We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Fictitious Trade?

Mary McMahon
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A fictitious trade is a securities transaction that is falsified in some way for the benefit of the trader. This term can also refer to a type of placeholder used to record a transaction and updated later with correct information. Fictitious trades in the first sense are illegal because they are a form of market manipulation, where a broker or trader aims to benefit from a perceived change in the market that is actually created through their actions. The second type may be used for certain kinds of securities transactions by agreement.

One example of a fraudulent fictitious trade is a wash trade, where brokers simultaneously buy and sell securities to create the illusion of activity. There is no net change in ownership as a result, but to other traders, it looks like something is happening on the market. This can stimulate actual activity which the broker may exploit. Other trades may be used to create the illusion of account activity on a client’s statement in order to cover up embezzlement and other fraudulent activities.

Regulators monitor the market for signs that investors are engaging in market manipulation, and they are alert to signs of a fictitious trade. Engaging in such activity can be grounds for expulsion from an exchange as well as legal penalties. If the trading is used to falsify account records for the purpose of defrauding clients, they may also sue for compensation and breach of contract. Money managers are charged with a fiduciary responsibility, meaning that they must care for their client’s assets responsibly, and fraudulent trades are a breach of professional ethics.

In effect, a fictitious trade appears to take place on the open market and looks legitimate to an outsider, but is actually fake. The securities aren’t transferred to another party and any profits that may appear to have been realized are also false. These trades may be recorded on a client’s account to make it look like trading activity is occurring so that at a casual glance, customers think their assets are in good hands.

As a placeholder, a fictitious trade may be part of a regular transaction agreement between two companies. They set a date in the future and update it when they have information about the correct rate and settlement date to finalize the trade. This is used to record an agreement without setting the date and rate, because these may change in accordance with the terms of the contract.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.