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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. [ABSTRACT FROM AUTHOR]

A well-managed financial market of stocks, commodities, derivatives, and bonds is crucial to a country’s economic growth. It provides confidence to investors, which encourages the inflow of cash to ensure good market liquidity. However, there will always be a group of traders that aims to manipulate market pricing to negatively influence stock values in their favor. These illegal trading activities are surely prohibited according to the rules and regulations of every country’s stock market. It is the role of regulators to detect and prevent any manipulation cases in order to provide a trading platform that is fair and efficient. However, the complexity of manipulation cases has increased significantly, coupled with high trading volumes, which makes the manual observations of such cases by human operators no longer feasible. As a result, many intelligent systems have been developed by researchers all over the world to automatically detect various types of manipulation cases. Therefore, this review paper aims to comprehensively discuss the state-of-the-art methods that have been developed to detect and recognize stock market manipulation cases. It also provides a concise definition of manipulation taxonomy, including manipulation types and categories, as well as some of the output of early experimental research. In summary, this paper provides a thorough review of the automated methods for detecting stock market manipulation cases. [ABSTRACT FROM AUTHOR]

Copyright of WISTA Wirtschaft und Statistik is the property of Statistisches Bundesamt and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

John Ratliff and his colleagues summarize and comment on recent detailed Spanish and Italian Energy Regulator decisions on market manipulation through giving false or misleading signals (coordination on matched orders, including iceberg bids, and wash trades). The cases include explanations of such practices, the related evidence relied on by the authorities to show the infringements of Article 5 of REMIT, and the defence arguments raised, including ne bis in idem. He also summarizes (with the assistance of Monica Iancu and her colleagues in Bondoc & Asociatii) a press release from the Romanian Energy Regulator, noting the many decisions it had taken between 2019 and 2022, mainly on wash trades, with some on layering and pre-arranged transactions. Some 20 market participants have been sanctioned for infringements on the wholesale electricity market; and four market participants have been sanctioned for infringements on the wholesale natural gas market. Finally, he notes two recent press releases from the Bulgarian Energy Regulator concerning market manipulation cases, one including layering and spoofing, in which seven companies were sanctioned. [ABSTRACT FROM AUTHOR]

The article analyzes whether retail investors acting together on social media are subject to federal market manipulation under the Securities and Exchange Act and U.S. Securities and Exchange Commission (SEC) Rule 10b-5.

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Purpose: The purpose of this study is to investigate market reaction to corporate governance reform pronouncements on board diversity in Kenyan listed firms. Design/methodology/approach: An event study was performed using 240 days pre-event period and an event period that consisted of 25 days pre and 25 days post the March 2016 board diversity reforms announcement in Kenya. The difference in differences (DiD) method was also used for cause–effect analysis for two years before and three years after the March 2016 board diversity reforms announcement. The outcome variable was firm value, whereas the treatment and control groups were Kenyan listed firms and deposit-taking credit unions, respectively. Findings: The event study method found cumulative abnormal returns after the date of the board diversity reforms announcement to be positive and significant. The DiD methods found a positive and significant market reaction to the March 2016 board diversity reforms announcement in Kenya. Research limitations/implications: This study was limited by the secondary data that was collected and analyzed from financial statements and stock price data from the Nairobi Securities Exchange (NSE). Financial statements have the disadvantage of being affected by the judgment and estimates of their preparers or accountants. Practical implications: Emerging markets like the NSE are vulnerable to market manipulation by insiders. Efficient stock markets are known to attract more investors who are interested in a trustworthy stock price determination mechanism. The Capital Market Authority should thus continue implementing corporate governance reforms aimed at improving the efficiency of the NSE and the trustworthiness of stock prices therein. The continued reforms thus imply better value for money for the NSE investors. Originality/value: This study makes an important contribution to literature by combining an event study and DiD analysis to assess market reaction to board diversity reform announcements in emerging markets of sub-Saharan Africa which is a concept that has not been researched before. Past studies have used event studies to investigate the efficiency status of stock markets in sub-Saharan Africa, whereas the current study used an additional method of DiD and hence contributed to literature. [ABSTRACT FROM AUTHOR]

Abstract 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.

