Accommodation Trading – Definition

Cite this article as:"Accommodation Trading – Definition," in The Business Professor, updated September 20, 2019, last accessed October 20, 2020,


Accommodation Trading Definition

Accommodation trading is an illegal trading in which a trader agrees to accommodate another trader through a non-competitive stock trade. It is a type of trade in which two or more traders cooperate to trade a security for another at a price lesser than the current market price, believing that it will be traded back at the same price.

An accommodation trading might also be referred to as a wash sale depending on the context of the trade. Usually, traders use accommodation trading as an illegal trading to avoid paying taxes.

A Little More on What is Accommodation Trading

When two traders cooperate to exchange a stock or security at a price below the market price of the security, an accommodation trading has occurred. It is an intentional but illegal way of accruing a significant capital loss on the security solely to avoid paying taxes on the security. Once time passes, trade is reverse. Many countries frown against accommodation trading, it is unlawful and an unethical way of cheating the government. In most cases, accommodation trading and money laundering go hand in hand.

Nevertheless, there are some cases under securities law where accommodation trading is acceptable. Situations that may warrant accommodation trading are contained in securities law.

Example of Illegal Accommodation Trading

This is an example of accommodation trading; Joan bought a stock at $100 per share. But when it is time to file tax reports and make tax payments, Joan enters an accommodation trading with Ryan who agrees to purchase the stock at $65 per share ad against the $120 per share that the stock is currently trading in the market.

Using this accommodation trading technique, Joan has realized a $35 loss on his stock and this will be included in his tax report and result in less tax payment. Once he is done with tax matters, Joan buys the stock back from Ryan at the same $65. Using this illegal trading, Joan has successfully cheated the tax system since he didn’t realize any loss in the real sense.

Reference for “Accommodation Trading”

Academics research on “Accommodation Trading”

Prohibited Floor Trading Activities Under the Commodity Exchange Act, Markham, J. W. (1989). Prohibited Floor Trading Activities Under the Commodity Exchange Act. Fordham L. Rev., 58, 1.

The Nation’s Commodity Cops-Efforts by the Commodity Futures Trading Commission to Enforce the Commodity Exchange Act, Schief, W. R., & Markham, J. W. (1978). The Nation’s Commodity Cops-Efforts by the Commodity Futures Trading Commission to Enforce the Commodity Exchange Act. Bus. Law., 34, 19.

Paths towards family‐friendly working time arrangements: Comparing workplaces in different countries and industries, Wiß, T. (2017). Paths towards family‐friendly working time arrangements: Comparing workplaces in different countries and industries. Social policy & administration, 51(7), 1406-1430. Although studies have examined the distribution and conditions of employer‐provided work–family arrangements, we still lack a systematic investigation of how these vary for different countries and industries. Based on the European Working Conditions Survey 2010, this study examines the conditions under which firms provide family‐friendly working time arrangements and what the differences are across four countries (Austria, Denmark, Italy and the UK) and four industries. The impact of employee representatives, employee involvement, manager support and female managers varies across countries and industries because of the institutional environment (prevailing family model, industrial relations) and workforce composition (gender). The impact of employee representatives depends on their co‐determination rights, and the direction of their effect on the prevailing family model (e.g. negative in conservative countries such as Austria) and the gender composition of the workforce (negative in male‐dominated production, but positive in services). Employee involvement in the work organization is significantly positive in Austria and Denmark (both with co‐operative industrial relations), while manager support has the strongest effect in the UK (liberal regime). At the industry level, female supervisors are positively associated with family‐friendly working time arrangements only in the male‐dominated production industry. These findings suggest that the effects of agency variables and their direction vary depending on the institutional context.

Entrepreneurship and illegality: insights from the Nigerian cross-border trade, Fadahunsi, A., & Rosa, P. (2002). Entrepreneurship and illegality: insights from the Nigerian cross-border trade. Journal of Business Venturing, 17(5), 397-429. Illegal business activity is common throughout the world, occurs in a diversity of forms, and is often viewed as the darker side of entrepreneurship. Of particular interest is illegal cross-border trade, which occurs at low levels between developed countries, but is often widespread between developing countries. It is on the increase, despite many attempts by governments to eradicate it. Yet illegal trading is poorly studied both theoretically and empirically from an entrepreneurial perspective. The paper outlines a working model exploring the relationships between key entrepreneurial factors and illegal trading, and explores the model using fieldwork data collected by the first author in Nigeria during an 8-month ethnographic study of cross-border trading. The Nigerian cross-border trade is particularly interesting, as it takes place in an environment of long-standing illegality and corruption. The findings reveal that illegal practices are so widespread that they are a norm, an almost parallel economy with its own traditions and values. In this context, entrepreneurial advantage in trading illegally is quite different from that which would be expected in more familiar Western contexts. The entrepreneurial advantages of trading in illegal goods and evading duties appear overwhelming at first, as bribery of officials is widely accepted, which reduces risk of law enforcement to negligible levels, and most traders do not view illegal trading as immoral. Closer analysis reveals, however, that traders need to bribe to trade any goods, legal as well as illegal. Bribery is part of a system of harassment by officials that pervades all aspects of the trade. In this climate, there are no special advantages in targeting illegal goods to trade in. The distinction between what is legal and illegal becomes blurred and irrelevant. Traders target any goods irrespective of their legal status if potential profit margins are high. Entrepreneurial advantage thus lies in the trade itself and making it work, not in its illegality. Most entrepreneurial energy is devoted to creatively circumvent the harassment of corrupt officials, not to exploit illegal business opportunities. The paper concludes by demonstrating that certain factors are crucial to our understanding of the relationship between entrepreneurship and illegal trading, in both Western and Nigerian contexts, but that the relationships between the factors differ widely in the two contexts. The model constructed provides a basis for further comparative research in other regional contexts. In terms of policy implications, the illegality of the trade is of some benefit in that it has created hundreds of associated jobs and businesses, which enable traders to operate more securely and efficiently in the climate of corruption, harassment, and uncertainty. Most traders, however, have learnt to profitably live with illegality, but nonetheless, would still prefer to trade in a less stressful and impartial legal system. Illegality on balance is more harmful than beneficial for economic development. Removing illegality once institutionalised, however, is not a simple matter and no solution can be found without fuller understanding of the sociology and the entrepreneurial processes of illegal trading.

Cross-border trade: a strategy for climbing out of poverty in Masvingo, Zimbabwe, Muzvidziwa, V. N. (1998). Cross-border trade: a strategy for climbing out of poverty in Masvingo, Zimbabwe. Zambezia, 25(1), 29-58. A number of female household heads in the high density suburbs of Masvingo were able to break out of poverty through cross-border trading. Although the traders have received unsympathetic treatment by press and officials, they show themselves to be enterprising individuals. This article, based on participant observation, in Masvingo townships, description by the women and their trade. It looks at their strategies for making a good income out of the trade, their markets, and the constraints that they have to deal with – particularly from officialdom.

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