its illegal where it is handy is if you work for a prop shop and pay say 50% profit. say you are up 10k on the month at your prop shop... you take a 10 k loser by paying up on a very thin stock (hitting your own bid or ask on a different account) and then hit your own bid/ask to get out say i.b., where you get to keep 100% you are now flat on the month at the prop shop and up 10k on your i/b account.... just dont get caught....
So its illegal based on a SEC rule, NASD rule? and what does the rule stipulate exactly? We seem to have come up with a few creative uses for this already, which i wasnt even thinking of, esp that last one!! I'll compile them here just for fun: 1. Transfer your profits to 100% payout account 2. Fake more volume on a low volume stock 3. Create an uptick so you can short 4. Transfer a position from one account to another without paying the spread Keep em coming..
this is totally illegal what is also illegal is, for example, to prearrange a sale with another trader, like saying "i'll offer at price X and you take my offer at 0910 hrs"
Folks, this is the same guy who spent most of his teenage years leaning over, seeing if he can ummm 'hit' his own 'bid' with his mouth since he couldn't get a date. p.s. it's also not OK to marry your own sister, let's clear that one up right now. __________________ Please, I'm not a daytrader, I'm an "Intraday Liquidity Provider" 1-888-TRADEUP
you think you are the first person to think of this? Come on, you will get burned sooner then later..
I believe this sort of stuff might happen on the OTC Board with penny stocks. The local paper has a good business writer on scams and he mentions the OTC Board quite a bit. ET doesn't allow threads on penny stocks probally for this reason.
Itâs illegal in most markets. Usually a variation of this strategy is used. Itâs called triangular transactions (usually the scheme is B is buying from A and sells to C and then C sells back to A). The cost is only the transaction cost, and the strategy is used to manipulate prices. In a stock market I am familiar with, this scheme has been used extensively in the past to skyrocket low-cap stocks.
Unless somebody gets ratted out, I don't see how you could ever discover this scheme (NO, I wouldn't do it!)? If 3 or 4 unrelated people set up accounts with different brokers and just banged out these coordinated trades, who would know they weren't legit? Maybe suspicious liqudity in a formerly thin stock? And I guess, if you owned the stock and it went up, you wouldn't care if some others were jamming it higher with bogus trades and volume...
It's painting the tape and it's as old as the hills. I'm no lawyer so I don't know which law it flouts, but I'll reckon a good guess is that it's illegal under market manipulation.
May not apply here, but I just noticed this: Notice Regarding Pre-Arranged Trading On U.S. Futures Exchanges Pre-arranged trades are trades that are the result of discussions between two market participants prior to execution to ensure that a contra party will take the opposite side of a particular order. U.S. futures exchanges, including CME and CBOT, have regulations prohibiting the execution of pre-arranged trades except in certain limited instances. Interactive Brokers customers are responsible to know and abide by all exchange restrictions regarding pre-arranged trading. For your reference, the relevant CME and CBOT rules are set forth below: CME (GLOBEX) Policy 539 Prearranged, Pre-negotiated and Noncompetitive Trades Prohibited 539.A. General Prohibition No person shall prearrange or pre-negotiate any purchase or sale or noncompetitively execute any transaction, except in accordance with Sections B and C below. Violation of this rule may be a major offense. 539.B. Exceptions The foregoing restriction shall not apply in the following circumstances: Block trades pursuant to Rule 526; A transfer of spot for futures pursuant to Rule 538; and, A transfer of cash for futures after termination of a contract pursuant to Rule 719. 539.C. Pre-Execution Discussions Regarding GLOBEX Trades Parties may engage in pre-execution discussions with regard to transactions executed on the GLOBEX platform where one party (the first party) wishes to be assured that a contra party (the second party) will take the opposite side of the order under the following circumstances: A party may not engage in pre-execution discussions with other market participants on behalf of another party unless the party for whose benefit the trade is being made has previously consented to permit such discussions. Parties to pre-execution discussions shall not (i) disclose to a non-party the details of such discussions or (ii) enter an order through the GLOBEX platform to take advantage of information conveyed during such discussions except in accordance with this rule. A period of 5 seconds shall elapse between entry of the two orders in the case of futures orders or a period of 15 seconds shall elapse between entry of the two orders in the case of option orders. In any transaction involving pre-execution discussions, the first partyâs order must be entered into the GLOBEX platform first and the second partyâs order may not be entered into the GLOBEX platform until the time period prescribed in Section 539.C.3. above has elapsed. Pursuant to Rule 585 (âGLOBEX®Call Market Trading Algorithmâ), solicitation of bid(s) and/or offer(s) through private discussion for the purpose of establishing a market or improving the market for an eligible contract or an eligible combination of contracts for options on Eurodollar futures shall be preceded by issuing a Request For Quote (âRFQâ) through an eligible terminal. Subsequent to such RFQ, a trade intended for execution pursuant to Rule 585 for which there has been a pre-execution discussion shall be initiated with a Request for Cross Trade (âCross Requestâ) for the specific contract or combination of contracts, with explicit reference to the anticipated order quantity. The order from the initiator of the Cross Request for the contract or combination of contracts must be entered within three (3) minutes of the entry of the Cross Request. The opposing order may not be entered until the requisite period of time as stipulated in Section C.3. above has elapsed. Failure to enter the initiating order within three (3) minutes of the entry of the Cross Request shall be considered an abandonment of that pre-execution discussion. Any subsequent pre-execution discussion concerning the transaction must be preceded by the entry of a new RFQ and, thereafter, a new Cross Request must be entered before proceeding with the order entries.