Which of the following is a permitted securities transaction?

Which of the following is a permitted securities transaction?

• A. Market making to provide liquidity and reducing bid/ask spread
• B. Insider trading on confidential information
• C. Front-running
• D. Not deleting quotes under suspended trading

Answer: (A)

Providing liquidity through market making is a permitted securities transaction because it helps markets function smoothly. Market makers quote two-sided prices and stand ready to buy and sell, which narrows the bid/ask spread and improves execution for other participants. This activity supports price discovery and reduces trading costs, and it is conducted within regulatory rules to maintain fair and orderly markets. In contrast, insider trading uses non-public information to profit, which undermines market fairness and is illegal. Front-running involves trading ahead of a known upcoming order to benefit from the anticipated move, which is also prohibited. Not deleting quotes under suspended trading would mislead participants and violate exchange rules designed to maintain integrity during abnormal conditions.

Providing liquidity through market making is a permitted securities transaction because it helps markets function smoothly. Market makers quote two-sided prices and stand ready to buy and sell, which narrows the bid/ask spread and improves execution for other participants. This activity supports price discovery and reduces trading costs, and it is conducted within regulatory rules to maintain fair and orderly markets.

In contrast, insider trading uses non-public information to profit, which undermines market fairness and is illegal. Front-running involves trading ahead of a known upcoming order to benefit from the anticipated move, which is also prohibited. Not deleting quotes under suspended trading would mislead participants and violate exchange rules designed to maintain integrity during abnormal conditions.