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Exam 2016-FRR Topic 1 Question 372 Discussion

Actual exam question for GARP's 2016-FRR exam
Question #: 372
Topic #: 1
Which of the activities represent examples of market manipulation?

Suggested Answer: C Vote an answer

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.
References
Source: How Finance Works

by Haley at Apr 02, 2025, 09:26 AM

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