Naked Open-Market Manipulation and Its Effects

Abstract

More than 80 years after US federal law first addressed stock market manipulation, there is still dispute about manipulation law’s foundational principles; this chapter aims to provide clarity by offering an analytical framework for understanding a specific manipulation. There has been a sharp split among the federal circuits concerning manipulation law’s central question: Can trading activity alone ever be considered illegal manipulation? Economists and legal scholars do not agree on whether manipulation is possible in principle, let alone on how to address it properly in practice. The framework offered by this chapter aims to help clarify federal law and may guide regulators in successfully prosecuting financial law’s most intractable wrong. We draw on the tools of microstructure economics and the theory of the firm to provide an analysis of a particular form of manipulation, identify who is harmed by it, and evaluate the social welfare effects.

Globalization of White-Collar Crime: Far and Beyond National Jurisdictions

“…Hence, American model of enforcing lawfulness and integrity in its stock market can serve as both an example and a source of valuable experience for the countries with emerging markets. Additionally, American legal and economic scholars have elaborated an impressive body of scholarship on the issues of stock market functioning as well as market fraud (Fox et al, 2018).…”

A Survey on Stock Market Manipulation Detectors Using Artificial Intelligence

“…While exploring stock market manipulation in both developed and emerging stock markets, Baker et al [24] explained that stock market manipulation involves various aspects, such as trading frequency, trading volume, order size, and stock price fraction magnitude. Their argument is further supported by Fox et al [25] who categorized stock market manipulation into two broad categories: open market or misstatement manipulations. Open market manipulation occurs via fictitious trading, while misstatement manipulation is an information-based manipulation whereby a trader creates a materially false statement to push down a stock price.…”

MEV on Ethereum: A Policy Analysis

“…74 See, e.g., Sebastian Bürgel, DERP Example 3: Uniswap MEV, (2022), https://medium.com/hoprnet/derp-example-3uniswap-mev-c2a8d3417c8 against those orders. 75 A "DeFi PFOF internalizer" can extract MEV from transactions in a various ways, not only in the context of asset swaps (trades), but also, e.g., in other uses of smart contracts, like NFT mints. Unlike in traditional PFOF, it is relatively rare for an MEV extractor to be a counterparty in a trade from which she is extracting MEV (although this arguably happens in justin-time liquidity provision), 76 due to the use of automated market makers in DeFi.…”