Wash trade

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A wash trade is a trade in which there is no real change in the ownership of the securities - the buyer is also the seller or is associated with the seller. It is done to give the appearance that purchases and sales have been made with no actual risk to the buyer or seller.[1] Similar to a wash trade, a pre-arranged trade involves two parties making a trade that will be reversed later, or under an arrangement that removes the risk of ownership from the buyer. "Pooling" or "churning" can involve wash sales or pre-arranged trades executed in order to give an impression of active trading in the stock. The Commodity Exchange Act prohibits wash trading.[2]

References

  1. CFTC Glossary: wash trading. CFTC.
  2. Wash Trades. LinkedIn.