Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What are abusive squeezes in the context of securities?

1. Strategies to introduce new securities into the market

2. Efforts to inflate the supply of a security

3. Actions that restrict a security's liquidity to raise its price

4. Practices to enhance trading visibility

The correct answer is: Actions that restrict a security's liquidity to raise its price

In the context of securities, abusive squeezes refer to actions that restrict a security's liquidity with the intention of manipulating or raising its price. This tactic often involves creating artificial scarcity or limiting the availability of the security in the market, which can lead to a significant increase in the security's price as demand outstrips supply. By orchestrating a squeeze, traders might leverage market dynamics to their advantage, effectively forcing others to purchase at higher prices due to a perceived lack of available shares. The other options do not appropriately capture the essence of what constitutes an abusive squeeze. Introducing new securities into the market speaks more to supply-side strategies rather than manipulation of existing securities. Inflating the supply does not align with the goal of an abusive squeeze, as it typically involves limiting availability rather than increasing it. Lastly, enhancing trading visibility would not directly relate to the concept of liquidity restrictions or price manipulation, as it focuses more on market transparency rather than the mechanics of pricing and stock availability.