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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 …


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