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How Does the Presence of Wash Trading Impact the Trust in a Derivatives Exchange’s Open Interest Data?

Wash trading erodes trust because the reported open interest may not reflect genuine market participation or real hedging/speculative demand, but rather fabricated volume.
Greeks.Live08.11.25

How Does the Presence of Wash Trading Impact the Trust in a Derivatives Exchange’s Open Interest Data?

Wash trading directly undermines the reliability of open interest data. Open interest is the total number of outstanding derivatives contracts that have not been settled.

If a significant portion of the trading volume is wash trading, it suggests that the reported open interest may not reflect genuine market participation or real hedging/speculative interest, eroding institutional trust in the exchange's depth and liquidity claims.

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