A wash trade is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. First, an investor will place a sell order, then place a buy order to buy from themself, or vice versa. This may be done for a number of reasons:
- To artificially increase trading volume, giving the impression that the instrument is more in demand than it actually is.
- To generate commission fees to brokers in order to compensate them for something that cannot be openly paid for. This was done by some of the participants in the Libor scandal.
- The New Market Manipulation, 66 Emory Law Journal 1253 (2017)
- "September 25, 1997 order regarding the Securities Exchange Act of 1934".
- "Financial Services Authority" (PDF). www.fsa.gov.uk.
- "Self Trade Prevention Functionality" (PDF). theice.com. September 2013.
- Staff, Investopedia (18 November 2003). "Wash Trading".
- What is Copy Trading