Bait and switch
Stock-of-the-month recommendations are issued, usually without appropriate foundation, and the stock is sold to a group of customers. who resell the stock for a small profit, thereby creating interest and encouraging other investors to buy at higher levels. This process can be repeated several times, each time pushing the price higher.
Highest bidder or transactions at progressively higher prices - consistently appearing as the highest bidder, a device which can be used to support or to raise the price of securities; following the market too closely on a rise with either purchases or bids may also create apparent activity. Each time new buyers enter the market, even as a result of an independent purchase or bid, it exhausts the supply of securities at lower levels and forces others to raise their bid. (See also “pump and dump”). The inverse is used to lower the price of a security.
Hype and dump
talking up the price of stock by using false or exaggerated reports, rumors, brokers’ recommendations, etc. Once price has risen, stock is dumped. The antithesis can be known as “slur and slurp”; it occurs when the price of a stock is talked down, allowing the manipulator to buy shares at lower prices.
Pump and dump
making transactions at successively higher prices, thus giving the appearance of real activity by investors, then dumping or selling at highs. Can occur as a supply side manipulation as well, by making undisclosed offers for only small parcels of shares, thereby inducing others to sell and allowing the manipulator to buy a large parcel of shares later at a cheaper price.
Ramping
marking (up) the close either by placing bid or purchasing parcel at or near the close; this changes the closing price although the bid often is dropped the next morning. Also called “painting the tape” or “window dressing.” The same technique can be used to push the share price of a stock lower.
Window dressing
ramping by institutional investors to allow valuation at desired prices (see above, “ramping”).
Chain letter rally
occurs as speculators enter the market, thereby unwittingly assisting manipulator by increasing both volume and price movement.
Churning
the manipulator acquires a holding of shares and then places both buy and sell orders, either through one broker or several, in order to create an impression of large turnover. These orders are usually placed at progressively higher prices. Also called “pass the parcel.“
Pools
a group of manipulators who trade shares back and forth between themselves, usually through one broker, thereby raising volumes and creating additional investor interest. Similar to both “churning” and “pass the parcel.”
Short squeeze
purchasing a significant amount of stock, i.e., cornering the market, in order to force short sellers to purchase shares to cover their short positions at successively higher prices, thereby increasing the price.
Matched orders
pre-arranged trades by associated parties who enter either a purchase or a sale order, while knowing an associate has entered a corresponding order.
Wash sales
purchase and sale orders placed at the same time; in wash sales, actual beneficial ownership does not change.
Capping and pegging
when the holder of a large short put and/or call option position sells or buys the underlying security in order to affect the price of the security such that the option position expires valueless and the holder avoids assignment.
Mini-manipulation
a relatively short-term stock manipulation in which the price of an underlying stock is manipulated upwards or downwards in order to benefit the liquidation of an open option position.
Short squeeze intermarket
a short squeeze between the share market and a related security, such as the options market.
Warehousing or parking
selling parcels of shares to the warehouser in order to disguise the path from original seller to the ultimate buyer. Often used to disguise ownership in a takeover situation, or where control over the shares is needed to ensure a company resolution is passed without disclosing the association between the warehouser and the beneficial owner.
Failure to disclose
any failure to disclose control or association of the purchase or sale of securities prescribed by statute. The lack of disclosure can allow a manipulator to incorrectly convey to the market that demand or supply for securities is genuine when, in fact, it is related to his own position.
Churning and burning
the excessive trading of an account by a broker (churning) for the purpose of generating commission without regard to the needs and objectives of the client (who is burnt).
Guarantees or payments
guaranteeing purchasers against loss or making payments to induce others to purchase or sell the security.
Use of nominee accounts
the use of nominee/fictitious accounts to stage widespread buying and selling activity at designated price levels, thereby concealing the actual control exercised by the manipulators and the purpose of such activity.
Spinning
Securities firms involved in initial public offerings may allocate shares to preferred investors on the understanding of obtaining future business, creating a transfer of wealth to those individuals at the expense of other investors. In India, SEBI, in the recent past, has taken measures for avoidance of such situations. Merrill Lynch, J.P.Morgan, Citi have been indicted for spinning during the dotcom induced stock market boom in the US in early 2000.
Investor loans
In order to ensure that an underwriting goes well, a bank may make below market loans to third-party investors on condition that the proceeds are used to purchase securities underwritten by its securities unit. |
Glossary of Financial Terms