In recent years, algorithmic-based market manipulation in stock and power markets has considerably increased, and it is difficult to identify all such manipulation cases. This causes serious challenges for market regulators. This work highlights and lists various aspects of the monitoring of stock and power markets, using as test cases the regulatory agencies and regulatory policies in diverse regions, including Hong Kong, the United Kingdom, the United States and the European Union. Reported cases of market manipulations in the regions are examined. In order to help establish a relevant digital regulatory system, this work reviews and categorizes the indicators used to monitor the stock and power markets, and provides an in-depth analysis of the relationship between the indicators and market manipulation. This study specifically compiles a set of 10 indicators for detecting manipulation in the stock market, utilizing the perspectives of return rate, liquidity, volatility, market sentiment, closing price and firm governance. Additionally, 15 indicators are identified for detecting manipulation in the power market, utilizing the perspectives of market power (also known as pricing power or market structure), market conduct and market performance. Finally, the study elaborates on the current challenges in the regulation of stock and power markets in terms of parameter performance, data availability and technical requirements. [ABSTRACT FROM AUTHOR]

Around the globe, electric power networks are transforming into complex cyber–physical energy systems (CPES) due to the accelerating integration of both information and communication technologies (ICT) and distributed energy resources. While this integration improves power grid operations, the growing number of Internet-of-Things (IoT) controllers and high-wattage appliances being connected to the electric grid is creating new attack vectors, largely inherited from the IoT ecosystem, that could lead to disruptions and potentially energy market manipulation via coordinated load-altering attacks (LAAs). In this article, we explore the feasibility and effects of a realistic LAA targeted at IoT high-wattage loads connected at the distribution system level, designed to manipulate local energy markets and perform energy storage (ES) arbitrage. Realistic integrated transmission and distribution (T&D) systems are used to demonstrate the effects that LAAs have on locational marginal prices at the transmission level and in distribution systems adjacent to the targeted network. [ABSTRACT FROM AUTHOR]

Cryptocurrencies are increasingly popular. Even people who are not experts have started to invest in these assets, and nowadays, cryptocurrency exchanges process transactions for over 100 billion US dollars per month. Despite this, many cryptocurrencies have low liquidity and are highly prone to market manipulation. This paper performs an in-depth analysis of two market manipulations organized by communities over the Internet: The pump and dump and the crowd pump. The pump and dump scheme is a fraud as old as the stock market. Now, it has new vitality in the loosely regulated market of cryptocurrencies. Groups of highly coordinated people systematically arrange this scam, usually on Telegram and Discord. We monitored these groups for more than 3 years, detecting around 900 individual events. We report on three case studies related to pump and dump groups. We leverage our unique dataset of the verified pump and dumps to build a machine learning model able to detect a pump and dump in 25 seconds from the moment it starts, achieving the results of 94.5% of F1-score. Then, we move on to the crowd pump, a new phenomenon that hit the news in the first months of 2021, when a Reddit community inflated the price of the GameStop stocks (GME) by over 1,900% on Wall Street, the world’s largest stock exchange. Later, other Reddit communities replicated the operation on the cryptocurrency markets. The targets were DogeCoin (DOGE) and Ripple (XRP). We reconstruct how these operations developed and discuss differences and analogies with the standard pump and dump. We believe this study helps understand a widespread phenomenon affecting cryptocurrency markets. The detection algorithms we develop effectively detect these events in real-time and helps investors stay out of the market when these frauds are in action. [ABSTRACT FROM AUTHOR]

Based on the OECD literature and the analysis of the cases EBSA, EPM, Electricaribe, Electrohuila and Emgesa-Efigas, the authors explore the benefits of complementarity and the problem of inconsistency that are produced by the coexistence between the Superintendency of Public Services and the Superintendency of Industry and Commerce as enforcement authorities for the promotion and protection of competition. The authors argue that the current coexistence generates inefficiencies in the functioning of the Government, a situation that could be overcome if Law 142 of 1994 is modified in the sense of equating the enforcement tools. In addition, to overcome the risk of inconsistency, it is necessary for both authorities to advance in the alternatives recommended by the OECD to improve inter-institutional coordination, such as: (i) agreements to share information; (ii) exchange of officials; and (iii) preparation of joint reports, among others. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates both coin-specific and market-based factors that drive cryptocurrency pump-and-dump schemes. It analyzes a data set comprising 1457 pump events that occurred from January 3, 2018, to January 2, 2022. Empirical findings, derived from binary cross-sectional regression models, reveal several characteristics that increase the likelihood of cryptocurrencies being pumped. These include lower market capitalization, lower trading volume, greater social media popularity, increased developer activity, and fewer exchanges trading them. Furthermore, the study employs count time-series models to examine market-based factors. The results indicate that periods of higher volatility or uncertainty are associated with an increase in pre-announced pump-and-dump activities. Additionally, the analysis shows that macroeconomic factors and specific time-related effects – such as Sundays, certain months, and the COVID-19 period – are significant in explaining the frequency of pump occurrences. Based on these findings, the article discusses several targeted recommendations. • We explore coin-specific vs market-based factors that drive pump-and-dump schemes. • We use a data set of 1457 pump events that span over 4 years. • Low market cap and volume, and social media buzz explain pump-and-dump schemes. • Higher market volatility is positively linked with pump-and-dump activities. • Macro factors, specific days, and COVID-19 impact pump frequency. [ABSTRACT FROM AUTHOR]

