Trading Rules and Market Manipulation

1. What does front running involve?

• Trading after executing a client's order

• Trading before executing a client’s order based on expected price movement

• Executing trades without client consent

• Colluding with clients to manipulate stock prices

2. Which of the following statements about trading ahead of research reports is true?

• It is not considered a form of insider trading.

• It is independent and can be carried out by brokers.

• It does not require trade execution.

• It often leads to misleading price and volume.

3. What does price manipulation commonly involve?

• Placing orders at successively lower prices.

• Engaging in excessive trading to inflate stock volume.

• Entering orders at the same price and volume.

• Entering purchase orders at successively higher prices.

4. What is churning in terms of volume manipulation?

• Simultaneously entering orders at differing prices.

• Excessive trading of a stock to inflate its volume.

• Trading based on public information alone.

• Buying and selling stocks without any profit motive.

5. What is a characteristic of prearranged trading?

• It can mislead investors about market trends.

• It does not involve a change in beneficial ownership.

• It is always illegal under trading rules.

• It requires collusion among participants.

6. Which of the following best describes spoofing?

• Manipulating stock volume by churning.

• Trading based on insider information.

• Holding a stock for a long period to gain legitimacy.

• Creating false buy signals to manipulate stock prices.

7. What is wash trading?

• Simultaneously buying and selling the same security to create misleading volume.

• Trading non-public information only in large volumes.

• Engaging in front running to benefit from client trades.

• Selling stocks at a loss to manipulate tax outcomes.

8. What is the main difference between front running and other forms of insider trading?

• Front running involves executing trades on public information.

• Front running does not require change in beneficial ownership.

• Front running is initiated by brokers based on client orders.

• Front running can be done without trade execution.

9. What is the primary purpose of insider trading rules?

• To regulate market manipulation.

• To prevent trading based on non-public information.

• To enhance market liquidity.

• To encourage brokers to prioritize client trades.

10. Which situation exemplifies front running?

• A broker delays a client order to secure a better price for themselves.

• A broker shares a client's trade information with other traders.

• A broker executes a trade for their own account before a client's trade.

• A broker buys shares after a significant public announcement.