Market Manipulation Research Articles

PUMP AND DUMP CRIMINAL OVERVIEW ACCORDING TO CAPITAL MARKET LAW NO. 8 YEAR 1995

This study aims to look at the Juridical Review of the Pump and Dump crime in capital market transactions on the Indonesia Stock Exchange based on the Capital Market Law. The main problem that the author discusses and analyzes in this research is the form of the Pump and Dump crime in capital market transactions on the Indonesia Stock Exchange based on the Capital Market Law and the proof of the Pump & Dump crime in the capital market (Case Study of TAXI and LUCK Issuers). The research method is a normative legal research method with a law approach and a case approach. Based on the analysis and provisions of the Capital Market Law, the author concludes that the Pump and Dump crime in capital market transactions on the Indonesia Stock Exchange, can be seen in its form based on certain patterns and methods. The form of the pump and dump pattern and method is in accordance with the elements of market manipulation as stipulated in the provisions of Articles 90 to 93 of the Capital Market Law. To prove that a pump and dump crime has occurred, evidence can be used as regulated in the Criminal Procedure Code.

How does the stock market manipulation affect the emerging market in developing countries?

Due to the expansion of stock markets in developing countries and the large number of buyers and sellers seeking to benefit from their dealings, manipulation has become more sophisticated. Forgers may influence the stock market by creating a false impression, misleading investors, and convincing them to buy their stocks. Because it could make investors anxious about the market, market manipulation serves as a barrier to market depth. People must be aware of these challenges, take additional measures, and abide by certain norms and special legislation in order to deal with this issue without impairing investors' judgment and exposing them to deceptive pricing.

How Elon Musk's Twitter activity moves cryptocurrency markets

Elon Musk, one of the richest individuals in the world, is considered a technological visionary and has a social network of over 110 million followers on social media platform Twitter. He regularly uses his social media presence to communicate on various topics, one of which is cryptocurrency, such as Bitcoin or Dogecoin. Using an event study approach, we analyze to what extent Musk's Twitter activity affects short-term cryptocurrency returns and volume. In other words, we investigate whether cryptocurrency markets exhibit a “Musk Effect”. Based on a sample of 47 cryptocurrency-related Twitter events, we identify significant positive abnormal returns and trading volume following such events. However, we discover that on average, price effects are only significant for Dogecoin-related Tweets but not for Bitcoin. This is because regarding the latter, the significant price effects of positive and negative news cancel each other out. Considered in isolation, non-negative tweets from Musk lead to significantly positive abnormal Bitcoin returns. Individual tweets do raise the price of Bitcoin by 16.9 % or reduce it by almost 11.8 %. Our study shows the significant impact that the social media activity of influential individuals can have on cryptocurrencies. This suggests a conflict between morals, risks of market manipulation and investor protection.

Decentralizing components of electronic markets to prevent gatekeeping and manipulation

The landscape of electronic marketplaces has been monopolized by a handful of market operators that have accumulated tremendous power during the last decades. This trend raises concerns about fairness and market manipulation by these operators acting as gatekeepers. These concerns have recently been outlined in the EU Digital Markets Act (DMA).In this work, we highlight how technological logic of separation understood in the framework of decentralization can address manipulation concerns. As a first step, we devise a reference model of electronic marketplaces, containing six functional components, and outline how control over these components enables different manipulative practices by gatekeepers. We identify two dimensions of decentralization that can counterbalance monopolistic abuse of marketplace components. We then present a software implementation of our reference model and demonstrate how decentralization and unbundling of market components can alleviate manipulation and fairness concerns. We end our work with a review of related approaches and conclude that modular and interoperable marketplaces can enable an open ecosystem of fair electronic markets envisioned by the DMA.

Perceptions, Problems and Prospects of Contract Farming: Insights from Rice Production in Vietnam

Contract farming (CF) is considered a relevant measure to tackle the challenges to sustainable development from the serious effects of climate change and the COVID-19 pandemic. Despite the positive effects of CF, low participation and frequent breaching of contracts remain challenges. Several studies have mentioned the advantages and disadvantages of CF but little is known about their rankings and perceptions of CF from the involved stakeholders. To address these evidence gaps, this study surveys stakeholders, ranks the perceived advantages and disadvantages of CF, and investigates the problems and prospects of CF. The study utilizes data triangulation from three stakeholders: farmers, contractors, and government policymakers. Data include twenty-seven key informant interviews (KIIs), seven focus group discussions (FGDs), and two participant observations (POs). Data are analyzed by a mixed method approach with methods of constant comparison, content analysis, and Rank Based Quotient (RBQ). The results indicate that while the main perceived advantage of CF relates to the outputs, the top three disadvantages of CF relate to issues likely to cause a breach of contract. The results also reveal that there seems to be a difference in the perception of CF’s advantages and disadvantages among the stakeholders. Despite the problems such as breaching several contract terms, mistrust, or market manipulation from the local collectors, CF in Vietnam is overall promising.

