👉 Circular Trading क्या होती हे ?

 Introduction:
In the world of finance and investments, maintaining fair and transparent markets is crucial. However, there are instances where unscrupulous individuals employ deceptive tactics to manipulate market activity. Circular trading, also known as round-tripping, is one such practice that raises concerns about market integrity. This article aims to shed light on circular trading, its mechanics, and the impact it can have on financial markets.

👉 Understanding Circular Trading:
Circular trading refers to a deceptive technique where trades are conducted between two or more parties without any genuine change in ownership or value. The primary objective is to create the illusion of market activity or volume, potentially attracting other investors or influencing market prices. In circular trading, the same or similar financial instruments, such as stocks or derivatives, are repeatedly bought and sold at similar prices and quantities, creating a loop or circular flow of trades.

👉 The Mechanics of Circular Trading:
Circular trading typically involves colluding parties who engage in coordinated buying and selling activities. They may execute trades at predetermined prices, timings, and quantities to maintain the appearance of genuine market activity. By conducting these transactions, the parties involved aim to inflate trading volumes, create false liquidity, or manipulate prices for their own benefit.

👉 Impact on Financial Markets:
Circular trading undermines the fairness, transparency, and integrity of financial markets. It can distort market conditions, mislead investors, and introduce artificial volatility. The inflated trading volumes and false liquidity created by circular trading can entice other investors to participate, potentially leading to unwarranted market movements and mispriced assets. Moreover, genuine investors may suffer losses if they make decisions based on manipulated market signals.

👉 Regulatory Measures and Detection:
Regulators and exchanges worldwide are vigilant in combating circular trading. They employ various measures to detect and prevent such practices. Surveillance systems are used to monitor trading patterns, identify suspicious activities, and track repetitive trades involving the same securities or parties. Reporting requirements ensure market participants disclose relevant information, facilitating transparency. Penalties and legal consequences act as deterrents to those engaging in circular trading.

👉 Protecting Market Integrity:
To maintain market integrity, it is crucial for regulators, exchanges, and market participants to collaborate in identifying and eliminating circular trading. Enhanced surveillance, strict enforcement, and education about market manipulation practices are essential. Promoting transparency, implementing robust reporting mechanisms, and encouraging ethical conduct within the financial industry are equally important.

👉 Conclusion:
Circular trading represents an unethical and illegal practice that undermines the fairness and integrity of financial markets. By understanding the mechanics and impact of circular trading, investors can become more vigilant and informed about market manipulation tactics. It is the collective responsibility of regulators, exchanges, and market participants to remain proactive in detecting and preventing circular trading, thereby safeguarding the integrity of the financial system and protecting the interests of genuine investors.