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Daisy chaining is an illegal practice undertaken by brokers and investors to artificially inflate stock prices for personal gain. Daisy chining entails forging false transactions in order to simulate a dynamic, high-interest environment with respect to a specific security. Once such a condition is achieved, the increasing volume and growth of the stock induced by daisy chaining attracts unsuspecting investors. Investors who are unaware of daisy chaining will typically suffer a loss once the hype dissipates. Perpetrators of daisy chaining, on the other hand, will sell their holdings at an ample profit before the stock tailspins. Stocks with low initial volumes are usually selected for daisy chaining. Clusters of brokers and investors involved in daisy chaining are called daisy chains. Daisy chaining is also known as wash selling. |
