An illegal form of market manipulation where a trader simultaneously buys and sells the same financial instrument to create misleading, artificial trading activity and inflate volume figures. Wash trading generates the appearance of genuine market interest without any actual change in beneficial ownership, deceiving other market participants about the true level of demand or liquidity. In traditional securities markets, wash trading violates regulations under the Commodity Exchange Act, while in cryptocurrency markets it remains a widespread concern due to less rigorous enforcement.
Example
“The exchange was found to have inflated its daily volume by 95% through wash trading, using bot accounts that simultaneously placed matching buy and sell orders.”