A trader simultaneously places matching buy and sell orders for equal quantities of a thinly traded equity security across two separate accounts under the same ownership. The transactions execute, but no actual change in beneficial ownership occurs. The trader's objective is to create a false impression of active market interest to attract other buyers. How is this trading activity correctly classified under securities regulations?
- Prohibited wash trading, because orders were executed with no change in beneficial ownership to simulate market activity.Cevap
- BProhibited spoofing, because non-bona fide orders were displayed to mislead market participants prior to being cancelled.
- CPermissible market activity, because self-regulatory organizations like FINRA lack regulatory authority to discipline market manipulation without SEC criminal proceedings.
- DPermissible principal trading, provided the executing broker-dealers filled the orders from their own dealer inventory.
Cevap
The activity is classified as prohibited wash trading because matching transactions were executed without a change in beneficial ownership to create a misleading appearance of active trading volume.
Executing buy and sell orders for the same security with no genuine shift in beneficial ownership is prohibited wash trading. The sole purpose of such activity is to deceive the investing public by creating a false impression of trading volume and liquidity.
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Anahtar Kavram
Wash Trading and Prohibited Market Manipulation