What should happen to shares trading at a premium that are returned to a syndicate member?

The correct choice indicates that shares trading at a premium, when returned to a syndicate member, should be used to offset syndicate short positions. This practice aligns with the regulatory framework governing syndicate activities and the management of securities.

When shares are returned, particularly those that are trading at a premium, the syndicate member may have previously entered into short positions, meaning they have sold shares they do not currently own. Using returned shares to cover these short positions allows the syndicate to manage its risk and meet its obligations without incurring additional costs that would arise from purchasing shares on the open market.

This strategy provides an efficient means for syndicate members to balance their inventory of shares, ensuring compliance with regulations while maintaining market integrity. It highlights the importance of managing both long and short positions within a syndicate's overall trading strategy.

In contrast, destroying shares would eliminate them from the market without addressing the short positions, and keeping them on hold does not serve to mitigate the risk associated with those positions. Selling at market value could yield a profit or loss but does not directly serve the purpose of managing short risks effectively.