Which statement describes market manipulation?

Which statement describes market manipulation?

• A. Engaging in front-running and parallel running
• B. Securities transactions must have an economic basis and be consistent with genuine bid and ask behavior
• C. Trading based on rumors without any economic rationale
• D. Executing trades solely to influence price for a client

Answer: (B)

Market manipulation involves actions that distort prices or mislead the market. The statement that securities transactions must have an economic basis and be consistent with genuine bid and ask behavior expresses the standard for legitimate, transparent trading. When trades are grounded in real economic rationale and reflect true supply and demand, there is no manipulation; prices move in response to real information. This view provides the benchmark against which manipulative behavior is judged. The other descriptions point to practices that are typically considered manipulative or improper—trading on rumors without justification, front-running, or trades aimed solely at pushing a price for a client. These actions can distort markets, which is exactly what manipulation seeks to avoid.

Market manipulation involves actions that distort prices or mislead the market. The statement that securities transactions must have an economic basis and be consistent with genuine bid and ask behavior expresses the standard for legitimate, transparent trading. When trades are grounded in real economic rationale and reflect true supply and demand, there is no manipulation; prices move in response to real information. This view provides the benchmark against which manipulative behavior is judged.

The other descriptions point to practices that are typically considered manipulative or improper—trading on rumors without justification, front-running, or trades aimed solely at pushing a price for a client. These actions can distort markets, which is exactly what manipulation seeks to avoid.