What is 'Corner'

To corner is the act of obtaining enough controlling interest or ownership within a single security so that manipulation of price can occur. It can also refer to a rare situation occurring in commodity markets wherein the quantity of underlying securities and commodities available are exceeded by the commitments of delivery quantities on future contracts.

BREAKING DOWN 'Corner'

To corner means that an individual or group of individuals have established a major degree of control over a specific security or area of the market.

When someone is said to have cornered the market, he or she has gained significant power over the manipulation of quantity and price. In other words, the obligations on future contracts to deliver a particular commodity greatly outweigh the actual amount of the commodity available. For example, a freak tornado sweeping through Hawaii and killing all pineapple crops would result in a corner. The tornado would drastically reduce the quantity of pineapples available for delivery against the delivery obligations of future contracts that were previously created.

The Securities and Exchange Commission and Commodity Futures Trading Commission regulate and monitor activities involving securities and commodities markets. Those entities are responsible for preventing and in some cases prosecuting attempts to corner the markets in those areas if those actions involve any violations of applicable laws.

The Commodities Exchange Act prohibits an individual from cornering or attempting to corner any commodity in interstate commerce, specifically by means of communicating false, misleading or inaccurate information. Violation of this statute is a criminal offense that could constitute a felony which is punishable by a prison sentence and a significant fine.

Corner as part of common lingo

The term “corner” is now often used in a slang context in a positive or complimentary way to indicate that a person or entity has dominated a territory or mastered a certain area. However, in an investing context and various other situations, people sometimes view this term with a negative connotation, as many people consider it to be an unfair practice or a way to gain an advantage through negative means, depending on the circumstances.

There are numerous theories about the origins of the phrase corner the market. Some people believe it was inspired by a strategy used in boxing in which one fighter backs their opponent into a corner, essentially forcing someone into a position from which there is no easy way out. In an investing context, the word could represent the fact that the market has been backed into a corner and is unable to move around to find buyers and sellers.

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