Pairing Off

AAA

DEFINITION of 'Pairing Off'

An illegal practice of a brokerage firm offsetting short and long positions between house accounts by collecting cash payments without physically delivering the securities.

INVESTOPEDIA EXPLAINS'Pairing Off'

Pairing off can occur only by brokerage firms colluding with one another. Proper settlement of short and long positions require the delivery of physical securities be made within three business days after the transaction. By settling these positions with cash payments, the brokerage firms are able to manipulate the market by trading non-existent shares and circumventing settlement regulations.

RELATED TERMS
  1. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  2. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  3. Parking

    A form of kiting shares that a brokerage commits by moving long ...
  4. Clearing

    The procedure by which an organization acts as an intermediary ...
  5. Kiting

    1. The act of misrepresenting the value of a financial instrument ...
  6. Clowngrade

    An upgrade or downgrade of a security for reasons considered ...
Related Articles
  1. Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  2. Personal Finance

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from unscrupulous practices means knowing how to spot them.
  3. Active Trading Fundamentals

    The Short And Distort: Stock Manipulation In A Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  4. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  5. Investing Basics

    Is Your Broker Churning Your Account?

    Is your broker churning your account to generate fees? Here's how to know and what recourse you have.
  6. Investing Basics

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
  7. Professionals

    What Does a Broker Do?

    In the investment world, broker is a term used to refer to an individual or entity that helps facilitate trading in financial securities.
  8. Professionals

    Are You Sure You Aren't Ponzi Scheme-Susceptible?

    Anyone can be a victim of a Ponzi scheme — even the most financially literate. Here's how to avoid the next Madoff.
  9. Professionals

    7 Cybersecurity Tips for Advisors

    The digital age has created a new breed of thief who can break into client files at any time, but there are ways to minimize risk exposure.
  10. Professionals

    Tips for Protecting Clients from Scammers

    Predators now have more access to vulnerable clients than ever before; advisors should communicate with clients to better spot potential scams.
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  3. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  4. What is the cost of a share purchase?

    When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged ... Read Full Answer >>
  5. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  6. What is the difference between fee-based advisors and commission-based advisors?

    The difference between a fee-based adviser and a commission-based adviser is that the former collects a flat fee for investment ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!