Trading, Accounts & Prohibited ActsQuestion 256 of 398
A trader enters large buy orders he intends to cancel before execution, hoping to trick others into thinking demand is rising so he can sell at a higher price. What is this prohibited practice?
a.Spoofing
b.Dollar-cost averaging
c.Rebalancing
d.A wash sale for tax purposes
Explanation
Spoofing is placing bids or offers with the intent to cancel them before execution, creating a false impression of supply or demand to manipulate prices. It is an illegal form of market manipulation.
Law Reference: Securities Exchange Act of 1934Practice all 398 questions free — no signup required.
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