A Framework for the Analysis of Market Manipulation (original) (raw)
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Brill research perspectives, 2018
Private and Internal Investigations Regulatory and Governmental Enforcement Actions Research and Analysis Market Manipulation Cornerstone Research conducts detailed analyses in a range of matters involving benchmark manipulation, spoofing and layering, corners and squeezes, and wash trading allegations. We work with clients to determine the appropriate analyses for each matter, applying advanced modeling techniques and econometric methods to address complex issues. We bring substantial experience handling big data, complex source code, and forensic analysis of data and documents. Using large public datasets and proprietary company information, we offer insightful and effective analyses. We combine technical expertise with a deep knowledge of litigation and regulatory issues.
Stock Market Manipulation on the Hong Kong Stock Exchange
Australasian Accounting, Business and Finance Journal, 2014
This study is the first to empirically examine stock market manipulation on the Hong Kong Stock Exchange. The dataset contains 40 cases of market manipulation from 1996 to 2009 that were successfully prosecuted by the Hong Kong Securities & Futures Commission. Manipulation is found to negatively impact market efficiency measures such as the bid-ask spread and volatility. Markets appear incapable of efficiently responding to the presence of manipulators and are characterised by information asymmetry. Manipulators were successfully able to raise prices and exit the market. This finding contradicts views that trade-based manipulation is entirely unprofitable and self-deterring. The victimisation of information-seeking investors and the market as a whole provides a strong rationale for all jurisdictions, including Australia, to have effective laws that prohibit manipulation and for robust enforcement of those laws to further deter market manipulation.
SSRN Electronic Journal, 2014
A hedge fund manager's bang-the-close trades in platinum futures provides a natural experiment for investigating the response of financial intermediaries (floor traders) to suspected manipulative trades. We show that the fund manager's trades generated artificially high settlement prices, and that the price impact of these trades exceeded those predicted by various competitive benchmarks designed to account for their immediacy and exceptionally large size. We consider this empirical evidence in light of theoretical models that predict tacit collusion (implicit cooperation) can arise in trading environments with a small number of participants engaged in long-term repeated interactions.
Characterising trader manipulation in a limit-order driven market
Mathematics and Computers in Simulation, 2013
Use of trading strategies to mislead other market participants, commonly termed trade-based market manipulation, has been identified as a major problem faced by present day stock markets. Although some mathematical models of trade-based market manipulation have been previously developed, this work presents a framework for manipulation in the context of a realistic computational model of a limit-order market. The Maslov limit order market model is extended to introduce manipulators and technical traders. We show that "pump and dump" manipulation is not possible with traditional Maslov (liquidity) traders. The presence of technical traders, however, makes profitable manipulation possible. When exploiting the behaviour of technical traders, manipulators can wait some time after their buying phase before selling, in order to profit. Moreover, if technical traders believe that there is an information asymmetry between buy and sell actions, the manipulator effort required to perform a "pump and dump" is comparatively low, and a manipulator can generate profits even by selling immediately after raising the price.
Manipulation of stock price and its consequences
With expansion of financial markets and capital market and also existence of so many buyers and sellers who are looking to gain from their trades, manipulation has taken a new display. Forgers are able to manipulate the trading activity of the stock market and offer a false display and mislead the investors and encourage them to buy their shares. Manipulation in capital market can cause investors to be uncertain to the capital market and it is an obstacle to market depth. Certain controls and special regulations needed to deal with this phenomenon in order to avoid distorting the minds of investors and confronting false prices.
Forensic Finance: Market Abuse and Price Manipulation on Security Markets on the Trail
SSRN Electronic Journal, 2012
On 19th March 2009, national newspapers in Austria reported on a "turbo scandal" that had been suspected on the Vienna Stock Exchange. Concerned investors argued that the issuers of turbo certificates tried to raid the underlying prices of these downand-out call options by pushing down the prices of the underlyingsbelow the barriers of the derivatives. The goal of this research is to find out which variables are crucial for the research, which stocks were manipulated and who their manipulators were. According to our empirical results, we definesuspicious issuers for each stock and classify them as being highly, moderately, less suspicious or rather unsuspicious issuers.
Forensic Finance: Market Abuse and Price Manipulation in Security Markets on the Trail
The Review of Finance and Banking, 2014
On 19 th March 2009, several national newspapers in Austria reported on a "turbo scandal" that had been suspected on the Vienna Stock Exchange for several years. Concerned investors argued that the issuers of turbo certificates tried to raid the underlying prices of these down-and-out call options by selling underlyings with prices under the barriers, resulting in valueless turbos. The goal of this research is to find out which variables are crucial for the research, which stocks were manipulated and who their manipulators were. According to our empirical results, we define suspicious issuers for each stock and classify them as being highly, moderately, less suspicious or rather unsuspicious issuers.
The offense of capital market manipulation
2012
The novelty and use of current technology in stock exchange trading operations are just a few reasons for which the capital market domain is a controversial one, and the number of crimes already committed in the financial market raises the issue of securing the supply-demand relationship of capital and capital investment protection. If in the Community law there is no incrimination of market abuse, Romanian legislature sanctioned the capital market manipulation as criminal acts committed intentionally in order to discourage such practices and also to increase the confidence of investors in the financial market.
Strategic trading behavior and price distortion in a manipulated market: anatomy of a squeeze
Journal of Financial Economics, 2005
This paper investigates an attempted delivery squeeze in a bond futures contract traded in London. Using cash and futures trades of dealers and customers, we analyze their strategic trading behavior, price distortion, and learning in a market manipulation setting. We argue that marked differences in settlement failure penalties in the cash and futures markets create conditions that favor squeezes. We recommend that regulators require special flagging of forward term repurchase agreements on the key deliverables that span futures contract maturity dates, and that exchanges mark-to-market ARTICLE IN PRESS www.elsevier.com/locate/econbase 0304-405X/$ -see front matter r 2004 Published by Elsevier B.V. (J.J. Merrick Jr). their contract specifications more frequently, or consider a cash-settled contract on a basket of bonds. r 2004 Published by Elsevier B.V.