the Water Act. Broadly, these prohibit:
- trades and transfers resulting in artificial prices
- creating a false appearance of active trading
- false offers and trades that distort prices
- spreading information about the effect of prohibited market manipulation activities.
Trades and transfers resulting in artificial prices
Under section 101JG you must not participate in trades or transfers of eligible tradeable water rights that:
- create an artificial price
- maintain an artificial price.
What is an ‘artificial price’ will vary on a case-by-case basis. The term may capture prices that do not reflect genuine supply and demand.
Example scenario
Everyone in Joe’s catchment knows that water will be limited for the upcoming season.
Joe only needs a 50 ML entitlement but buys all available entitlements totalling 300 ML.
Joe now has a monopoly over the entitlements for the upcoming season.
Joe sells 250 ML at significantly increased prices. Because there are no other options, buyers have no choice but to pay the inflated prices or miss out.
In this scenario, Joe may have broken the law under section 101JG. This is because Joe's purchasing of all available entitlements likely allowed him to sell at an increased price, which may be considered artificial.
Creating a false appearance of active trading
Under section 101JH you must not engage in conduct that has or is likely to create a false or misleading appearance of active trading in the market.
Example scenario
Lee registers 2 companies:
- XYZ Company Pty Ltd
- 123 Company Pty Ltd
XYZ Company and 123 Company each offer to buy 100 ML of temporary entitlements at $50 per ML at the same time through separate brokers.
Lee instructs the 2 brokers acting on behalf of the 2 companies to execute the trades, so that water rights are transferred between her 2 companies.
While the market records 2 transaction of 100 ML at $50, each entity has the same assets they did before the trade.
In this scenario, Lee may have broken the law under section 101JH. This is because the entities involved have completed a matched trade, where there is no real change in water ownership. The trades create a false impression of active trading in the market for those eligible tradeable water rights.
False offers and trades that distort prices
Under section 101JJ you must not:
- make a fictitious or artificial offer for eligible tradeable water rights that maintains, changes or causes pricing to fluctuate
- enter into or engage in a fictitious or artificial trade or transfer of eligible tradeable water rights that maintains, changes or causes pricing to fluctuate.
Example scenario
Mike wants to sell some entitlements he holds for his water catchment.
To drive up prices, Mike registers several large offers to buy the same kind of entitlement without intending to complete the trades. He cancels each of these offers before a trade can be confirmed.
Other traders see the offers and mistake them for increased demand, causing them to place offers of their own at an increased price. Mike then sells his entitlements at this inflated price.
In this scenario, Mike may have broken the law under section 101JJ. This is because he made offers he did not intend to fill resulting in an inflated price for eligible tradeable water rights, which may be considered artificial.
Spreading information about the effect of prohibited activities
Under section 101JK you must not distribute statements or information stating the price for trading eligible tradeable water rights will, or is likely to, rise or fall, or be maintained because of an action if:
- that action is a contravention of the above prohibitions on market manipulation, and
- the person or their associate engaged in this contravening action, or may receive a benefit for distributing this statement or information.
Example scenario
Mike has been driving up entitlement prices in his catchment through false offers, as described in the previous example.
Trying to trigger panic buying and further drive-up prices, Mike sends out emails to other irrigators in his catchment telling them the market price for entitlements is currently soaring and this is expected to continue for the next few weeks. Mike hopes to benefit from this by receiving an even higher price when selling his remaining water entitlements.
In this scenario, Mike may have broken the law under section 101JK because he spread information about the effect his prohibited conduct under section 101JJ will have on prices and he may benefit from spreading this information.
Penalty
Such conduct can attract a pecuniary penalty.
For more information see compliance and enforcement of water markets integrity provisions.