Round-Trip Trading

AAA

DEFINITION of 'Round-Trip Trading'

An action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. Round-trip trading can be used to refer to the practice of a business selling an unused asset to another company while agreeing to buy back the same asset for about the same price. This type of market manipulation has been seen in the energy and telecom business.

INVESTOPEDIA EXPLAINS 'Round-Trip Trading'

This is a market-manipulation practice used to misrepresent the number of transactions occurring on any given day. Round-trip trading artificially inflates volume and revenues, but in reality adds no profit. Enron was a company that engaged in round-trip trading, and, by doing so, was able to increase revenues (and expenses) without changing its net income.

RELATED TERMS
  1. Wash Trading

    The process of buying shares of a company through one broker ...
  2. Late-Day Trading

    An unethical (if not illegal) practice of a hedge fund purchasing ...
  3. Volume

    The number of shares or contracts traded in a security or an ...
  4. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  5. Manipulation

    The act of artificially inflating or deflating the price of a ...
  6. Churning

    Excessive trading by a broker in a client's account largely to ...
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Investing

    The Biggest Stock Scams Of All Time

    Where there is money, there are swindlers. Protect yourself by learning how investors have been betrayed in the past.
  3. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  4. Options & Futures

    Business Owners: Avoid Enron-esque Retirement Plans

    If your business administers a retirement plan, you should recognize what's at stake.
  5. Economics

    America's Most Notorious Corporate Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  6. Investing Basics

    What are some high profile cases of companies who failed to be socially responsible?

    Learn about corporate social responsibility. Explore how Enron's lack of corporate responsibility ultimately destroyed the company and ruined many lives.
  7. Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  8. Investing Basics

    Infographic: The Unconstrained Approach

    The unconstrained approach: a global style of investing that looks at opportunities across a broad set of asset classes and markets.
  9. Investing

    What was the Mahonia company and why did it become the subject of a lawsuit?

    In 1992, J.P.Morgan went into the energy trading business by creating a venture company called Mahonia Limited. At least, that is how things appeared on paper. Mahonia was actually a type of ...
  10. Personal Finance

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center