SIE (Securities Industry Essentials) Practice Exam

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What type of market manipulation involves making an excessive number of trades to increase trade commissions?

Churning
Front running
Cornering the market
None of the above

The correct answer is: Churning

Churning is the type of market manipulation where the seller makes an excessive number of trades in order to generate more commission fees. This is often done for their own benefit, rather than that of the buyer. Front running, on the other hand, involves a trader taking advantage of information about pending trades to make a profit. Cornering the market is when a group of buyers or sellers control a particular asset, making it difficult or impossible for others to participate in trading. None of the above options is correct because the question specifically asks about market manipulation involving excessive trades for commission purposes.