Q: Hi,
The other day I sold 300 shares of a company from an RRSP account. A minute later I submitted a buy order for the same amount of shares in my TFSA. Both the buy and sell were for the same price.
Today I received a call from my broker advising that I had broken the rules(?) and engaged in a wash trade.
Can you enlighten me as to what and whose rules I have broken?
The other day I sold 300 shares of a company from an RRSP account. A minute later I submitted a buy order for the same amount of shares in my TFSA. Both the buy and sell were for the same price.
Today I received a call from my broker advising that I had broken the rules(?) and engaged in a wash trade.
Can you enlighten me as to what and whose rules I have broken?
5i Research Answer:
A wash trade is an illegal form of market manipulation where an entity simultaneously buys and sells the same financial instrument, creating false appearances of high trading volume or price movement. It involves no change in beneficial ownership or market risk, aimed at misleading investors or inflating activity. It is monitored by CIRO and provinical securities regulators. While we are sure it was benign, because there was no change in ownership (since you are the registered owner of both accounts) and it was the same security at the exact same price, it qualifies under the definition.