What is a wash trade?

It's when brokers simultaneously buy and sell shares to give the impression that trading activity has increased for a stock. This practice is illegal as it’s trying to manipulate the market. It might falsely drive up prices and deceive other investors into buying the stock.

Where have you heard about wash trades?

In the past, brokers carried out wash trades because they earned commission from them. In 2012, a culture of wash trading was exposed at Swiss bank UBS after it was fined £940 million for its role in the Libor rigging scandal.

What you need to know about wash trades.

Regulators monitor the stock market for signs that traders are trying to manipulate it. Anyone who engages in such activity can be banned from an exchange and face legal penalties.

A fast turnaround in the amount of stock a trader holds isn’t considered wash trading, as long as the transaction creates market risk for the trader and changes their market position.

A wash trade is not the same as a wash sale , which is when a stock is rebought shortly after it’s sold to claim a loss on the sale for tax purposes.

Find out more about wash trades.

Read our definition of wash sale  to see how it differs to a wash trade.