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Market manipulation

 

 
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Market manipulation
 
 
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Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security
Security (finance)

A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities , and stock securities; e.g., common stocks....
, commodity
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
 or currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
. Market manipulation is prohibited under Section 9(a)(2) of the Securities Exchange Act of 1934
Securities Exchange Act of 1934

The Securities Exchange Act of 1934 is a law governing the secondary market of securities . The Act, 48 Stat. 881 , codified at et seq., was a sweeping piece of legislation....
, and in Australia under Section s 1041A of the Corporations Act 2001
Corporations Act 2001

The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Australia that sets out the laws dealing with business entity in Australia at federal and interstate level....
. The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradable security.

Markets manipulation can occur in multiple ways: Pools : "Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses." Churning : "When a trader places both buy and sell orders at about the same price.






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Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security
Security (finance)

A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities , and stock securities; e.g., common stocks....
, commodity
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
 or currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
. Market manipulation is prohibited under Section 9(a)(2) of the Securities Exchange Act of 1934
Securities Exchange Act of 1934

The Securities Exchange Act of 1934 is a law governing the secondary market of securities . The Act, 48 Stat. 881 , codified at et seq., was a sweeping piece of legislation....
, and in Australia under Section s 1041A of the Corporations Act 2001
Corporations Act 2001

The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Australia that sets out the laws dealing with business entity in Australia at federal and interstate level....
. The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradable security.

Markets manipulation can occur in multiple ways: Pools : "Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses." Churning : "When a trader places both buy and sell orders at about the same price. The increase in activity is intended to attract additional investors, and increase the price." Runs : "When a group of traders create activity or rumors in order to drive the price of a security up." An example is the Guinness share-trading fraud
Guinness share-trading fraud

The Guinness share-trading fraud was a famous United Kingdom business scandal of the 1980s. It involved an attempt to manipulate the stock market on a massive scale to inflate the price of Guinness shares and thereby assist a ?2.7 billion take-over bid for the scotland drinks company Distillers Company Limited....
 of the 1980s. In the US, this activity is usually referred to as painting the tape. Ramping (the market) : "Actions designed to artificially raise the market price of listed securities and to give the impression of voluminous trading, in order to make a quick profit." Wash sale
Wash sale

Wash Sale is a sale of a security at a loss and repurchasing the same or substantially identical stock soon afterwards. The idea is to make an unrealised loss claimable as a tax deduction, by offsetting against other capital gains in the current or future tax years....
 : "Selling and repurchasing the same or substantially the same security for the purpose of generating activity and increasing the price" Bear raid
Bear raid

A bear raid is a type of stock market strategy, where a Trader attempts to force down the price of a stock to cover a short selling. This can be done by spreading negative rumors about the target firm, which puts downward pressure on the share price....
 : "Attempting to push the price of a stock down by heavy selling or short selling."

See also

  • Stock manipulation
    Stock manipulation

    Stock manipulation is a practice whereby owners of a company or others such as brokerage firms or investment companies take actions to increase or decrease the value of that stock, solely so they can buy or sell shares at a profit....