The Dark Arts of Market Abuse: 15 Tactics Used by Rogue Traders

As trading volumes soar and financial crimes grow more sophisticated, trade surveillance systems are essential to helping institutions stay ahead of market manipulation. Our latest research in this area predicts that by 2029, spend on third-party trade surveillance systems will climb to $4.9 billion; from just $2.7 billion in 2025 - representing 82% growth over the next four years.

Trade surveillance systems are designed to spot a range of deceptive practices, including:

Price Manipulation

Price manipulation involves deliberately influencing the price of securities or derivatives. It can take various forms, such as:

• Spoofing: This occurs when traders place large orders they have no intention of fulfilling, to trick other participants into moving the market in a direction that benefits the manipulator.
• Layering: A form of spoofing where multiple orders are placed at different price levels to create the illusion of market depth, only for those orders to be cancelled once the price moves.
• Ramping: Traders artificially inflate the price of a security by purchasing small lots, causing the price to rise, before selling a large amount at the inflated price.
• Pump-and-dump: A manipulator hypes a security to increase its price, then sells off once the price has been pumped up, causing the value to crash.
• Squeeze: A trader acquires a large position in a security to create a supply shortage, forcing the price to rise when the information is revealed to the market.
• Bull raids: This tactic involves spreading false or misleading information about a security to drive its price up, allowing the manipulator to sell at a profit.
• Pools: Traders collude to engage in prearranged transactions, creating a false impression of market activity and driving prices up.

Circular Trading

Circular trading refers to transactions where participants trade with each other, essentially cancelling out the trade. This creates an illusion of market activity or liquidity, without any actual risk being transferred.

• Parking: Securities are sold to a buyer with the agreement that they’ll be repurchased shortly thereafter, obscuring the true owner.
• Churning: A form of wash trading done solely to generate commissions, not to affect market prices.
• Wash trades: Involves buying and selling the same financial instrument simultaneously, without any real risk or value exchange.
• Compensation trades: These are used to disguise a payment, typically in a wash trade scenario.

Improper Order Handling

Improper order handling involves unethical practices that give one party an advantage over others in the market. Common types include:

• Front-running: A trader executes a personal trade in advance of a known pending order to profit from the anticipated market movement.
• Cherry picking: A trader chooses which trades to allocate to clients based on whether they’re profitable or not.
• Triggering: A manipulator may deliberately trigger or protect stop-loss orders to benefit from market movements.
• Disclosing client orders: A trader reveals a client’s pending orders to gain an advantage by trading ahead of them or exploiting the information for personal profit.

Source: Global Trade Surveillance Systems Market 2025-2029

Download the Whitepaper: The Biggest Trade Surveillance Challenges for Compliance Teams

Read the Press Release: Trade Surveillance Systems Spend to Reach $4.9 Billion by 2029, Amid Escalating Regulatory Scrutiny