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Market Corners: Definition, How It Works, Types, and Examples

Last updated 03/22/2024 by

Bamigbola Paul

Edited by

Fact checked by

Understanding corners in investing is crucial to grasp the dynamics of market manipulation. This article explores the concept of corners, their implications, types, regulations, and real-world examples to provide a comprehensive insight into this complex phenomenon.

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What is a corner in investing?

In investing or trading, a corner occurs when an individual, group, or entity gains control over a significant portion of a business, stock, commodity, or other security. This control enables them to manipulate the price, influencing market dynamics to their advantage. While some instances of cornering may be unintentional or legal, many are illegal schemes aimed at deceiving and manipulating investors.

How a corner works

When someone corners the market, they hold substantial power over the manipulation of quantity and price. This often involves obtaining a controlling interest in a particular asset, which allows them to influence its supply and demand dynamics. For instance, if a natural disaster were to decimate most pineapple growers except one, that remaining grower would effectively control the pineapple market and dictate prices.

Types of market cornering

Market cornering can take various forms, each with its own methods and objectives:

Pump and dump

In a pump-and-dump scheme, perpetrators artificially inflate the price of a stock by disseminating false or exaggerated information to entice investors to buy. Once the price reaches a desirable level, they sell off their shares, causing the price to plummet, leaving unsuspecting investors with losses.

Poop and scoop

Contrary to pump and dump, in a poop-and-scoop scheme, individuals spread negative rumors or false information about a stock to drive down its price. They then purchase the stock at reduced prices, anticipating its value to rebound once the misinformation clears.

Other methods

Aside from pump and dump and poop and scoop, market cornering can involve tactics such as limiting publicly traded shares, creating artificial demand, price rigging, or painting the tape.

Regulations to prevent market corners

Government agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) play a vital role in monitoring and regulating market activities to prevent manipulation. Laws like the Commodity Exchange Act (CEA) aim to promote fair and competitive futures trading by curbing fraudulent practices.

Real-world examples

Several high-profile cases highlight the prevalence and consequences of market cornering:
  • In 2018, the SEC charged individuals involved in a fraudulent scheme manipulating the stock of Biozoom, Inc., resulting in significant losses for investors.
  • In 2017, the SEC settled a case with a stock manipulator accused of artificially boosting the price of a small oil and gas company through a pump-and-dump scheme.
Here is a list of the benefits and drawbacks to consider.
  • Market corners can provide opportunities for individuals or entities to profit from controlling a significant portion of an asset.
  • Successful market corners may result in substantial financial gains for those involved.
  • Regulatory scrutiny and enforcement aim to protect investors from fraudulent market manipulation.
  • Market corners often involve unethical or illegal practices that can harm investors and undermine market integrity.
  • Attempts to corner markets can lead to market distortions, volatility, and unfair advantages for manipulators.
  • Regulatory measures to prevent market corners may restrict legitimate market activities and innovation.

Types of market manipulation

Market manipulation comes in various forms, each with its own tactics and objectives:


Front-running occurs when a broker or trader executes orders on a security for their own benefit based on advance knowledge of pending orders from their clients. This unethical practice can distort market prices and harm investors.


Spoofing involves placing large buy or sell orders with no intention of executing them to create false impressions of demand or supply. Once other traders react to these fake orders, the spoofer cancels their original orders and takes advantage of the resulting price movements.

Insider trading

Insider trading occurs when individuals or entities trade securities based on material, non-public information. This illegal practice undermines market fairness and erodes investor confidence in the integrity of the financial markets.

Impact of market corners

The consequences of market corners can be far-reaching and affect various stakeholders:

Investor losses

When market corners lead to artificial price distortions or sudden price collapses, investors who are not privy to the manipulation may incur significant losses on their investments.

Market volatility

Market corners can introduce unpredictability and volatility into financial markets, making it challenging for investors to make informed decisions and contributing to market instability.

Regulatory response

In response to instances of market manipulation, regulatory authorities may implement stricter oversight measures and enforcement actions to deter future misconduct and protect investor interests.


Understanding corners in investing is crucial for both investors and regulators to safeguard market integrity and investor interests. By recognizing the signs of market manipulation and adhering to regulatory frameworks, stakeholders can contribute to a fair and transparent financial market ecosystem.

Frequently asked questions

What are the signs of market manipulation?

Market manipulation can manifest in various ways, including abnormal trading volumes, sudden price movements, and coordinated buying or selling activity. Investors should remain vigilant and report any suspicious behavior to regulatory authorities.

How can investors protect themselves from falling victim to market corners?

Investors can mitigate the risks of market manipulation by conducting thorough research, diversifying their portfolios, and staying informed about market developments. Additionally, adhering to regulatory guidelines and avoiding investments based on rumors or unverified information can help safeguard against fraudulent schemes.

What role do regulatory bodies play in preventing market manipulation?

Regulatory bodies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) oversee financial markets and enforce laws to prevent market manipulation. They conduct investigations, impose penalties on violators, and work to maintain market integrity and investor confidence.

Are all attempts to corner the market illegal?

No, not all attempts to corner the market are illegal. Some individuals or entities may inadvertently gain significant control over an asset without engaging in manipulative practices. However, deliberate attempts to manipulate prices through deceptive or fraudulent means are unlawful and subject to regulatory scrutiny and penalties.

What should investors do if they suspect market manipulation?

If investors suspect market manipulation, they should report their concerns to the appropriate regulatory authorities, such as the SEC or CFTC. Providing detailed information and evidence of suspicious activities can aid in investigations and contribute to maintaining market fairness and transparency.

Key takeaways

  • Market corners involve gaining control over an asset to manipulate its price.
  • Types of market manipulation include pump and dump, spoofing, and insider trading.
  • Regulatory bodies like the SEC and CFTC play a crucial role in monitoring and preventing market manipulation.
  • Investors should remain vigilant and report any suspicious activities to regulatory authorities to protect themselves and maintain market integrity.
  • The consequences of market corners can include investor losses, market volatility, and regulatory responses to deter future misconduct.

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