DESPITE the successful prosecution of former Holian Investment managing director Reginald Wong Ho for cross-trading, the stock exchange concedes the problem is hard to police. In the October issue of The Securities Journal, executive director of compliance Paul Phenix said even if the exchange caught investors breaching Section 135(1)(a) of the Securities Ordinance, it was difficult for regulators to prove they had deliberately distorted the stock price with the intention to profit. ''Cross-trading is a form of market manipulation,'' Mr Phenix said. ''It disrupts the natural market forces and gives misleading impressions regarding both the price and the genuine level of interest in a share. A stock analyst said: ''The reason that [Wong] got caught was due to two factors. First, the intent of the defendant was very blatant, which perhaps raised the SFC's suspicion. Second and most importantly, he pleaded guilty himself.'' Another stock trader said the Wong case did not define the activities considered to be market-making or market distortion. ''In order to differentiate between the two, more cases will be needed for reference. And in those cases, the intent or motive must be not be blatant or clear-cut.'' Wong got into trouble after selling 51 per cent of Delux Glory International Holdings to Holian Investments. As consideration, he received 38.9 million Holian shares. He then bought some 50 million Holian shares and sold more than 83 million despite the fact Holian was thinly traded. Using six brokers and two banks to sell shares to and buy shares from himself, he made nearly $23 million from the transactions.