Circular trading
Also called: wash trading, wash trades, circular trades
Related accounts repeatedly buying and selling the same shares among themselves, to create the appearance of heavy trading and demand.
The trades are real on the exchange's records, but ownership barely changes. The artificial volume and rising prices are meant to attract outside buyers, to whom the group then sells. It is a form of market manipulation and is prohibited.
Example
Three related people trading the same 5,000 shares in a circle ten times create 1,50,000 shares of volume while their combined holding hardly changes.
Learn more in these lessons
- Market manipulationHow is the stock market manipulated, and how is it caught?
Related terms
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