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. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  2. Painting The Tape

    A form of market manipulation whereby market players attempt ...
  3. Mutual Fund Timing

    A legal, but frowned-upon practice, whereby traders attempt to ...
  4. Churning

    Excessive trading by a broker in a client's account largely to ...
  5. Wash Trading

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

    An unethical (if not illegal) practice of a hedge fund purchasing ...
Related Articles
  1. Top 8 Ways Companies Cook The Books
    Personal Finance

    Top 8 Ways Companies Cook The Books

  2. The Biggest Stock Scams Of All Time
    Investing

    The Biggest Stock Scams Of All Time

  3. Understanding The Income Statement
    Forex Education

    Understanding The Income Statement

  4. Business Owners: Avoid Enron-esque Retirement ...
    Options & Futures

    Business Owners: Avoid Enron-esque Retirement ...

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center