What Is a Corner?

In investing or trading, a corner is an act of one entity obtaining a controlling interest of a business, stock, commodity, or other security so that they may manipulate the price. Cornering may happen to a specific security or a market area if an individual or group of people have established a significant degree of control. Another term for cornering is market manipulation. In most instanc🌟es, cornering and ma💖rket manipulation are illegal.

How a Corner Works

When someone is said to have 澳洲幸运5开奖号码历史查询:cornered the market, they have gained significant power over the manipulation of quantity and price. In other words, the obligations on future contracts to deliver a particular commodity greatly outweigh the ac🧜tual amount of the product ♔available. 

For example, if a volcanic eruption in Hawaii should destroy all except one pineapple grower, that surviving grower would have a corner on the pineapple market. While there was no malicious intent by the grower, they now can determine a 澳洲幸运5开奖号码历史查询:market price for the remaining crop. While rare, an event like this could drastically affect the futures market. Our grower has, now, cornered the pineapple futures market. In this situation, there ar🔴e more existing market commitments for delivery than there is of the available product.

Types of Market Cornering

Many people who try to corner the market are not innocent bystanders like our grower, but instead, active pꩲarticipants. The two most common cornering methods have colorful but fitting names.

Pump and Dump

In a 澳洲幸运5开奖号码历史查询:pump-and-dump scheme, those with an existing position attempt to boost the price of a stock through recommendations based on false, misleading, or greatly exaggerated statements. This strategy frequently attempts to manipulate and artificially inflate a micro-cap or 澳洲幸运5开奖号码历史查询:small-cap stock. T🔯he culprits will then sell out, le🌼aving later buyers to hold the bag.

Poop and Scoop

Less frequent is the 澳洲幸运5开奖号码历史查询:poop and scoop approach. Here a small group of informed people attempts to drive down a stock's price by spreading false information, rumors, and otherwise damaging information. If successful, the market price of the asset will fall as others sell. After the market selloff, they can then swoop in and purchase the stock at bargain prices, knowing the 澳洲幸运5开奖号码历史查询:fundamentals of the business are sound.

A business or indiv⛎idual may attempt to corner a market using other methods, including:

• Improperly limiting the number of publicly traded shares that are available
• Making trades to create a false image of the demand for the security
• 澳洲幸运5开奖号码历史查询:Price rigging to artificially inflate the price of a stock

Regulations to Avoid Corners

Passed in 1936, the Commodity Exchange Act (CEA) provides federal control of all futures trading activities in the United States. The purpose of the CEA is to help advance a competitive and efficient market for futures trading by regulating🐈 transactions on commodity futures exchanges. The CEA looks to restrict and police fraudulent trade practices, thereby protecting investors from market manipulation. 

The 澳洲幸运5开奖号码历史查询:Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regulate and monitor activities involving securities and the commodities markets. These entities are responsible for preventing, and in some cases prosecuting, attempts to corner the markets if the actions include any violations of applicable laws. SEC penalties can be both civil and administrative and may include 澳洲幸运5开奖号码历史查询:disgorgement, sanctions, fines, and the los🐻s of trading righ𒈔ts.

Real-World Examples of Market Cornering 

In May 2018, the SEC charged four individuals in a fraudulent scheme that involved unlawful stock sales of micro-cap company Biozoom, Inc. According to the SEC's complaint, the alleged scheme generated almost $34 million for the defendants from illicit stock sales and caused significant harm to retail investors. The defendants allegedly used various methods to artificially inflate Biozoom's share price and to hide their deception, including using 澳洲幸运5开奖号码历史查询:offshore bank accounts and sham legal documents.

In Aug. 2017, the SEC settled a case with an overseas stock manipulator, who was accused of a pump-and-dump scheme to artificially boost the stock price of a small oil and gas company. The stock manipulator, who had a significant stake in the company, ran a fraudulent promotional campaign to inflate the stock price, dumping the shares once the share price increased. The manipulator was permanently barred from trading 澳洲幸运5开奖号码历史查询:penny stocks and paid almost $800,000 in disgorgement, interest, and penalties.