CAMS · Question #734
A law enforcement action alleged that, over the course of two months, defendants engaged in a series of copper, gold, crude oil, and natural gas futures transactions on an electronic trading platform.
The correct answer is C. Wash trading. Wash trading is a form of market manipulation where two parties coordinate to create artificial trading activity, often for money laundering, tax fraud, or price manipulation. No real market risk is taken--transactions are simply cycled between the same parties. Creates an illusi
Question
A law enforcement action alleged that, over the course of two months, defendants engaged in a series of copper, gold, crude oil, and natural gas futures transactions on an electronic trading platform. One defendant repeatedly bought future contracts at low prices from another party and immediately sold them back at higher prices, effectively ensuring that one defendant made profits while the other took losses, even though there was no actual market risk involved. What is the name of this typology?
Options
- AShort position
- BReverse flip
- CWash trading
- DBid-ask spread
How the community answered
(35 responses)- A3% (1)
- B11% (4)
- C80% (28)
- D6% (2)
Explanation
Wash trading is a form of market manipulation where two parties coordinate to create artificial trading activity, often for money laundering, tax fraud, or price manipulation. No real market risk is taken--transactions are simply cycled between the same parties. Creates an illusion of liquidity or inflates asset prices artificially. Common in commodities, stocks, cryptocurrency, and futures markets. Red flag for money laundering: Criminals may use wash trading to layer illicit funds through financial markets.
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