Which term describes cornering the market by acquiring enough shares to influence the price?

Which term describes cornering the market by acquiring enough shares to influence the price?

• A. Painting the tape
• B. Wash trades
• C. Cornering
• D. Arbitrage

Answer: (C)

Cornering a market happens when someone buys enough of a security to influence its price by restricting supply or steering quotes. The aim is to gain enough leverage so that the large holder can push the price in a direction that benefits their position, often by pushing it up if they plan to sell later or by creating a supply squeeze. This kind of control over a sizable portion of outstanding shares makes the market behave differently than it would under normal conditions, and in many markets it’s illegal or tightly regulated because it distorts fair price discovery. The other ideas describe different activities. Painting the tape is about creating a false sense of trading activity to mislead others; wash trades are transactions where the same party buys and sells to generate artificial volume without any real change in ownership; arbitrage is taking advantage of price differences across markets with the expectation of a risk-free profit, not manipulating price through market control.

Cornering a market happens when someone buys enough of a security to influence its price by restricting supply or steering quotes. The aim is to gain enough leverage so that the large holder can push the price in a direction that benefits their position, often by pushing it up if they plan to sell later or by creating a supply squeeze. This kind of control over a sizable portion of outstanding shares makes the market behave differently than it would under normal conditions, and in many markets it’s illegal or tightly regulated because it distorts fair price discovery.

The other ideas describe different activities. Painting the tape is about creating a false sense of trading activity to mislead others; wash trades are transactions where the same party buys and sells to generate artificial volume without any real change in ownership; arbitrage is taking advantage of price differences across markets with the expectation of a risk-free profit, not manipulating price through market control.