economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...

and

finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, market manipulation occurs when someone intentionally alters the supply or demand of a security to influence its price. This can involve spreading misleading information, executing misleading trades, or manipulating quotes and prices. Market manipulation is prohibited in most countries, in particular, it is prohibited in the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

under Section 9(a)(2) of the

Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (also called the Exchange Act, '34 Act, or 1934 Act) (, codified at et seq.) is a law governing the secondary trading of securities (stocks, bonds, and debentures) in the United States of America. A land ...

, in the

European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

under Article 12 of the ''Market Abuse Regulation'', in

Australia Australia, officially the Commonwealth of Australia, is a country comprising mainland Australia, the mainland of the Australia (continent), Australian continent, the island of Tasmania and list of islands of Australia, numerous smaller isl ...

under Section 1041A of the

Corporations Act 2001 The ''Corporations Act 2001'' is an Act of the Parliament of Australia, which sets out the laws dealing with business entities in Australia. The company is the Act's primary focus, but other entities, such as partnerships and managed invest ...

, and in

Israel Israel, officially the State of Israel, is a country in West Asia. It Borders of Israel, shares borders with Lebanon to the north, Syria to the north-east, Jordan to the east, Egypt to the south-west, and the Mediterranean Sea to the west. Isr ...

under Section 54(a) of the securities act of 1968. In the US, market manipulation is also prohibited for

wholesale Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In ...

electricity markets under Section 222 of the Federal Power Act and wholesale

natural gas Natural gas (also fossil gas, methane gas, and gas) is a naturally occurring compound of gaseous hydrocarbons, primarily methane (95%), small amounts of higher alkanes, and traces of carbon dioxide and nitrogen, hydrogen sulfide and helium ...

markets under Section 4A of the Natural Gas Act.

Examples

Pools

Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

for a work period of time and then to share in the resulting profits or losses. In Australia section 1041B prohibits pooling.

Runs

When a group of traders create activity or rumours in order to drive the price of a security up. An example is the Guinness share-trading fraud 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 A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a phy ...

of listed securities and give the impression of voluminous trading in order to make a quick profit.

Bear raid

In a

bear raid A bear raid is a type of stock market strategy, where a Trader (finance), trader (or group of traders) attempts to force down the price of a stock to cover a short selling, short position. The name is derived from the common use of Market trend, '' ...

there is an attempt to push the price of a stock down by heavy selling or

short selling In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common Long (finance), long Position (finance), position, where the inves ...

Quote stuffing

Quote stuffing is made possible by high-frequency trading programs that can execute market actions with incredible speed. However, high-frequency trading in and of itself is not illegal. The tactic involves using specialized, high-bandwidth hardware to quickly enter and withdraw large quantities of orders in an attempt to flood the market, thereby gaining an advantage over slower market participants.

Cross-market manipulation

Cross-market manipulation occurs when a trader trades in one market for the purpose of manipulating the price of an asset in another market, capitalizing off the price-moving effects thus generated, instead of with the bona fide intent of profiting off the trade itself.

Cornering the market

In cornering the market, the manipulators buy a sufficiently large amount of an asset, often a

commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...

, so they can control the price creating in effect a

monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...

. For example, the brothers Nelson Bunker Hunt and William Herbert Hunt attempted to corner the world

silver Silver is a chemical element; it has Symbol (chemistry), symbol Ag () and atomic number 47. A soft, whitish-gray, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. ...

markets in the late 1970s and early 1980s, at one stage holding the rights to more than half of the world's deliverable silver. During the Hunts' accumulation of the precious metal, silver prices rose from $11 an ounce in September 1979 to nearly $50 an ounce in January 1980. Silver prices ultimately collapsed to below $11 an ounce two months later, much of the fall occurring on a single day now known as Silver Thursday, due to changes made to exchange rules regarding the purchase of commodities on margin.

References

{{stock market Commercial crimes Corporate crime Cover-ups Financial markets Financial crimes Finance fraud Organized crime Stock market crashes