At the settlement time of the VIX Volatility Index, volume spikes on S&P 500 Index (SPX) options, but only in out-of-the-money options used to calculate the VIX, and more so for options with a higher and discontinuous influence on VIX. We investigate alternative explanations of hedging and coordinated liquidity trading. Tests including those utilizing differences in put and call options, open interest around the settlement, and a similar volatility contract with an entirely different settlement procedure in Europe are inconsistent with these explanations but consistent with market manipulation. Large transient deviations in prices demonstrate the importance of settlement design. [ABSTRACT FROM AUTHOR]

The article presents the results of the application of machine learning methods to identify customers prone to the use of insider information and market manipulation. The feature space was formed taking into account the specifics of the subject area. Cluster analysis techniques were used to markup data and to construct a training sample to identify features of anomalous objects. The key distinguishing features of atypical transactions were obtained and analyzed, an "atypical investor profile" was created. Ensemble algorithms of machine learning were used to build models for identifying transactions with possible misuse of insider information and signs of market manipulation. The practical significance of the study lies in the fact that the use of models will allow to effectively and timely identify atypical transactions, as well as unscrupulous investors involved in the misuse of insider information and market manipulation. The proposed approaches can be applied both in the work of the Bank of Russia and in the brokers' work, who should independently monitor the doubtful operations of their clients. [ABSTRACT FROM AUTHOR]

Theoretical background: Free float (hereinafter referred to as FF) refers to the ratio of shares held by small investors (less than 5%) to all shares in a company. FF investors are generally unrelated to each other or to major shareholders and they constantly review the company’s current stock market valuation and thus improve the stock market efficiency. This means that the higher the FF, the potentially higher liquidity and better valuation of the company’s shares. A low FF recalls the institution of protecting the rights of minority shareholders, calls into question the sense of maintaining a public company status, and raises the potential risk of incorrect valuation. The literature generally lacks studies referring to all these issues as well as FF statistics in Poland. Purpose of the article: The purpose of the article is to sum up the term “free float”, analyze FF statistics on the Polish capital market, indicate the link between FF and market liquidity, identify potential risks associated with listed companies having low FF and to determine whether it makes sense for the strategic investor to maintain public company status with low FF. Research methods: Theoretical analysis (including analysis of capital market laws) and statistical analysis. Main findings: The research confirmed that the relationship between FF and stock market liquidity is positive, but only considering FF in nominal terms. On the Polish capital market, as the nominal level of FF increases, market capitalization and trading liquidity increase largely and the average market spread decreases slightly. The article also points out important risks associated with low FF conditioning low liquidity, such as the risk of stock manipulation and the risk of incorrect company valuation. Potential areas for changing the law on squeeze-out/sell-out institutions due to the inadequacy of the FF percentage were also pointed out. [ABSTRACT FROM AUTHOR]

Whether foreign investors can play a prominent monitoring role as shareholders in emerging markets is a controversial issue. This study investigates the effect of foreign ownership on corporate real activities manipulation in China. We find that, even after correcting for the potential endogeneity issues, foreign investors help to decrease corporate real earnings management, and this effect is explained by the disciplinary and monitoring roles of foreign investors. We also find that foreign institutional investors have greater influence on real earnings management than domestic institutional investors do. Further evidence shows that foreign ownership affects firm value via real earnings management. [ABSTRACT FROM AUTHOR]

