Chapter 4 - NASDAQ/OATS Flashcards Preview

Chapter 4 - Supervision of Trading and Market Making > Chapter 4 - NASDAQ/OATS > Flashcards

Flashcards in Chapter 4 - NASDAQ/OATS Deck (18):

What does OATS do ?

allow FINRA to reconstruct markets, conduct surveillance, and enforce its rules.


The Nasdaq is a screen-based, SEC-registered stock exchange. The Nasdaq can be divided into two main components:

(1) the Global Market, and (2) the Capital Market.


Within the Global Market, there is a special tier called

Global Select, whose listing standards are designed to compete with those of the NYSE



designated routing for the order to go to the NYSE or NYSE MKT for participation in the opening and closing.


NASDAQ is available from what time ?

4am to 8pm


Nasdaq’s minimum listing requirements for a company’s equity securities to trade on the Global Select Market is:

a bid price of $4 per share for initial inclusion and $1 pershare for continued listing.

There must be at least three market makers for initial inclusion and two market makers for continued listing.


Nasdaq listing standard for Capital Market

Companies already listed or quoted on another marketplace (e.g., listed on a regional exchange) may qualify for a Capital Market listing under the market capitalization listing standard only. To do so, the issue must meet the minimum market value and bid price requirements for 90 consecutive trading days before applying for listing.


Nonquantitative criteria that issuers must meet to qualify for Nasdaq listing.

These include:

  1. ■ minimum of two independent directors;
  2. ■ establishment of an audit committee;
  3. ■ providing shareholders with quarterly and annual reports;
  4. ■ having an annual shareholders meeting;
  5. ■soliciting proxies for all shareholder meetings; and
  6. ■ executing a listing agreement with FINRA.


FINRA may terminate or suspend an issue’s inclusion in Nasdaq if:

  1. the issuer files for bankruptcy;
  2. the issuers’ independent accountants issue a disclaimer opinion on the company’s financial statements (a disclaimer opinion is one in which the accountants, for whatever reason, cannot render an opinion); or
  3. FINRA deems termination to be in the public interest.


A newly registered NASDAQ market maker must begin quoting the security within how many days ?

The newly registered market maker must then begin quoting the security within five business days.


When is registration of a Nasdaq market maker effective if the request is made more than 5 days after a stock is included in Nasdaq ?

If the request is made more than five business days after inclusion, the registration is effective the same day.


Nasdaq also requires market makers to continuously maintain a two-sided quotation within

a designated percentage of the National Best Bid and Offer (NBBO). This eliminates trade executions against market maker placeholder quotations traditionally priced far away from the inside market, known as “stub quotes.” This rule covers all NMS stocks.


Advantage of Primary Market Maket in a Global Market Stock

The advantage of being a primary market maker in a Global Market stock is that it allows the market maker an exemption from the locate requirement of Regulation SHO (discussed later) in certain transactions. If a market maker is a primary market maker in a particular stock, a .Pindicator is displayed next to its identification symbol.


Duration of an excused withdrawal for a Nasdaq Market Maker

If granted, excused withdrawals generally cover no more than five business days. If granted based on legal considerations, the time frame can be up to 60 calendar days.


If a market maker fails to enter quotes within five business days after registration is effective,

the firm will be involuntarily terminated as a market maker in that security.


Should the member wish to reregister as a market maker in that security, it must wait

20 days


Payments for Market Making permitted ?

Member firms are prohibited from accepting any type of compensation from an issuer to make a market in the issuer’s securities. Compensation includes cash, loans, stock in the issuer, and so forth. This prohibition extends to affiliates of the issuer, as well as to promoters engaged by the issuer. This prohibition does not include payment for services rendered or reimbursement of expenses.

If a market maker pays the Nasdaq listing fees for an issuer and is reimbursed, there is no violation.


Protected bid or Protected offer

The term protected bid or protected offer means a quotation in an NMS stock that is displayed by an automated trading center, and is an automated quotation that is the best bid or best offer of a national securities exchange