A proprietary trader enters multiple high-volume buy orders for an illiquid stock significantly below the current national best bid, having no intention of allowing these orders to execute. The sudden increase in visible bid size induces other market participants to raise their offer prices, allowing the trader to sell an existing position at an artificially inflated price. Immediately following the sale, the trader cancels all the initial buy orders. What prohibited market manipulation practice has the trader committed?
- Spoofing, because the trader entered non-bona fide orders to deceive market participants and cancelled them prior to execution.Cevap
- BWash trading, because the transaction resulted in no net change in the beneficial ownership of the security.
- CMarking the close, because the trader acted in a principal capacity to adjust inventory valuation prior to market settlement.
- DPegging, which is a permissible SRO stabilization technique unless FINRA initiates criminal prosecution against the firm.
Cevap
Spoofing, because the trader entered non-bona fide orders to deceive market participants and cancelled them prior to execution.
Entering non-bona fide orders with the intent to cancel them prior to execution to create a false appearance of market demand or supply is defined as spoofing. Spoofing is a prohibited market manipulation tactic under FINRA and SEC rules.
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Anahtar Kavram
Spoofing and Market Manipulation