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A while ago there was a "flash crash" in the price of Ethereum widely understood to be the result of a particularly large sell order.

I have recently heard people saying that the person who placed the order did so intentionally to manipulate the market.

My understanding is that market manipulation is illegal on the stock market.

This leads me to my question (which is very hypothetical; this will never happen). If I placed a large enough market buy order (on the scale of an extremely liquid large cap stock's market cap) so that there is no way for supply to keep up with demand, would I be breaking any laws or regulations? If I can't make a market order on that scale can I make a limit order with an absurd limit? Is there any way for a normal participant of the market to break regulation by just making orders?

It would seem to me that this doesn't really fit the definition of "market manipulation" since I am a (horribly irrational) participant in the market.

  • "If I placed a large enough market buy order (on the scale of an extremely liquid large cap stock's market cap)" - if you have that amount of money, you certainly could do that, but you'd have better investment options. – Aganju Aug 5 '17 at 16:33
  • @Aganju I understand that. In practice this is a terrible idea, I'm just curious about the implications. – Neil Locketz Aug 5 '17 at 16:37
  • There is no blanket law against "market manipulation." That term is not even well-defined. Certain specific behaviors may be illegal for some participants. Submitting a large order is neither illegal nor profitable unless there is something else going on. – farnsy Aug 6 '17 at 0:03
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If you own a stake large enough to do that, you became regulated - under Section 13(d) of the 1934 Act and Regulation (in case of US stock) and you became regulated. Restricting you from "shocking" market.

Another thing is that your broker will probably not allow you to execute order like that - directed MKT order for such volume.

And market is deeper than anyone could measure - darkpools and HFTs passively waiting for opportunities like that.

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