>>volume can easily be pumped up to create the mirage of liquidity<<
While stocks and volume can be manipulated, the phenomenon you describe here is seen in many stocks with no evil scheme behind it. The "inflated" volume you see in many NASDAQ stocks has to do with NASDAQ's unusual volume reporting system. On NASDAQ, one broker may buy from another simply to increase inventory, or to fill an order when no member of the public is selling, or none is selling at the desired price. Thus if I put in to buy 10,000 shares of "ABCD", an illiquid stock, the filling broker may have to buy from another broker just to fill the trade. Volume would then show up at 20,000 shares, even though the only public order involved 10,000 shares. Sometimes this does involve a broker getting in between the bid and ask, but this is permitted. Schemes are schemes and quirks are quirks, and the "inflated" volume on NASDAQ stocks is more usually just a quirk of the system NASDAQ uses rather than a market maker manipulation.
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