A compliance officer at a registered broker-dealer is reviewing various account trading activities across the firm. Which of the following practices constitute illegal or prohibited market manipulation? (Select all that apply)
- Submitting large buy orders for a security with the explicit intention of canceling them before execution to induce other market participants to trade.Cevap
- Simultaneously buying and selling the same security through accounts with identical beneficial ownership to generate artificial trading activity.Cevap
- CPlacing a limit order to purchase a security at a specified price below the current prevailing market offer.
- DExecuting a customer market order as an agent on a public exchange and charging a disclosed commission for the service.
Cevap
The practices that constitute illegal market manipulation are: (1) entering non-bona fide orders intended for cancellation to create fake market activity (spoofing) and (2) entering transactions with no change in beneficial ownership to artificially inflate trading volume (wash trading).
Both entering orders with no intention of execution (spoofing) and executing trades without a change in beneficial ownership (wash trading) are illegal forms of market manipulation. They deceive investors by creating a false perception of market depth, activity, and liquidity.
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Prohibited Market Manipulation Practices (Spoofing and Wash Trading)
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