According to MAR's Commission Delegated Regulation (EU) 2016/522 of 17/Dec/2015, painting the tape is the act of entering orders or making trades that "are shown on a public display facility to give the impression of activity or price movement in a financial instrument".
Similarly, the Nasdad describes it as an "illegal practice by traders who manipulate the market by buying and selling a security to create the illusion of high trading activity and to attract other traders who may push up the price."
Having these definitions in mind, it seems that painting the tape can be considered to be one of two different practices:
- A form of wash trading, or quasi wash trading (as I defined it the post What is wash trading?), in which the manipulator artificially inflates the volume by buying and selling the same security at slightly different moments of time (and thereby never participating in both sides of a same trade);
- A form of momentum ignition, in which the manipulator artificially inflates the buy (sell) interest in order to lure other market participants to buy (sell) that security, and therefore driving the price upwards (downwards) - the difference could be that in momentum ignition, the manipulator has a more active and prolonged role in pushing up (down) the price.
Comments
Post a Comment