2016-FRR Exam Dumps | Which of the activities represent examples of market manipulation?

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GARP.2016-FRR.v2024-09-09.q145
Question 83

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Question 83/145

Which of the activities represent examples of market manipulation?

A. Market gap

B. Crowded trades

C. Short squeeze

D. Stop-loss order

Correct Answer: C

Market manipulation refers to deliberate actions taken to deceive or mislead investors by affecting the supply, demand, or price of securities. Here are the activities considered:
* Market gap: This refers to the difference between the closing price of one trading session and the opening price of the next session. It is not inherently a form of market manipulation.
* Crowded trades: These occur when a large number of market participants take the same position in a security. While this can influence prices, it is not a deliberate act of manipulation.
* Short squeeze: This occurs when a heavily shorted stock suddenly increases in price, forcing short
* sellers to buy back shares to cover their positions, further driving up the price. This can be orchestrated to create rapid price increases, qualifying as market manipulation.
* Stop-loss order: This is an order placed with a broker to buy or sell once the stock reaches a certain price. It is a risk management tool and not a form of manipulation.
Therefore, a short squeeze is an example of market manipulation.
ReferencesSource: How Finance Works

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