Ginzy Trading

Posted in Finance, Accounting and Economics Terms, Total Reads: 405
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Definition: Ginzy Trading

Ginzy Trading is a term used for a practice observed in floor trading, where the broker sells part of an order at the offer price but sells the remainder of the order to the same broker at a lower bid price (which could later be used to sell again and receive greater marginal benefit by the broker).


Originally, such practices were performed primarily to achieve an average order price for the customer within the “ticks” (predefined increments) in which the market is traded. Hence, the greater the “tick”, the better the broker would make.


Generally, Ginzy Trading is considered unethical. This practice is even considered unlawful if the manipulated trade is a result of collusion among multiple brokers. As per the exchange rules, typically, it is the role of a broker to fetch the best price for the order placed by a customer and that they make all the trades in the open market only. This practice has mostly declined in the present days since most of the exchanges have reduced the “tick” size of the traded instruments (e.g.: in the US, the tick size has been reduced from one-eighth of a dollar to one cent tick). Apart from this, the increased use of electronic and OTC (over the counter) transaction matching systems have reduced the number of illegal trade practices.

 

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