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, commodity or currency.Market manipulation is prohibited under Section 9(a)(2) of the Securities Exchange Act of 1934, and in Australia under Section s 1041A of the Corporations Act 2001. 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."
- 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
- "Selling and repurchasing the same or substantially the same security for the purpose of generating activity and increasing the price"
- Bear raid
- "Attempting to push the price of a stock down by heavy selling or short selling.
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