Market Making And Trading STC Flashcards
1
Q
A client sells $10,000 of MBRT and uses the proceeds to buy $10,000 of TNLN and is charged $850. What is the markup?
A
Proceeds transactions are treated as single trades, therefore the markup is 8.5% ($850/ $10,000= 8.5)
2
Q
A client directs her BD to liquidate securities and use the proceeds to buy other securities , this is called a ______
A
Proceeds transaction
3
Q
Regulations consider riskless principal trades as ______ trades since the executing broker dealer is not exposed to______ risk
A
Agency ; market
4
Q
True or false: an order entry firm has 10 seconds to accept or reject a trade report submitted to FINRA
A
False - the order entry firm has 20 minutes
5
Q
What are the different methods of obtaining consent from an institution for executing net basis traits?
A
Broker dealer may obtain or or written consent prior to each net basis trade
Or depend on a negative consent letter
6
Q
A client who is long 500 shares of XYZ and short 600 shares of XYZ us net short ____shares
A
100 shares
7
Q
Between 8am and 6:29pm two FINRA members are in a trade.
Who reports it to TRACE?
A
each member reports their side of the trade
8
Q
To not violate the firm quote rule, when must a market maker have communicated a change to its quote (price or size )?
A
Prior to presentation of an order
9
Q
ABC’s inside market is 15.15-15.40
May a new market maker enter a quote of 14.40- 14.90?
A
No, the 14.90 offer would cross the high bid of 15.15
10
Q
True or false : a 200 share trade of MSFT on Nasdaq is subject to the 5% policy
A
True, the policy covers trades executed in the secondary market
11
Q
A _______ state occurs if the NBB is below the lower band or the NBO is above the upper band, but not in a limit state
A
A straddle state
12
Q
True or false: only companies whose stock is listed as Nasdaq Global Select are subject to corporate governance rules
A
False- all companies are
13
Q
If a transaction is reported at a clearly erroneous price, when will review and action be taken by FINRA?
A
Under normal circumstances , within 30 minutes
14
Q
Securities quoted through the CQS are _______ securities trading over-the-counter
A
Listed securities
15
Q
Is this a not-held order? :
Buy 500 shares of XYZ this morning if it looks good
A
Yes
16
Q
For NMS stocks priced at $1 or greater, what access fee may market center is charge market participants?
A
$0.003 per share
17
Q
What is considered regular and continuous quoting as defined by the piggyback exception?
A
No more than 4 business days elapsed without a quote over the last 30 days
18
Q
What’s the pink market?
A
A real time electronic quotation system for OTC equities
19
Q
Shares were mistaking bought on a client’s account - who is authorized to place the shares in the firm’s error account ?
A
The firms principal
20
Q
A market maker is quoting ABC stock at 21.05 - 21.35 , 15 x 10. What happens if it accepts a client order to sell 500 at 21.35?
A
Assuming the market maker is at the inside, it adds the clients interest to its displayed size (15 x 15)
21
Q
Prior to executing each net basis trade for a non institutional client , what must be obtained ?
A
Written consent on an order by order basis
22
Q
How is the volume weighted average price (VWAP) calculated ?
A
By totaling the dollar value of each trade (shares x price) divided by total number of shares traded over a given period
23
Q
If the difference between the bid and ask, widens, is this a sign of a liquid or an illiquid market?
A
Wide-spreads are a sign of an illiquid market
24
Q
True or false: the 5% policy is based on the dealers inventory cost on a security
A
False, it is generally based on the inside market price
25
What is the maximum size order that can be entered into the NASDAQ market center execution system?
999,999 shares
26
FINRA disseminates _________ trade information for TRACE eligible securities
Real time
27
True or false : once a firm files an application for market making , it may immediately begin to quote specific stocks
False - after filing an application for market making, the firm must be notified by FINRA of its effectiveness
28
For trades effected between a member firm and a nonmember firm or customer , the _______ reports the trade
The member firm reports
29
For what transactions does TRACE NOTTT disseminate real time trade information?
