What gets labeled manipulation
Market manipulation cases target trading or statements meant to create a false impression of price or demand. Familiar allegations include spoofing, in which orders are placed with the intent to cancel them before execution, pump-and-dump schemes in thinly traded stocks, coordinated or matched trading, and trading at the close to move a price. The SEC, the CFTC for futures and commodities, FINRA, and the exchanges all surveil for these patterns, and the Justice Department brings criminal cases. Because legitimate strategies can look similar on a chart, the central issue is usually the trader's purpose.
Data drives both sides
Manipulation cases are built from order and trade data, often down to fractions of a second, along with chats, emails, and social media posts. Regulators compare your activity with market conditions and with your own trading history, looking for patterns that suggest a false signal. The defense uses the same data to show a legitimate reason, such as hedging, liquidity provision, risk management, or a strategy applied consistently over time. Preserve trading records, algorithm code and its change history, and communications, and do not alter or delete anything, including chat histories on personal devices.
Responding to the inquiry
A document request from FINRA, an exchange, or the SEC should be answered carefully and with counsel, since early explanations are often quoted later. If you work for a firm, its compliance department and lawyers may be involved, but they represent the firm. We review the flagged trades, the market context, and your usual strategies, and we consider whether retained analysts are needed to model the trading. We also assess whether there is criminal exposure, which changes how testimony and interviews should be approached. A careful first response can sometimes narrow the inquiry.
