Wash trading

Buying and selling the same security with no real change of ownership, so trading appears where there is none. It is transaction-based manipulation because its only purpose is to mislead others about interest in it.

Where you will meet it

Wash trading appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Put the Market Manipulation standard, II(B), into practice
  CFA Level I · Ethical and Professional Standards

  “Transaction-based manipulation uses trades themselves to create a false impression — wash trading, matched orders, or marking the close to influence a price at which something else is valued.”

• Explain the manipulative trading practices that live market monitoring can uncover
  CFA Level III · Portfolio Construction

  “Wash trading has the same beneficial owner on both sides to fake volume.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with W · Glossary