Series 66: Market Manipulation

Market Manipulation

For the average investor, manipulating the stocks of the Dow Jones Industrial Average may be virtually impossible due to the sheer number of trades taking place each day and the large number of analysts covering each company. But rather substantial swings in the prices of thinly traded “penny stocks” can be accomplished with a much smaller amount of volume or a well-timed rumor.

This doesn’t mean that professionals or their clients need to be overly concerned about accidentally manipulating the market through their transactions or casual discussions. It just means that they need to avoid all attempts of doing these in the hope of affecting the price of a security. Regulators want the markets to operate freely, based on honest supply and demand. The moment that gets interfered with and someone introduces artificial forces to affect prices, regulators have a problem.

Five particular situations