SIE (Securities Industry Essentials) Practice Exam

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What is stabilizing in Wall Street terms?

Reducing volatility in the overall market
Maintaining a market price at or near the POP of a new issue
Preventing insider trading
Gauging investor interest in a new offering

The correct answer is: Maintaining a market price at or near the POP of a new issue

Stabilizing in Wall Street terms refers to maintaining the market price at or near the public offering price (POP) of a new issue. This is typically done by a group of investment banks, known as the underwriters, who intervene in the market to prevent the stock price from falling below the POP. Option A is incorrect because reducing volatility is a different concept and does not specifically refer to the stabilization of a new issue's price. Option C is incorrect because preventing insider trading is a legal and ethical consideration, not a specific action related to stabilizing a market price. Option D is incorrect because gauging investor interest in a new offering can be important for market analysis, but it is not the same as stabilizing the market price.