have an account?【sign in】Cross-market manipulation examples: Understanding Cross Market Manipulation in Financial Markets
barterauthorCross-market manipulation is a form of market manipulation that involves the manipulation of prices in one market to influence prices in another market. This type of manipulation can have significant consequences for investors and the overall stability of financial markets. In this article, we will explore several examples of cross-market manipulation and discuss the implications of these events for market participants.
1. Enron Corporation
One of the most high-profile cases of cross-market manipulation was the collapse of Enron Corporation in 2001. Enron was a massive energy company that had diversified its holdings into various other industries, including natural gas, electricity, and telecommunications. As the company's financial situation deteriorated, Enron executives allegedly manipulated the prices of these other assets to make the company's financial statements appear more stable. This led to a massive fraud investigation and the company's eventual bankruptcy.
2. London Interbank Offered Rate (LIBOR) scandal
In 2012, the British Financial Conduct Authority (FCA) launched an investigation into alleged manipulation of the London Interbank Offered Rate (LIBOR). LIBOR is a benchmark interest rate used to set the rates on trillions of dollars worth of financial transactions worldwide. It was found that several major banks had submitted false rates to benefit their own trading positions, which had severe consequences for market participants and the overall stability of the financial system.
3. Metals pricing
In the metals market, cross-market manipulation has also been a concern. In 2010, the Commodity Futures Trading Commission (CFTC) charged several traders with manipulating the prices of gold, silver, and platinum. The defendants were accused of using various strategies, such as pooling their positions and coordinating their trades, to manipulate the prices of these metals. This manipulation affected the prices of countless products that relied on these metals, such as jewelry, electronics, and industrial equipment.
4. Agricultural commodity pricing
In the agricultural commodity market, cross-market manipulation has also been an issue. In 2013, the U.S. Department of Justice charged several traders with manipulating the prices of soybeans, corn, and wheat. The defendants were accused of using various strategies, such as pooling their positions and coordinating their trades, to manipulate the prices of these commodities. This manipulation affected the prices of countless products that relied on these commodities, such as food and livestock feed.
Cross-market manipulation is a significant issue in financial markets, with the potential to harm investors and affect the stability of the financial system. The examples above show that manipulation can occur in various markets and involve various types of assets. Market participants must be aware of the potential for cross-market manipulation and take steps to protect themselves against the risks associated with this form of manipulation. Regulatory bodies and governments must also continue to monitor and enforce regulations against cross-market manipulation to ensure the integrity of financial markets.