5 ms·

How much of the movement in NYSE is wash trading?

by mistercheph 3y ago

onlyrealcuzzo 3y ago
Considering it's illegal and monitored - no where near as much. It's obviously not 0.
- scotty79 3y ago
  If two independent entitities are trying to sequentially wash trade to inflate the price it no longer looks like a wash trade, but like two entities suddenly finding asset more valuable and bidding for it with each other as it appreciates. So way more than 0.
crazygringo 3y ago
Exceedingly little, considering it's illegal, and the NYSE employs technological measures to prevent it as well.
chollida1 3y ago
> How much of the movement in NYSE is wash trading? Well by definition wash trading results in no change of price, so none of the movement in the NYSE is a result of wash trading. Further more, wash trading is illegal and every order entered into the CLOB is recorded as to which trader sent it so its trivial it detect if a trader did wash trade.
- crazygringo 3y ago
  Wash trading can absolutely be used to manipulate prices, that's one of its purposes -- to sell+buy at increasingly higher prices to attempt to make something temporarily appear more valuable than it otherwise would be. I'm not going to comment on whether that's realistically achievable on the NYSE specifically, but it's definitely not true that wash trading doesn't change prices "by definition". To the contrary -- that's one of the reasons it was made illegal.
  - chollida1 3y ago
    Wash trading by definition means nothing changes, the price remains constant as you buy and sell for the same price. Wash trading can not change the price of a stock. It's use is to increase volume. From teh SEC who over sees this. If you aren't happy with their definition you can take it up with them but you don't get to redefine the term for your own use;) https://www.sec.gov/files/litigation/aljdec/id78grl.txt https://www.sec.gov/files/litigation/aljdec/id78grl.txt > -[1]- Wash trades are purchases and sales of securities that match each other in price, volume and time of execution, and involve no change in beneficial ownership.
    - crazygringo 3y ago
      That's incorrect. Because you're missing the part that in certain circumstances, when you are performing both the sale and the purchase, you can choose whatever sale price you want. E.g. most recent genuine market trades were at $0.50, but you offer for sale at $0.60 and buy your offer at $0.60. Then do the same at $0.65 and $0.70. Then it looks to outsiders like the price really is going up, and that can be used for all sorts of things. You can look it up in Wikipedia if you want, which explicitly gives one of the motivations for wash trading as: "- Falsely driving up asset prices by fabricating trade history with increasing prices" [1] I'm not redefining anything at all. ;) (It is also used for increasing volume, but that's not the only motivation.) [1] https://en.wikipedia.org/wiki/Wash_trade https://en.wikipedia.org/wiki/Wash_trade
      - chollida1 3y ago
        I mean, one thing i've learned about finance is that others will hijack common terms like front running and redefine them. The SEC has the job of handling this in the US and I cited them. You cited Wikipedia. I'm happy with using the definition that the SEC uses. Maybe someone somewhere now uses wash trading to mean raising the prices but if you actually think about the name its meant to mean nothing changes after the trade, meaning no price change. Given we're talking about the NYSE and therefor the SEC, i'm happy using their definition vs the wikipedia definition but I understand why you came to your opinion. Thanks for sharing!!

How much of the movement in NYSE is wash trading?

onlyrealcuzzo 3y ago

Considering it's illegal and monitored - no where near as much. It's obviously not 0.

scotty79 3y ago
If two independent entitities are trying to sequentially wash trade to inflate the price it no longer looks like a wash trade, but like two entities suddenly finding asset more valuable and bidding for it with each other as it appreciates. So way more than 0.

crazygringo 3y ago

Exceedingly little, considering it's illegal, and the NYSE employs technological measures to prevent it as well.

chollida1 3y ago

> How much of the movement in NYSE is wash trading? Well by definition wash trading results in no change of price, so none of the movement in the NYSE is a result of wash trading. Further more, wash trading is illegal and every order entered into the CLOB is recorded as to which trader sent it so its trivial it detect if a trader did wash trade.

crazygringo 3y ago
Wash trading can absolutely be used to manipulate prices, that's one of its purposes -- to sell+buy at increasingly higher prices to attempt to make something temporarily appear more valuable than it otherwise would be. I'm not going to comment on whether that's realistically achievable on the NYSE specifically, but it's definitely not true that wash trading doesn't change prices "by definition". To the contrary -- that's one of the reasons it was made illegal.
- chollida1 3y ago
  Wash trading by definition means nothing changes, the price remains constant as you buy and sell for the same price. Wash trading can not change the price of a stock. It's use is to increase volume. From teh SEC who over sees this. If you aren't happy with their definition you can take it up with them but you don't get to redefine the term for your own use;) https://www.sec.gov/files/litigation/aljdec/id78grl.txt https://www.sec.gov/files/litigation/aljdec/id78grl.txt > -[1]- Wash trades are purchases and sales of securities that match each other in price, volume and time of execution, and involve no change in beneficial ownership.
  - crazygringo 3y ago
    That's incorrect. Because you're missing the part that in certain circumstances, when you are performing both the sale and the purchase, you can choose whatever sale price you want. E.g. most recent genuine market trades were at $0.50, but you offer for sale at $0.60 and buy your offer at $0.60. Then do the same at $0.65 and $0.70. Then it looks to outsiders like the price really is going up, and that can be used for all sorts of things. You can look it up in Wikipedia if you want, which explicitly gives one of the motivations for wash trading as: "- Falsely driving up asset prices by fabricating trade history with increasing prices" [1] I'm not redefining anything at all. ;) (It is also used for increasing volume, but that's not the only motivation.) [1] https://en.wikipedia.org/wiki/Wash_trade https://en.wikipedia.org/wiki/Wash_trade
    - chollida1 3y ago
      I mean, one thing i've learned about finance is that others will hijack common terms like front running and redefine them. The SEC has the job of handling this in the US and I cited them. You cited Wikipedia. I'm happy with using the definition that the SEC uses. Maybe someone somewhere now uses wash trading to mean raising the prices but if you actually think about the name its meant to mean nothing changes after the trade, meaning no price change. Given we're talking about the NYSE and therefor the SEC, i'm happy using their definition vs the wikipedia definition but I understand why you came to your opinion. Thanks for sharing!!