Discussion on the Influence of Stock Market opening on Market Manipulation

The stock market is an emerging market formed after China's reform and opening up. It plays a very important role in the development of our social economy. As an information intensive market, the stock price is very sensitive to the change of information. In order to make the stock market in a more fair and true state, relevant information needs to be transmitted to investors in a timely and accurate manner. However, in the actual stock market, relevant stock information cannot be disclosed to investors in a timely and accurate manner, which leads to an unfair stock investment environment and is not conducive to the sustainable and healthy development of the stock market. However, the gradual opening of the stock market in recent years has had an important impact on the manipulation of the stock market. Based on this, this paper chooses the impact of the opening of the stock market on market manipulation to study, in order to provide some reference for the follow-up research.

Analyzing Market Manipulation in Kids and Consequential Parental Guilt from the Denial of Advertised Products

Analyzing Market Manipulation in Kids and Consequential Parental Guilt from the Denial of Advertised Products

Децентралізовані фінанси в сучасній фінансовій системі: розвиток та ризики

The article highlights analogues of traditional financial instruments - decentralized financial services (DeFi), their protocols and essence, it also explores the spheres and types of activities, crypto-financial operations, defines the concept of decentralized finance and reveals the essence of blocked capital and market making. Concepts and prospects for the development of decentralized stablecoins and stable assets, their interaction, disintermediation function and decentralization are considered. Current risks associated with the use and adoption of DeFi areanalyzed, including market manipulation, wrong incentives, excessive short-termism, systemic risks, fraud and money laundering issues. Implementation of a risk-oriented approach in the context of combating money laundering and terrorist financing (AML/CFT) by national state supervisory and law enforcement agencies and enterprises involved in activities on the virtual assets market, is a mechanism for preventing threats and developing a legislative framework for regulation crypto market and interaction on these issues at the international level.

A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets

We investigate the puzzle of widespread participation in cryptocurrency pump-and-dump manipulation schemes. Unlike stock market manipulators, cryptocurrency manipulators openly declare their intentions to pump specific coins, rather than trying to deceive investors. Puzzlingly, people join in despite negative expected returns. In a simple framework, we demonstrate how overconfidence and gambling preferences can explain participation in these schemes. Analyzing a sample of 355 cases in 6 months, we find strong empirical support for both mechanisms. Pumps generate extreme price distortions of 65% on average, abnormal trading volumes in the millions of dollars, and large wealth transfers between participants.

Game Theory and its Impact on Economic Profit in the Electric Power Market

Due to the creation of electricity markets, which are characterized by the competitiveness among participants, particularly in the generation of electric energy, this led to a considerable increase in the number of energy producers. However, in order to maximize their profit, some of them submit their bids beyond competitive prices, incurring in some irregularities in the market. Therefore, this paper analyzes the participants strategy using game theory, because the electricity market is a conflict scenario, in which participants interests are at play. For this purpose, a bilevel optimization model was employed, incorporating a cooperative game theory methodology known as incomplete information gaming, which maximizes the profit of the producers through an optimal strategy and minimizes the systems operating costs. The results obtained in this paper show that, using the game methodology, it is possible to achieve a positive impact on participants profit. However, it is necessary for the participants to be rational and logical when they make their bids. Moreover, the results indicate that this methodology can be used to identify irregularities in the market, such as market manipulation and market power indicators in the participants.

How Does Economic Policy Uncertainty Affect Momentum Returns? Evidence from China

Economic policy uncertainty has been identified as a new macroeconomic risk factor that harms the stock market’s profitability. This paper examines the impact of the Chinese EPU levels on one of the most famous financial anomalies—momentum returns. A new EPU index based on mainland China newspapers is used to obtain more accurate EPU–momentum relations. We selected 3958 Chinese listed companies’ stocks from 2011 to 2022 to establish time-series (TSM) and returns signal momentum strategies (RSM). Although the momentum effect in the Chinese stock market is weak, the EPU-based dynamic-threshold RSM strategies yield significant positive excess returns: eight times more excess returns than conventional fixed-threshold strategies. We used the ordinary least squares regression model (OLS), and the event study method only identified robust negative EPU–momentum relationships in the Chinese stock market during high-EPU stages. Surprisingly, the negative relationship between EPU and momentum returns turns positive during expansion cycles. We explain this phenomenon as follows: expansions increase Chinese investors’ confidence, and uncertainties reduce market manipulations.

