Wash Trades

Owned by Sai Man Wong
Last updated: Nov 10, 2015 by Brent Bergh

"Wash Trades" are transactions where a party individually, or in collusion with another, attempts to generate interest in a particular security, which typically trades with limited liquidity. Wash Trades may also be used to circumvent short-sale rules or manipulate pricing.

This report is intended to identify instances where traders may have inadvertently or intentionally crossed their trades or those of another party. Currently, the parameters for the report are:

  • Equities must have less than 5,000,000 shares volume on the exchange (not your instance) for that day. If daily volume is unknown, the security will be checked.  (Versions prior to 1.5.98.33 used a 3 million share thresh-hold)
  • Accounts to be checked must have profit/loss calculations enabled.
  • Executions for review must be marked "REGULAR" (i.e. journal entries, corporate actions, buy-ins and assignments will not be checked).
  • Executions must occur at the same time, have the same price, quantity and destination.

Examples (assuming XYZ is a low volume security):

Example 1. Same account

ACCOUNT1 09:30:00 Buy 100 XYZ @ $10 ARCA
ACCOUNT1 09:30:00 Sell 100 XYZ @ $10 ARCA

Example 2. Two accounts

ACCOUNT1 09:30:00 Short 100 XYZ @ $10 ARCA
ACCOUNT2 09:30:00 Cover 100 XYZ @ $10 ARCA