Painting The Tape

A A A

DEFINITION

A form of market manipulation whereby market players attempt to influence the price of a security by buying and/or selling it among themselves so as to create the appearance of substantial trading activity in the security. Painting the tape is an illegal activity that is prohibited by the Securities and Exchange Commission because it creates an artificial price for a security. The term originated in a bygone era when stock prices were largely transmitted on a "ticker tape."

INVESTOPEDIA EXPLAINS

Two common objectives among market manipulators of painting the tape are to lure unsuspecting investors into a security, or achieve a high closing price for it.

Unusual trading volume in a security may attract investors to it. Cabals of market manipulators who have painted the tape in a security generally expect to make significant profits by offloading their holdings in it - which are usually acquired at much lower prices - to investors unaware of the stock manipulation. These investors are literally left "holding the bag" once the manipulation ceases and the stock declines steeply in price.

High closing activity attempts to create an artificial price for a security by boosting its price substantially at market close, since closing prices are widely reported in the media and are closely watched by investors. Since most portfolios and securities are valued on the basis of their closing prices, manipulators use this tactic to achieve a higher market value for their holdings rather than their intrinsic worth.


RELATED TERMS
  1. Ticker Tape

    A computerized device that relays financial information to investors around ...
  2. Digits Deleted

    A designation on an exchange's ticker tape that refers to the absence of one ...
  3. Bag Holder

    An informal investment term used to describe an investor who holds a position ...
  4. High Close

    A tactic used by stock manipulators; they make small trades at high prices during ...
  5. Fighting The Tape

    The action of placing a trade or trades that go against the ticker tape. Fighting ...
  6. Matching Orders

    The process for executing securities trades by pairing buy orders with sell ...
  7. Tape Is Late

    A situation on the trading floor where trading volume is so heavy that the real-time ...
  8. Print

    The execution of a trade. The term print originates from the ticker tape where ...
  9. Runoff

    The procedure of printing the end-of-day prices for every stock on an exchange ...
  10. Bidder

    The party offering to buy an asset from a seller at a specific price. A bidder ...
Related Articles
  1. Understanding The Ticker Tape
    Investing Basics

    Understanding The Ticker Tape

  2. Policing The Securities Market: An Overview ...
    Investing Basics

    Policing The Securities Market: An Overview ...

  3. The Short And Distort: Stock Manipulation ...
    Active Trading Fundamentals

    The Short And Distort: Stock Manipulation ...

  4. Do traders, market makers, specialists ...
    Investing

    Do traders, market makers, specialists ...

  5. Online Investment Scams Tutorial
    Economics

    Online Investment Scams Tutorial

  6. Top Companies Trading On The Toronto ...
    Investing Basics

    Top Companies Trading On The Toronto ...

  7. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

  8. What are the dangers of using the Electronic ...
    Taxes

    What are the dangers of using the Electronic ...

  9. During what time does after-hours trading ...
    Investing Basics

    During what time does after-hours trading ...

  10. Why does after-hours trading (AHT) exist?
    Investing Basics

    Why does after-hours trading (AHT) exist?

comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center