Dаnаher wоrks аs a cоrpоrate bond broker for AFB Financial (AFB), an interdealer broker that only trades dealer to dealer. Danaher and AFB’s other brokers are paid entirely by commissions and deal only with large banks, institutions, and other dealers, not with retail investors. AFB does not take positions in any securities and executes trades in a matched principal capacity. One of Danaher’s biggest and most demanding accounts is that of NOVA Capital. NOVA is represented by Elliott who works on NOVA’s corporate bond trading desk. NOVA requires a capital reserve for bond positions that age more than 180 days (aged inventory) and charges that reserve against Elliot’s inventory book. Aged inventory cash reserves affect the profit and loss calculations of Elliot’s proprietary account and, as a result, reduce Elliott’s compensation. At Elliott’s request, Danaher agrees to occasionally purchase bonds from NOVA and sell back the same bonds later in the day. Danaher understands that these trades allow Elliott to “reset the clock” to avoid aged inventory reductions in the profits of the proprietary account he manages for NOVA and to avoid negative effects to his compensation. Danaher does not immediately reverse the trades but holds these securities for four to six hours during the day. He also does not sell NOVA’s bond positions to another firm before selling them back to Elliott and NOVA at the original price. Danaher’s actions are