The author determines the peculiarities of privatisation processes in transformational economies compared with mature ones and considers the difference of the goal – to accelerate the development of the already existing stock market, and in fact, to create the market anew. Socio-economic transformations, privatisation of property and creation of market infrastructure are prerequisites but not a guarantee for the emergence of the domestic stock market as a specific institutional phenomenon, especially in the absence of adequate incentives for public equity. It is established that some local stock markets are degraded against the background of increasing size, globalisation, liquidity, and integration of world capital markets, including the Ukrainian one. It is stated that, unlike the neighbouring post-socialist states (firstly, Poland), the stock market has not been built in Ukraine as a basis for compelling attraction and allocation of capital. Paper substantiated that this is primarily a consequence of inefficient and protracted privatisation, mainly over-the-counter sale of shares, inconsistency of state and regulatory policy, optional iterations in the development of market infrastructure, the creation irrationality of privatised enterprises (even the smallest) exclusively in the form of open joint-stock companies, which die to their objective inability to raise public capital faced inadequate financial burden and coercion of listing on exchanges. The author identified the main problems of the Ukrainian stock market laid down during privatisation: excessively consolidated share capital structure, insecurity of minorities, meagre free-float and liquidity, conditional exchange pricing, the predominance of over-the-counter circulation of shares, etc. Emphasis is placed on the consequences of the attempt to implement the squeeze-out procedure in Ukraine. In the absence of market prices and the acquisition of control by dominant shareholders long before the legislative changes, the share buyback did not protect minorities. However, it led to significant investors’ losses, termination of circulation of shares of most issuers, even greater conditionality of indices, capitalisation and other indicators of market development. It is noted that the effectiveness of the announced state plans for the development of the stock market due to the privatisation of state property remains in doubt in the absence of prerequisites for balancing economic interests between market participants, the objectivity of pricing, incentives for public capital raising and effective institutional environment. It is concluded that in Ukraine, the focus on privatisation procedures in the stock market development has no prospects in the absence of adequate incentives for the public raising of capital.

Purpose: This study aims to analyze the practice of earnings management (EM) by the five largest banks in the Brazilian financial market through the manipulation of the loan loss provision (LLP). Methodology: The methodology used in this study recognizes (i) that the EM can result from both discretionary accounting records and actual decisions of companies and (ii) that, in the case of financial institutions, the calculation and registration of LLP do not comply with a detailed rule, but on general principles. Based on this recognition, it uses a sample composed of the five largest banks operating in the Brazilian market, in the period 2004-2019, with quarterly data, to estimate different panel specifications in order to test such as return, size and the use of financial derivatives affect the EM. Results: The research results suggest, from the identification of the random effects model, that the return and the use of derivatives have an inversely proportional influence, and that size has a proportional influence, on LLP, corroborating the thesis of the use of LLP as an instrument for earnings management by the largest Brazilian banks. Contributions of the Study: The general contribution of this study to the literature is in the discussion of LLP as a measure of earnings management by actual decisions and discretionary records in discretionary financial statements; the study also contributes to a better understanding of EM decisions in large Brazilian financial institutions. [ABSTRACT FROM AUTHOR]

Since the adoption of the SEC's Rule 10b-21 in 1988, many researchers have been concerned over the effectiveness of short sales constraints in preventing manipulative trading in the derivatives market. We analyze whether options can be used as synthetic short sale instruments to manipulate stock prices before a seasoned equity offer. Due to the existence of strict short sales constraints in the equity market and market makers' anticipation of manipulative trading, it would be very costly for a manipulator to drive stock prices down artificially either by short selling in the equity market or by using synthetic short sales in the options market. Using a sample of 237 firms that issued SEOs on the NYSE and had options listed on any U.S. options exchange from April 2002 to December 2004, we show that potential manipulators in the options market tend to use put options as a trading vehicle during the SEO's pre-offer period. The results of our empirical tests support the predictions of our model. [ABSTRACT FROM AUTHOR]

This study investigates trade-based manipulations of capital market instruments. The dataset of the study was gathered from 22 cases of manipulation in Borsa Istanbul (BIST) that occurred in the period between 2010 and 2015. We propose a machine learning approach consisting of supervised machine learning classification models to detect trade-based manipulation from the daily data of manipulated stocks. As a result of this study, supervised machine learning techniques are proven to be successful at detecting trade-based manipulations in trading networks based on the measurement methods of accuracy, sensitivity, and F1 score. We found that our proposed model has an F1 score of 91%, 95% sensitivity, and 93% accuracy in market manipulation detection. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper studies optimal index design to facilitate both hedging and alleviate illegal manipulation in a competitive equilibrium paradigm, modified to deal with manipulation. Specifically, a large trader is trading both derivatives and assets that effectively hides her trades behind the competitive market clearing mechanism. Unlike the strategic game paradigm, a volume-weighted average pricing (VWAP) index introduces basis risk and encourages manipulation because of the additional randomness in volume weight and the greater price impact enjoyed by the large trader. In contrast, an equal-weighted average pricing (EWAP) index preserves market completeness and discourages manipulation. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]