During a routine audit of a proprietary trading desk, a compliance officer identifies two distinct order entry patterns executed by a senior trader in a volatile equity security:
Pattern 1: In the final minutes before the market close, the trader routinely enters aggressive buy orders above the current bid to artificially raise the security's official closing price, thereby enhancing the end-of-day valuation of the firm's inventory positions.
Pattern 2: The trader enters a series of large, non-bona fide sell limit orders away from the current market price to generate the false appearance of intense selling pressure, intending to cancel all such orders prior to execution once the price drops enough to fill the trader's lower personal buy orders.
Based on federal securities regulations and FINRA rules governing market manipulation, which of the following statements regarding these patterns are CORRECT? (Select all that apply.)
- Pattern 1 constitutes marking the close, a prohibited manipulative practice designed to influence a security's closing price.Cevap
- Pattern 2 constitutes spoofing, an illegal quote manipulation scheme that relies on entering non-bona fide orders intended for cancellation.Cevap
- CPattern 1 constitutes wash trading because trading in firm inventory positions results in no ultimate change of beneficial ownership.
- DPattern 2 is a rule violation enforced exclusively by self-regulatory organizations (SROs) like FINRA, as the SEC lacks jurisdiction over canceled orders.