Ghosting is an illegal strategy where market makers manipulate the price of a stock to either increase or decrease its value. It is considered unethical and violates fair competition among investors. Penalties for breaking laws against ghosting range from fines to prison terms.
Ghosting, in financial circles, is an unethical and generally illegal strategy in which two or more market makers attempt to cause changes in the price of a particular stock. The attempt may be aimed at lowering the price of the shares or causing the value of the shares to artificially inflate over a period of time. Many countries around the world have specific laws that prohibit ghosting, and penalties for breaking those laws range from fines to prison terms.
The ghosting process typically requires a minimum of two partners to be effective. A market maker, who can be a business or an individual, will work to move the stock up or down, depending on the desired outcome. This can be accomplished in a number of ways, typically by manipulating information that makes it appear as if the price is migrating in response to prevailing market conditions, or the condition of the company issuing the shares. At the same time, the second partner will employ similar methods involving the same stock, often using strategies that obscure the first partner’s efforts or enhance the results of actions taken by the first partner.
The name of this unethical and often illegal practice comes from the fact that everything is done in a clandestine and seemingly intangible way. The general public, which includes the bulk of investors, is unaware of who is fabricating this artificial change in the value of the stocks involved. Since money makers will go to great lengths to eliminate any evidence that points to them as being involved in a pricing scheme, their presence in the strategy is much like that of a specter: hard to spot and even harder to implicate. in the recent change in stock value.
Ghosting is considered unethical because it violates the basic principle of investing that ensures fair competition among all money makers in the market. When the value of a given stock is altered, either to increase the value or decrease the value and cause investors to start selling the stock for less than its true value, it is impossible for investors to make decisions based on factual information. As a result, the ability of majority investors to earn a return on their efforts is compromised, while a few are in a position to benefit from pricing.
Being convicted of ghosting can have serious consequences. Depending on the nature of local laws, the market makers involved may be subject to heavy fines, not participate in the stock market for a period of time, or even face criminal prosecution. Many countries around the world see the ghost effect as a threat to the economic well-being of not only their individual nations, but also a potential threat to the global economy. As a result, there are few countries left in the world that do not have specific regulations against this type of activity.
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