BROWSE

Painting The Tape

What does 'Painting The Tape' mean

Painting the tape is a form of market manipulation whereby market players attempt to influence the price of a security by buying and/or selling it among themselves so as to create the appearance of substantial trading activity in the security. Painting the tape is an illegal activity that is prohibited by the Securities and Exchange Commission because it creates an artificial price for a security. The term originated in a bygone era when stock prices were largely transmitted on a "ticker tape."

Explaining 'Painting The Tape'

Two common objectives among market manipulators of painting the tape are to lure unsuspecting investors into a security, or achieve a high closing price for it.

Unusual trading volume in a security may attract investors to it. Cabals of market manipulators who have painted the tape in a security generally expect to make significant profits by offloading their holdings in it - which are usually acquired at much lower prices - to investors unaware of the stock manipulation. These investors are literally left "holding the bag" once the manipulation ceases and the stock declines steeply in price.

High closing activity attempts to create an artificial price for a security by boosting its price substantially at market close, since closing prices are widely reported in the media and are closely watched by investors. Since most portfolios and securities are valued on the basis of their closing prices, manipulators use this tactic to achieve a higher market value for their holdings rather than their intrinsic worth.


Further Reading


Painting the tape: Aggregate evidence
www.sciencedirect.com [PDF]
… This trading behavior, sometimes referred to as “painting the tape”, causes a price impact which … et al., 2002 MM Carhart, R. Kaniel, DK Musto, AV ReedLeaning for the tape: evidence of … of poor quality: evidence from the mutual fund industry. Journal of Law and Economics, 35 (1 …

A taxonomy of financial market manipulations: establishing trust and market integrity in the financialized economy through automated fraud detectionA taxonomy of financial market manipulations: establishing trust and market integrity in the financialized economy through automated fraud detection
link.springer.com [PDF]
… This trading behavior, sometimes referred to as “painting the tape”, causes a price impact which … et al., 2002 MM Carhart, R. Kaniel, DK Musto, AV ReedLeaning for the tape: evidence of … of poor quality: evidence from the mutual fund industry. Journal of Law and Economics, 35 (1 …

The Economic Humanities and the History of Financial AdviceThe Economic Humanities and the History of Financial Advice
academic.oup.com [PDF]
… This trading behavior, sometimes referred to as “painting the tape”, causes a price impact which … et al., 2002 MM Carhart, R. Kaniel, DK Musto, AV ReedLeaning for the tape: evidence of … of poor quality: evidence from the mutual fund industry. Journal of Law and Economics, 35 (1 …

Financial market misconduct and agency conflicts: A synthesis and future directionsFinancial market misconduct and agency conflicts: A synthesis and future directions
www.sciencedirect.com [PDF]
… This trading behavior, sometimes referred to as “painting the tape”, causes a price impact which … et al., 2002 MM Carhart, R. Kaniel, DK Musto, AV ReedLeaning for the tape: evidence of … of poor quality: evidence from the mutual fund industry. Journal of Law and Economics, 35 (1 …

A systematic framework for the analysis and development of financial market monitoring systemsA systematic framework for the analysis and development of financial market monitoring systems
ieeexplore.ieee.org [PDF]
… This trading behavior, sometimes referred to as “painting the tape”, causes a price impact which … et al., 2002 MM Carhart, R. Kaniel, DK Musto, AV ReedLeaning for the tape: evidence of … of poor quality: evidence from the mutual fund industry. Journal of Law and Economics, 35 (1 …



Q&A About Painting The Tape


How can unusual trading volume attract investors?

Unusual trading volume can attract investors because they may believe that there is something special about this stock that makes it worth investing in. This may be true if there has been no previous unusual trading activity, but not if there has been previous unusual trading activity. Investors need to be aware that sometimes unusual trading volume may just mean that someone wants them to buy or sell this stock at any cost, even though they know nothing about its value or future prospects. They should always do their own research before making any investment decisions based on what they see in news reports or hear from others about stocks with which they are unfamiliar. ""

How does painting the tape differ from other forms of market manipulation?

Painting the tape differs from other forms of market manipulation because it creates an artificial price for a security.

Why do people paint the tape?

Market manipulators paint the tape to lure unsuspecting investors into a security or achieve a high closing price for it.

What is painting the tape?

Painting the tape is a form of market manipulation whereby market players attempt to influence the price of a security by buying and selling it among themselves so as to create the appearance of substantial trading activity in the security.

What are two common objectives among market manipulators who paint the tape?

The two common objectives are to make significant profits by offloading their holdings in it and creating an artificial price for a security.