Accommodation Trading

Definition of 'Accommodation Trading'


A type of trading in which a trader accommodates another by entering into a non-competitive purchase or sale order. An accommodation trade is often executed when two traders are participating in illegal trading.

Investopedia explains 'Accommodation Trading'


An accommodation trade could occur when two traders agree to exchange a stock for a price well below the market value, allowing the seller to realize a large capital loss on the shares. For example, suppose that Bill purchased stock in Company XYZ at $55 per share. With tax season coming soon, Bill decides to sell the stock to Joe for $45, even though the shares are currently trading at $60. Bill realizes a capital loss of $10 per share, which he can use to lower the taxes paid on any capital gains on other investments. After the taxes are filed, Joe sells the stock back to Bill at $45. This trade, also known as a wash sale, allows Bill to cheat the tax system, while never actually losing any value on the stock.



comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center