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Investor A shorts stock S.

Without any news to justify it, investor B buys stock S, spiking the price for a few minutes, before selling it again, the price returning to the initial level.

During these few minutes, Investor A is forced to close their short position at a loss.

Has any illegal activity occurred?

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  • 2
    Legal questions require a jurisdiction (and might be better asked on law.SE).
    – Vicky
    Commented Dec 17, 2023 at 11:53
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    who do you think did something illegal? A,B, the broker, the people that generated the meme?
    – mhoran_psprep
    Commented Dec 17, 2023 at 12:37
  • All the stock market knows is that these traders were willing to buy and short at different prices. There's nothing illegal about that. The motivation of such traders would be subject to SEC investigation if illegal activities such as pump and dump, insider trading, etc. were involved. That's a different issue.
    – Bob Baerker
    Commented Dec 19, 2023 at 18:16

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There is no price spike. There is a single person willing to pay more. Unless others agree, the price of the next transaction is completely unaffected. Only the people who overpaid or were overpaid even see the higher price unless others are looking at an unreasonable level of detail.

See past answers about how the market matches up buyers and sellers.

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  • A price spike is a significant move in a short period of time. It doesn't matter if one person or 1,000 people paid more. It also doesn't matter if the higher price holds or collapses. It's still a price spike if it moves enough.
    – Bob Baerker
    Commented Dec 19, 2023 at 18:12
  • The key word is "significant". If the spike lasts for only that one transaction, which is what would happen here, it's meaningless noise.
    – keshlam
    Commented Dec 19, 2023 at 21:56
  • You're conflating multiple issues. "Significant move" refers to the size of the move not its meaningfulness to a trader. Duration has no relevance to the definition of a price spike. Google will help clarify this for you.
    – Bob Baerker
    Commented Dec 25, 2023 at 15:36
  • Depends on whether you are talking about statistical significance or investing significance. I submit that discussing the former would be out of scope here, so I'm explicitly assuming the latter. If folks disagree, see other answers; I don't see a need to debate this.
    – keshlam
    Commented Dec 25, 2023 at 17:14
  • It's also irrelevant to the question as asked. And frankly, if you're talking about the statistics, I refer you to Quantitative Finance
    – keshlam
    Commented Dec 25, 2023 at 17:35

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