Scalping (trading)

Scalping (English to scalp " scalp, pull the wool over my eyes " ) refers to the action of some fund managers, publishers of financial newsletters, financial journalists and other colloquially sometimes " market gurus" called people to buy at a favorable rate market close shares mostly small businesses and then deliberately sow positive reports about the security and to recommend it to the public for purchase. By so launched high demand among first rate soars into the air, until the author of the scalping sell their shares back and reap a capital gain resulting from the demand of investors enticed to buy. As often fall by the rapid sales of shares by the perpetrators courses strong again, suffer the investors who have relied on the positive news, not infrequently high system losses. So they are "pulled the wool over my eyes " and figuratively.

The term scalping is also used for a legal form of Daytradens. The investor takes advantage smallest fluctuations of a value. The purchased or sold value is often closed out a few ticks later. To be successful with this method of trading on the stock exchange, major capital movements are necessary. Therefore, we find this approach very often with the CFD and Forex trading.

Legal

Until 2003, the legal literature and the courts in Germany represented predominantly legal opinion that we are dealing with the scalping a criminal insider trading, which could be punished with imprisonment up to five years or a fine. In November 2003, however, presented the Federal firmly in the highest judicial instance, that it involves a prohibited market manipulation according to § 20a German Securities Trading Act ( WpHG). Repealed thus were imposed by the district court of Stuttgart in the lower court suspended prison sentences against two investment advisors who were involved in a classic case of scalping.

Depending on whether the manipulation act of scalping is only suited to act on the stock exchange or market price or if there is an actual action, there is a sanction as a misdemeanor ( § 39 Section 1 No. 2 WpHG), with a fine can be assigned up to one million Euros or a criminal offense ( § 38 section 2 WpHG), threatens to fine or imprisonment up to five years.

The prosecution of offenses or offenses of the WpHG by the BaFin is considerably complicated by the fact that the perpetrators of an intent to price manipulation usually can not be detected and the " spin from " certain securities is covered in by the constitutional guarantee of press and speech freedom. In the USA, there are significantly more stringent laws against scalping, here multi-year prison sentences for convicted offenders may be imposed. The U.S. regulatory body Securities and Exchange Commission (SEC) is entitled to more drastic methods of investigation than the German BaFin. In the United States the principle of " Disclose or Abstain " applies ( Exposing or stay out ). This was cited by the Supreme Court and is also in Germany (BGH, judgment of 6 November 2003, reference number 1 StR 24 /03).

The referrer disclose the conflict of interest in his market letter / share recommendation or stay out of it, so it can not be accused of scalping. The prohibition of § 20a WpHG is by the measures taken pursuant to § 20a WpHG Section 5 Market Manipulation Definition Regulation - given specific MaKonV. It reads:

However, will be here to check whether the law relating to the disclosure of conflict of interest is too vague. The law requires here a "reasonable " manner of the disclosure of conflict of interest, but this ignores the principle of legal certainty and the under criminal lawyers familiar cartoon: ". Anyone who behaves inappropriately, will be adequately punished"

The Munich Higher Regional Court goes on a stage and attempts to reinterpret the law a little: " The criminality of such market manipulation is omitted only if the existing conflict of interest is disclosed concretely and clearly. " Here, from " adequate and effective " " concretely and clearly ." Decision of 3 March 2011 ( Az: 2 Ws 87-11 )

Example

A prominent example is Markus Frick. He hid in his stock purchase recommendations his conflict of interest and sold for about 760 million euro shares. Therefore, he was sentenced to a suspended sentence of 1 year and 9 months.

Other forms of market manipulation

• Insider Trading
• Churning
• Front-Running