Market Manipulation

Markets rely on prices reflecting genuine supply and demand. Manipulation distorts this, misleading other investors and damaging trust. It is illegal in most countries.

Common forms include pump-and-dump schemes; spoofing, placing large orders with no intention of executing them to mislead others, then cancelling them; wash trading, buying and selling the same asset to create the appearance of activity; spreading false information; and cornering a market, gaining enough control of an asset's supply to dictate its price.

For example, a trader who places large buy orders to make a share look in demand, sells shares at the resulting higher price, then cancels the buy orders, is engaged in spoofing.

Regulators and exchanges monitor trading for unusual patterns using surveillance technology. Penalties include fines, bans from trading and prison sentences. Market manipulation rules apply to shares, bonds, derivatives, commodities and, increasingly, cryptocurrencies, where trading can be less regulated and manipulation harder to detect.