Is it illegal to attempt to manipulate markets in this sense?

Question

I'm not talking about things like insider trading or the pump and dump, which I know are illegal.

I'm talking about trying to manipulate other traders. For example, I have seen in forex where large players throw in orders at a support or resistance level in order to curve the trend. I have also seen level two quotes in which larger traders keep limit orders away from the traded price, but close enough so that they show up, causing traders to believe buying/selling pressure is mounting and trying to move the stock in the direction of the trade.

Are these practices illegal?

Thanks for your help.

Answer 1

Any sort of market manipulation is illegal but this depends country to country. Some of the countries are more open to law while some are very strict and closed.

Regards

Answer 2

Unlike in other markets every conscious effort to mve the market in a direction of your choice is illegal here. There are many examples to that like in India Harshad mehta scam and Ketan parekh scam one a bull and other a bear.

Answer 3

Don't listen to these other guys. It is NOT illegal. It happens every day and has little real effect consistently to a stock.

The only people it affects are those day trading the security. And those day trading the security know that "size is meant to be hit". Market makers and specialists try and "set-up" day traders so that they are "encouraged" to cover their trades into whatever size is posted which increased the volume traded in an issue, therefore increasing liquidity, and therefore helping the specialist out in providing a market for the security.

Most professional day traders can tell right off the bat if size is "legit". Real size is usually posted on the NYSE Open Book (for NYSE listed stocks) and sits at the price regardless of second by second fluctuations. If it keeps jumping around....it is usually fake. Sometimes if ECNs flash size, it is 50-50 if it is real and can be told if it is real the second it starts printing. And you usually see traders test this size often over the course of the day. It is rare that size is not hit or partially hit once it is seen on the book unless it has all been on one side of the market and the market can no longer absorb order flow in that particular direction (which causes trend reversals because of the heavy accumulation and distribution at such a time). i.e. if a stock is going up and big bids keep stepping up to accumulate.....another big bid might drive the price higher without the bid being hit because of the perception (or reality) that the stock is under heavy accumulation and people would not sell at the lower levels if there is demand for the issue. In those cases, if the size is real....it steps up/down until the market price allows is that there is enough opposing sentiment for the size to be hit.