B. Market Manipulation.
#analyst-notes #code-of-ethics-and-standards-of-professional-conduct #integrity-of-capital-markets
You must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead markets.
Market manipulation is an attempt to interfere with the free and fair operation of the market. It includes practices with the intent to deceive people or entities that rely on information in the market.
Market manipulation examples include:
- Price manipulation. Placing orders into the trading system in order to change the price of a stock. The motives for attempting to do this vary: to increase the value of a position for finance or accounting purposes, to be able to issue new shares at a higher price or to cause such a price rise that other investors are attracted to the stock, creating demand that the manipulator can sell into (called "pump and dump").
- Marking the close or ramping. Making a trade near the close of the day's trading, trying to affect published prices, particularly the reported closing price. This is done to avoid margin calls (when the trader's position is not self-financed) to support a flagging price or to affect the valuation of a portfolio (called "window dressing"). A common indicator is trading in small parcels of the security just before the market closes.
- Wash trades and pre-arranged trading. A wash trade is a trade in which there is no change in the beneficial ownership of the securities - the buyer is, in reality, also the seller. A pre-arranged trade involves two parties trading on the basis that the transaction will be reversed later, or with an arrangement that removes the risk of ownership from the buyer. "Pooling or churning" can involve wash sales or pre-arranged trades executed in order to give an impression of active trading, and therefore investor interest, in the stock.
- False or misleading information. Companies can be tempted to re-release information or present information in an over-optimistic manner, in order to generate interest in the company's securities or help a flagging market. In some cases this includes unrealistic, unsubstantiated, or incorrect data, projections or evaluations. When the perpetrators use the demand generated by the false information they have spread to sell their own shares, the operation is known as "hype and dump."
- Capping and pegging. This involves activity on both the stock market and the derivatives market. A trader writes an option, which obliges the trader to sell to (in the case of a call option) or buy from (in the case of a put option) the option holder a specified number of shares at a specified price. The trader then trades in the shares covered by the option in order to affect the share price in a direction that will make the option unprofitable to exercise.
If you want to change selection, open original toplevel document below and click on "Move attachment"
Summary
| status | not read | | reprioritisations | |
|---|
| last reprioritisation on | | | suggested re-reading day | |
|---|
| started reading on | | | finished reading on | |
|---|
Details