SIE practice questionmediumMunicipal Bonds
A dealer consistently posts quotes for municipal bonds at artificially high prices to attract sellers, then buys at lower prices. This practice is:
- APrice stabilization
- BPermissible market making
- CMarket manipulation, violating MSRB rules✓ Correct answer
- DA hedging strategy
Explanation
Why C — Market manipulation, violating MSRB rules
Posting false quotes to induce trading is market manipulation, prohibited under MSRB rules. Legitimate market making or stabilization involves truthful pricing and hedging must not be deceptive.
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