In economics and finance, 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.[1][2][3]
Market manipulation is prohibited in most countries, in particular, it is prohibited in the United States under Section 9(a)(2)[4] of the Securities Exchange Act of 1934, in the European Union under Article 12 of the Market Abuse Regulation,[5] in Australia under Section 1041A of the Corporations Act 2001, and in Israel under Section 54(a) of the securities act of 1968. In the US, market manipulation is also prohibited for wholesale electricity markets under Section 222 of the Federal Power Act[6] and wholesale natural gas markets under Section 4A of the Natural Gas Act.[7]
In India it is illegal under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.[8]
Examples
Pools
Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a work period of time and then to share in the resulting profits or losses.[9] In Australia section 1041B prohibits pooling.[10]
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.[11]
Ramping (the market)
New Market Manipulation Examples
Pinging and Spoofing
Pinging involves making small orders and then cancelling them with a computerized program in an effort to induce others in the marketplace to react to the "pings" and reveal their trading intentions to the party pinging.[19] Similarly, with spoofing, a computerized program submits or cancelling multiple bids or offers to manipulate the price of a security.
Electronic Front Running
Similar to traditional front running, electronic front running uses knowledge of future orders to execute trades ahead of a future price. However, electronic front running utilizes financial technology to evaluate price changes and financial transactions for parties to execute advantageous trades.[20]
See also
- Ponzi scheme
- Insider trading
References
- Market Manipulation Investor.gov, retrieved 2025-05-29^
- Tālis J. Putniņš. Market Manipulation: A Survey Journal of Economic Surveys, 2012^
- Calo, R. (2013). Digital market manipulation. Geo. Wash. L. Rev., 82, 995.^