Short-selling restrictions and financial stability in Europe: Evidence from the Covid-19 crisis

In March 2020, six European countries imposed temporary short-selling bans to prevent further stock price declines, to reduce volatility, and to ensure financial stability during the Covid-19 pandemic, whereas other countries abstained from implementing these restrictions. We examine the effects of these regulatory interventions on stock returns and market quality for major European countries with and without bans. Our results reveal that restricting short selling did not stabilize stock prices but adversely affected market liquidity, as reflected in wider bid-ask spreads and lower turnover. In addition, smaller stock markets and smaller firms suffered more from the deterioration in market quality. Using logit regressions, we investigate the determinants for the probability that a country would impose short-selling restrictions. The results suggest that countries with weaker economies, lower fiscal capacity, less financial development, and stricter lockdown measures were more likely to adopt a ban. Overall, short-selling bans during the Covid-19 crisis negatively affected market quality and consequently regulators in general should abstain from implementing such restrictions in the future.

Problems of Initiating Criminal Cases on Market Manipulation and Misuse of Insider Information

The authors analyze the grounds for initiating criminal cases on market manipulation and misuse of insider information, as well as the specific features of preliminary verification of reports on the abovementioned crimes by the bodies of preliminary investigation. The Bank of Russia, which uncovers the cases of legislative violations in the sphere of economics, experiences difficulties in stopping the actions of unscrupulous persons due to legal and organizational problems arising after turning to the law enforcement bodies. Although there is a certain legislative basis for cooperation between the Bank of Russia and the bodies of preliminary investigation, the latter believe that the information provided by the chief financial agency of the country does not contain sufficient data indicating the elements of crimes. According to the authors, this issue requires the regulation of not only organizational, but also procedural problems associated with collecting evidence of illegal economic activities. They propose an algorithm of actions to collect information necessary and sufficient for making a decision on the initiation of a criminal case on market manipulation and misuse of insider information that is based on the united efforts of three bodies - the Central Bank of the Russian Federation, the Russian Ministry of Internal Affairs and the Investigative Committee of Russia.

Opening price manipulation and its value influences

We investigate how opening price manipulation influences market behaviors and investors' returns. Analyzing direct evidence comprising 87 opening price manipulation cases, and indirect evidence consisting of 19,003 suspected cases detected by an opening price manipulation identification model that we construct, we examine the impact of manipulation on mispricing, investors' welfare, trading activity and price volatility. Our results indicate that manipulated stocks experience significantly lower returns and a higher probability of price reversal after manipulation. Investors who purchase manipulated stocks at their opening price, or the volume-weighted average price, on the manipulation day make losses on their investments. Further, manipulation increases market trading activity and price volatility due to the influx of retail investors. Our additional analysis demonstrates that enhancing the intensity of external supervision and internal governance can mitigate mispricing caused by opening price manipulation. Our study provides novel evidence of the economic consequences of open market manipulation and policy implications for governments and regulators to develop effective supervisory processes to reduce manipulation and mitigate its impact on efficient markets.

미국 증권집단소송의 최근 현황과 주요 사례 분석

Since the Securities-Related Class Action Act(hereafter "the Act") was effected on January 1 2005, total nine securities class actions were filed. It means that the securities class action under the Act has not been utilized actively to claim for damages of numerous small investors as the purpose of the Act, considering that the illegal market manipulation activities have increased as the scope of securities market has been expanded during the past ten years. This paper presents suggestion to improve the current regulations related to the securities class action by studying the recent trends and important cases in securities class action litigation in the U.S. which was the legislative model of the Act. The recent trends in securities class action litigation in the U.S. are analyzed in detail by various criteria, such as annual number of class action filings, change of market value, cause of allegation, percentage of U.S. exchange-listed companies subject to filings and change in the number of companies listed on U.S. exchange, status of filings such as being dismissed, settled, or trial verdict, time to resolution, status of motions for class certification and time from first complaint filing to class certification decision, number and size of settlement. This paper also deeply analyzes facts, issues, litigation process, outcomes and suggestions of important securities class cases - Enron case, WorldCom case, Basic Inc. v. Levinson, Dura Pharmaceuticals, Inc. v. Broudo, Tellabs, Inc. v. Makor Issues & Rights, Ltd. - which provide significant standards to apply the regulations for the securities class action.

