What is it called when a customer’s order is filled by interposing another broker-dealer in the transaction?

The term used to describe the practice of filling a customer's order by interposing another broker-dealer in the transaction is interpositioning. This occurs when a broker-dealer inserts themselves between a buyer and a seller without a legitimate reason, which can result in additional costs or inefficiencies for the customer. Interpositioning is typically frowned upon because it can lead to lack of transparency and potentially harm the client’s interests by increasing the cost of execution or slowing down the transaction process.

The other options refer to different practices in the financial industry. Free-riding and withholding pertains to issues involving the settlement of purchased securities. Backing away refers to a market maker's failure to execute at a quoted price, typically during periods of volatility. Churning indicates excessive trading in a client's account to generate commissions, which does not relate to the act of interposing another broker-dealer in fulfilling an order.