A compliance officer at a member broker-dealer is reviewing suspicious trading patterns across customer accounts. Trader X entered multiple large buy orders well above the current national best bid with the intention of cancelling them prior to execution once the market price rose, allowing them to sell an existing long position at inflated prices. Simultaneously, Trader Y executed matched buy and sell orders for another security across two accounts controlled by the same beneficial owner, resulting in no change in actual ownership. Which of the following statements regarding these activities are correct?
- Trader X's activity constitutes spoofing, a prohibited market manipulation tactic involving non-bona fide orders designed to mislead other market participants.Cevap
- BTrader Y's activity is considered legitimate volume stimulation as long as both transactions were executed through a registered public exchange.
- Trader Y's activity constitutes wash trading, which violates federal securities laws and FINRA rules by creating a false impression of trading volume.Cevap
- DFINRA possesses direct criminal prosecutorial authority to file federal felony charges against both traders independently of government agencies.
Cevap
The correct statements identify Trader X's actions as illegal spoofing and Trader Y's actions as prohibited wash trading.
Spoofing consists of placing non-bona fide orders to manipulate prices with the intent to cancel before execution. Wash trading occurs when offsetting buy and sell orders are entered without a change in beneficial ownership to fake market activity. Both are prohibited market manipulation practices.
Adım Adım Çözüm
Anahtar Kavram
Prohibited Market Manipulation and Fraudulent Practices