AI trading and the limits of EU law enforcement in deterring market manipulation

As in many other sectors of EU economies, ‘Artificial Intelligence’ (AI) has entered the scene of the financial services industry as a game-changer. A growing number of investment firms have been adopting AI, and particularly ‘Machine Learning’ (ML) methods, within the ramification of algorithmic trading. While AI/ML trading is expected to deliver several efficiency gains for capital markets, it also brings unprecedented risks for their safety and integrity due to some of its technical specificities and related additional uncertainties. With a focus on new and emerging risks of AI-driven market manipulation, this study critically assesses the ability of the EU anti-manipulation law and enforcement regime to achieve credible deterrence. It argues that AI trading is currently left operating within a (quasi-)lawless market environment with the ultimate risk of jeopardising EU capital markets’ integrity and stability. It shows how ‘deterrence theory’, as a normative framework, can allow us to think of innovative solutions to fix the many shortcomings of the EU legal framework in the fight against AI-driven market manipulation. In concluding, this study suggests improving the existing EU anti-manipulation law and enforcement regime with a number of policy proposals. Namely, (i) an improved, ‘harm-centric’ definition of manipulation; (ii) an improved, ‘multi-layered’ liability regime for AI-driven manipulation; and (iii) a novel, ‘hybrid’ public-private enforcement institutional architecture through the introduction of market manipulation ‘bounty-hunters’.

Counteracting the practices of sham transactions: market manipulations and using insider trading

Objective: to consider approaches to countering the use of unfair transaction practices, in particular, market manipulations and insider trading within the functions and powers of the Bank of Russia.Methods: the work used a combination of methods of dialectical, empirical, comparative and logical research.Results: approaches to the definition of market manipulation are established, the main methods of market manipulation are considered. The activity of the Bank of Russia to identify unfair practices in the Russian financial market was studied; the amount of market manipulation cases was identified and analyzed. The approaches were shown, which exist within the framework of the financial market development strategy to counteract the use of unfair transactions practices, including the practices of market manipulation and the use of insider trading; promising areas of development in the specified areas were identified.Scientific novelty: the article consolidates the dynamics of the activities of the Bank of Russia, the probable problem areas and the potential in the field of countering the unfair transactions practices, including market manipulation and insider trading; the amount of identified cases of market manipulation is analyzed.Practical significance: the main provisions and conclusions of the article can be used in the further analysis of countering the use of unfair behavior practices in the financial market and in forming a glossary.

A Look into ‘Market Manipulation’ With a Focus on Pump and Dump Schemes and Initial Considerations for Responding to a Regulatory Query

Public confidence in the fairness of markets enhances their liquidity and efficiency. Market manipulation harms the integrity of securities and derivatives markets by distorting prices, and creates an artificial appearance of market activity. Market manipulation damages the interests of retail and institutional investors alike by disrupting the smooth functioning of financial markets. This leads to a lack of trust in the fairness of the capital markets, resulting in higher risk premiums and reduced investor participation. This article provides an analytical framework (covering the United States, Switzerland, Singapore and the United Kingdom) for understanding select market manipulation behaviour with a focus on pump and dump schemes; and how to craft a preliminary defence strategy when a query is received from a markets regulator. Some tools for combating crossborder fraud and misconduct that can weaken global markets and undermine investor confidence, have been discussed. corporate governance, comparative law, shareholder primacy

Manipulation of the Bitcoin market: an agent-based study

Fraudulent actions of a trader or a group of traders can cause substantial disturbance to the market, both directly influencing the price of an asset or indirectly by misinforming other market participants. Such behavior can be a source of systemic risk and increasing distrust for the market participants, consequences that call for viable countermeasures. Building on the foundations provided by the extant literature, this study aims to design an agent-based market model capable of reproducing the behavior of the Bitcoin market during the time of an alleged Bitcoin price manipulation that occurred between 2017 and early 2018. The model includes the mechanisms of a limit order book market and several agents associated with different trading strategies, including a fraudulent agent, initialized from empirical data and who performs market manipulation. The model is validated with respect to the Bitcoin price as well as the amount of Bitcoins obtained by the fraudulent agent and the traded volume. Simulation results provide a satisfactory fit to historical data. Several price dips and volume anomalies are explained by the actions of the fraudulent trader, completing the known body of evidence extracted from blockchain activity. The model suggests that the presence of the fraudulent agent was essential to obtain Bitcoin price development in the given time period; without this agent, it would have been very unlikely that the price had reached the heights as it did in late 2017. The insights gained from the model, especially the connection between liquidity and manipulation efficiency, unfold a discussion on how to prevent illicit behavior.

Application and Criminalization of the Artificial Intelligence in Business: Recommendation to Counter the Regulatory Challenges

Artificial Intelligence (AI) is playing a significant role in our social and daily life for technological development. The efficient integration of AI into business organizations or firms is improving performance and efficiency on a significant scale. Nowadays, artificial intelligence (AI) is assisting criminal activities or committing crimes through autonomous activity related to business, e-commerce, and market manipulation. AI could be used to aid criminal activity or, in certain situations, a mistake has resulted in criminal activity and most of the fields lack strong legislative safeguards due to the regulatory challenges imposed by the special nature of AI-Crime (AIC). The paper has examined the application and criminalization of AI in business and firm management. As we will have to strengthen the legislation for managing, preventing, and punishing AI-based business-related crimes, the last segment of the paper has suggested recommendations to counter the regulatory challenges.