Rule 144A with QIBs
30
Sales of new issues and mutual funds and trades between members are_____ from the 5% policy
Exempt
31
If a security is listed from Nasdaq , it may begin trading on the pink market_______
Immediately
32
What is CAT?
Consolidated audit trail
It enables FINRA to review all treating activity in the US equity and option markets
33
True or false : executions may occur against a market maker’s displayed and reserve (undisplayed ) size
True
34
How often must BDs publish reports summarizing their order routing practices
Quarterly
35
what’s an example of an alternative trading system ATS?
ECNs, trade crossing networks, firms internal execution system
36
A firms trading desk may buy at a price that will fill a client order of another desk if_________ exist
Information barriers
37
True or false: TRF is used to execute trades in NASDAQ securities
False – it is used to report not execute
38
Where would do not reduce DNR instructions appear?
On the order ticket
39
On a net basis trade, BD capacity is reported as______ on the confirmation, but ______ is NOT disclosed
Reported as principal on the confirmation, but markup is NOT disclosed
40
Block trades of _____ shares or more, or $______ or more, are exempt from the Limit Order Display Rule
10,000 shares or $200,000
41
True or false: for principal trades, commission must be disclosed
False - principals charge markups or markdowns NOT commissions
42
If a new market maker enters a quote with the asked price lower than the highest bid, the market is_______
Crossed
43
True or false: some transactions may justify a markup higher than 5% while for others 5% may be too high
True
44
When is a firm generally prohibited from entering proprietary orders?
If the firm knows of an an executed client order on the same side of the market that may be executed at the same price.
45
Rather than displaying an order, what alternatives are available to firms?
Execute it upon receipt or deliver it to an ECN or another firm that is complying with the limit order display role
46
For NMS stocks priced at less than $1 what access fee may market centers charge market participants?
0.3% of the dollar value of the quote
47
True or false: trade confirmations must disclose details of trades affected through a payment for order flow agreement
True
48
Not held orders may be placed by both_____ And_______ customers
Retail and institutional customers
49
What information must be included in a broker dealers quarterly routing report?
The security and the option market center to which the orders are routed
50
To establish a give-up relationship , which BD is required to file the appropriate forms with Nasdaq ?
Both broker dealers are required to file
51
To establish a give-up relationship , which BD is required to file the appropriate forms with Nasdaq ?
Both broker dealers are required to file
52
True or false: TRACE disseminate information on debt securities sold under rule 144A and transaction between two QIBs
False – although the trade information is reported to TRACE, it will not be disseminated
53
What is the system that provides quotes for the third market?
CQS
54
If the highest bid is above the lowest ask, the market is____
Crossed
55
What are the three orders that are reduced on the ex dividend date?
Buy limits, sell stops, and sell stop limits (unless marked DNR)
56
What is the trade reporting system for NASDAQ securities?
TRF which used to be ACT
57
What is the difference in reporting a risk less principal trade and a net basis trade?
A restless principle trade may be reported as one trade, while net basis trades require two separate reports
58
Fails-to-deliver and threshold securities that have existed for________ settlement days must be closed out
13 consecutive settlement days
59
What is an ATS – alternative trading system?
an SEC approved, non exchange, electronic trading system designed to match the buy and sell orders of its subscribers
60
Form 211 is required for those initiating quotes in______
Non exchange (OTC) securities
61
A market maker is quoting a stock at 22.25- 25.30. If it receives an order to buy 300 shares, what must it sell?
With no size indicated, the “represents a willingness to buy 100 shares at its bid or sell 100 shares at its offer
62
Miss Gray places in order to buy 1000 shares of ABC. What must the broker dealer obtain to fill her order on a net basis capacity?
Miss Gray written consent must be obtained prior to executing the trade
63
True or false: if executed, MOC orders receive the closing price
True
64
When providing a firm quote for a NASDAQ stock, the minimum size is_____ shares
100 shares
65
True or false: if the security is delisted from NASDAQ, it may no longer trade in any market
False – a delisted NASDAQ security may begin trading on the OTC markets immediately
66
Before initiating quotes for a non-exchange stock what is the member firms responsibility?
