Quote-Based manipulation of illiquid securities

We document the effects of a manipulation akin to marking the close, conducted without any manipulative trades. Using prosecuted cases, we examine how manipulators can utilize periods of order-book illiquidity to navigate ill-conceived market design rules and influence security prices. Reference pricing, which has gained significant attention recently in interest rate and metals markets, is shown to contribute to significant increases in end of day returns for affected securities, with no observable subsequent reversals. We show that the price effects continue in the manipulated direction over extended periods, with average excess returns over 80% in the six months after manipulation.