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Market manipulation tactic which creates the illusion of demand From Wikipedia, the free encyclopedia
Wash trading is a form of market manipulation in which an entity simultaneously sells and buys the same financial instruments, creating a false impression of market activity without incurring market risk or changing the entity's market position. Wash trading has been deemed illegal in most jurisdictions. For instance, the United States enacted the Commodity Exchange Act (CEA) in 1936[1] to prohibit wash trading. To comply with regulations, most regulated stock exchanges have implemented protective measures, such as Self-Trade Prevention Functionality (STPF) on the Intercontinental Exchange (ICE).[2] However, in some unregulated emerging markets, such as cryptocurrency,[3][4][5] the practice is common.
Various practitioners engage in wash trading for several reasons. Some examples include:
[8] Several prevalent wash trading practices include:
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