The coding firm must collect and review certain information about the issue – i.e. complete form 211
67
True or false: firm at the inside market receives a client limit order equal to the firms quote must add to its size
True – it must increase the size of its “, unless de minimus (order size is 10% or less of market makers current size)
68
If a market maker decides to raise its bid on what NASDAQ level does this occur?
Level lll
69
True or false: a memorandum of each trade must show the terms of the transaction along with any modifications
True – trade tickets will also show the account name or number and the person accepting the order
70
True or false: SEC rule 606 requires a broker dealers quarterly order flow report to include pink market equities
False – pink market, and other OTC equities are not included
71
What trades are covered by the 5% policy?
Secondary market trades of stocks, corporate bonds, and treasuries
72
Is a riskless principal trade reported to FINRA as one or two transactions?
One
73
True or false: form 211 must be filed by firms that intend to make markets in NASDAQ securities
False – form 211 is required for firms that intent to initiate quotes for non-exchange securities
74
Prior to initiating quotes for an OTC equity, how many specific items about the issue may be required?
16 items that must be reasonably current
75
Due to a staff shortage, broker dealer 1 gives the client order to broker dealer 2 to execute with extra costs passed to the client. Is this acceptable?
No, this is interposition Ing and is not advantageous to the client
76
If not, a market maker, a NASDAQ member may have access to what level of NASDAQ to view quotes?
Level ll
77
Is the net basis trade reported to FINRA as one or two transactions?
It is reported as two separate transactions
78
True or false: non-displayed orders are NOT subject to price protection rules
False
79
A market maker is quoting ABC at
21.05– 21.35, 15 x 10.
What happens if it accepts a client order to sell 500 at 21.35?
If client interest is 10% or less of the market makers size no changes made (de minimis)
80
True or false: the capacity in which the firm is acting in a transaction is found on the order ticket
False – firm capacity is found on the confirmation
81
Where would information regarding an order’s time of entry and execution (time stamps) be found?
Order ticket
82
How long are not-held orders considered to be in effect for?
One trading day
83
According to the limit order display rule, what is a block sized order?
10,000 shares or with the value of at least $200,000
84
“ sell 300 shares of XYZ today if it starts to rise”
What kind of order is this?
A not held order
85
When one broker dealer executes a trade on behalf of another broker dealer and reports the trade to the clearing corporation, this is an example of what type of transaction?
A give up
86
If an ECN is unable to match a subsubscribers order internally, it will most likely display the order on the____
ADF
87
True or false: market makers, and ECNs must display their quotes on the NASDAQ market center execution system
False – market participants may display their quotes on the ADF
88
To comply with the best execution rule, is a broker dealer always required to obtain the best market price available for clients?
No, but broker dealers are required to use reasonable diligence to obtain the best price possible
89
A market maker is quoting stock at 14.50 - 15.00, 3 x 5. The firm must fill how many shares at the bid price?
They must fill a minimum of 300 shares
90
What is the difference between NMS securities and OTC equities?
NMS securities are those listed on NASDAQ or other national exchanges while OTC equities are not
91
To enable them to compete with market makers, customer limit orders are subject to______ rules
Display
92
What steps should be taken when a registered rep executes a trade, but uses the wrong account number?
Do a cancel and rebill – transfer the trade to the correct account number with permission of a supervising principal
93
What are the regular hours for the ADF trading center?
9:30 AM to 4 PM
94
What does selling short mean?
Selling securities that are not owned, but are borrowed from a broker dealer
95
When a broker dealer buys ABC calls for itself before executing a buy order it is holding for an institution, it is known as____
Front running
96
Which market does the CQS consolidate codes for?
NYSE
NOTTTTTT NASDAQ OR OTC
97
Sally converts her XYZ bonds and enters in order to sell XYZ stock. How would the cell order ticket be marked?
Since the tender for conversion has been entered prior to the sale, the order ticket may be marked long
98
Unauthorized trading by a registered person is also referred to as______ trading
Rogue
99
What transactions are exempt from the debt markup policy?
Municipals, treasuries, or QIBs buying non-investment grade debt
100
“ buy some ABC shares today if it’s price begins to fall”
Does this type of order require prior discretionary authorization?
