An individual day trader repeatedly enters large buy orders for a thinly traded stock at prices higher than the current national best bid, causing other market participants to raise their bids. Immediately prior to execution, the trader cancels these large buy orders and sells shares from an existing position at the artificially inflated price. Which of the following best describes this prohibited trading practice?
- Spoofing, because non-bona fide orders were entered with the intent to cancel them prior to execution to manipulate market prices.Cevap
- BWash trading, because offsetting buy and sell orders were executed simultaneously without any actual change in beneficial ownership.
- CPrincipal market-making, because broker-dealers acting as dealers are legally exempt from order cancellation rules when trading from inventory.
- DPermissible quote adjustments, because SRO regulations grant member firms criminal prosecution authority over price discovery cancellations.
Cevap
Spoofing, because non-bona fide orders were entered with the intent to cancel them prior to execution to manipulate market prices.
Spoofing occurs when a market participant enters non-bona fide orders that they intend to cancel before execution. The primary purpose of spoofing is to trick other traders into believing there is genuine market demand or supply, thereby artificially driving the price up or down for the spoofer's financial benefit.
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Anahtar Kavram
Market Manipulation - Spoofing