Yes, because this is NOTTT a not held order since the client did not specify the quantity of shares to be purchased
101
Current quotes of all market makers for a specific security can be found where?
On level ll of NASDAQ
102
What securities are quoted on the CQS?
Common and preferred stock, convertible, bonds, warrant, rights
103
The life of an order, including receipt, routing, display, modification, cancellation, and execution is all information that is included in what report?
CAT
104
A _____ Order indicates quantity, security, and whether to buy or sell and is executed at the best price available
Market
105
What concern would a firm have if a traitor repeatedly requests that the firms internal controls be relaxed?
Rogue trading
106
What securities are not TRACE eligible?
Money market, securities, foreign government, and municipal
107
How long will a day limit order remain on the display book?
Until executed or end of the day if un executed
108
True or false: an order ticket will indicate if an order was discretionary, solicited, or unsolicited
True
109
What is the initial bid price requirement for a stock listed on any level of NASDAQ?
$4
110
A client with the future’s contract has decided to sell stock. When may the order ticket be marked long?
Before the sale and the client is notified that the future’s contract will be settled, resulting in delivery of shares
111
To be considered a THRESHOLD security, excessive fails to deliver must occur for_____ consecutive settlement days
5 consecutive settlement days
112
Our exchanges considered auction markets or negotiated markets?
Auction markets
113
Where would a firm disclose whether an order was solicited or unsolicited?
On the order ticket – not the confirmation
114
Under the customer limit order protection rule, what is considered a large order?
10,000 shares or more unless the value is less than $100,000
115
NASDAQ market maker normal market hours are from______
9:30 AM to 4 PM
116
In order to NOT file form 211, no more than _____ business days may have elapsed without a quote for the stock
4 business days
117
What does the order protection rule (NMS Rule 611) prohibit ?
A market center is ability to trade through the best protected quote in an automated market
118
True or false: executing a client’s trade outside of the US would be an acceptable use of interpositioning
True
119
A broker dealer, practice of providing monetary incentive for routing orders to a broker dealer or exchange is defined as________
Payment for order flow
120
True or false: do not display requests may be entered by clients
True
121
The price that one broker dealer will pay another broker dealer for security at the time of a client’s trade when no competitive market exists is called_______
Contemporaneous cost
122
According to the Department of Justice, what activities of BDs would not be considered collusive?
Executing some trades outside of the inside market or executing large block trades outside of normal hours
123
How does NMS rule 611, the order protection rule, seek to prohibit the trade through practice?
By requiring a market center to route orders to the automated market displaying the best price
124
True or false: large orders may not be split to enter them into the NASDAQ market center execution system
False – large orders may be split to enter into the system
125
Who has the authority to stop stock in NYSE?
The designated market maker may stop stock
126
Who publishes a list of all threshold securities?
A self regulatory organization SRO
127
Beyond bid price and market makers, list some other considerations for a stock to be able to list on a market platform?
Public float
Round lot shareholders
Market cap
Revenues
NOT OFFERING PRICE
128
True or false: for trades negotiated manually not electronically reporting is done by the member firm
False – negotiated manual executions are reported by the executing firm
129
An order that does not have a specific market center designated by the client and has chosen by the broker dealer is a _____ order
Non directed
130
While holding a large block order to buy from a client, what action would be prohibited for the market maker?
Executing in order for its own account in an option on the security a.k.a. front running
131
ABC’s inside market is 15.15–15.40. May a new market maker enter a quote of 15.40–15.75?
No, because the high bid 15.40 and the low offer 15.40 would be the same price resulting in a locked market
132
True or false: a sell order ticket may be marked long if the client or his agent has title to the security
True - a broker dealer must be in possession of a security or have reason to believe the client is long and will deliver promptly
133
TRF reports trades in which securities?
Nasdaq and third market
134
For agency trades,________must be disclosed
Commissions
135
True or false: in a step-out transaction a clearing report, but not a trade report, is submitted
True
136
Trades involving US government securities effected by any type of client are _____ from the debt markup policy
Exempt
137
How long will a GTC good till call limit order remain on the display books
Until executed or cancelled by the customer
138
What are the system hours of operation for the ADF?
8am to 630pm
139
What is a threshold security
A reporting company’s stock that has substantial fails to deliver positions in existence for 5 consecutive business days
140
After the initial requirement is met, what bid price is required to continue to be listed on an level of Nasdaq
$1.00
141
Though acting in good faith a customer sells securities but does not deliver. When must the BD close out the trade
All fails-to-deliver must be closed out within 35 calendar days
142
What is the minimum quote size for a Nasdaq market maker ?
100 shares or one round lot
143
True or false: to be exempt from the debt markup policy , municipal bonds trades must involve only investment grade debt
False - the municipal bonds trades may include both investment and non investment grade debt
144
What does the following quote of a Nasdaq market maker indicate it is willing to do ? 15.30- 15.35, 6 x 10
Buy up to 600 shares at 15.30 or sell up to 1,000 shares at 15.35
145
The inside market for an NMS security is 12.56 - 12.62, 10 x 15.
May a BD place a bid $12.58?
Yes the broker dealers bid at $12.58 would serve to narrow the spread
146
When a BD buys or sells stock on a principal basis and fills an existing client order at a different price , this is a ______ trade
Net basis trade
147
What securities are included in a monthly market center reports
NASDAQ and exchange securities for which information is sent through an automated quotation system
148
To prevent rogue trading, a BD may limit an employees access to only trading systems that are ______to his job
Appropriate
149
Nasdaq system hours are ___am to ____pm
4am to 8pm
150
What type of transaction transfers the trade from one broker dealer to another for clearing purposes
A step out
151
A narrowing market means its______
Liquid
152
A market maker is quoting ABC at 21.05–21.35, 15 x 10. What happens if it accepts a client order to sell 700 at 21.30?
The market makers quote is improved, it must display the clients interest. Its quote is now 21.05–21.30, 15 x 7.
153
In Nasdaq level ll, what does TotalView provide members ?
Additional depth and aggregate size at the five best price levels
154
According to the piggyback exception, when is the filing of form 211 not require required?
When the stock has been quoted on a regular and continuous basis for the past 30 days
155
True or false: customer selling stock are considered long if they own a preferred or bonds convertible into the stock
False – the convertibles must already have been tendered for conversion
156
True or false: a market makers quote represents the maximum number of shares it will buy or sell
False – the market maker may buy or sell more shares than it’s bid and offer displays
157
Nasdaq Level lll allows a market maker to ____ and ______ its quote
Enter and change its quote
158
What does it mean to indicate that NASDAQ market center execution system trades are locked in?
The terms have been agreed to by the parties, and the transaction is ready for clearance and settlement
159
Name a type of transaction that is exempt from FINRA debt markup policy
Transactions in municipal securities
160
Bill directs his broker dealer to sell his $10,000 of ABC and use the proceeds to buy $10,000 of XYZ
What type of trade is this?
A proceeds transaction
161
If a trade is effected between two member firms, who is responsible for reporting the trade?
The executing firm
162
The type of security, the price of the security, and the availability of the security in the market are all factors that are used to determine______
The markup of a security under the 5% policy
163
True or false: under the limit of limit down rules, a trading pause may occur if the security enters a straddle state
True – the primary listing market may declare a trading pause when the security is in a straddle state
164
True or false: national best offers below the limit up limit down upper price band are non-executable
False –an NBO below the limit up limit down upper price band is executable
165
What is the first priority used by a dealer when determining the markup on debt securities?
The contemporaneous cost of the dealer
166
Do not display requests should be_______ in the request maybe on a______ basis
Documented, trade by trade
167
To be a threshold security, how many shares must be in a failing position?
10,000 shares or more
168
NMS rule 612 generally prohibits market participants from displaying orders and pricing increments of ______\
Less than one cent
169
True or false : ECNs use the ADF to display orders
True
170
To obtain consent for affecting net basis trades for non-institutional clients, as a negative consent letter allowed?
No, they are only allowed for institutional clients
171
Size/type of transaction, number of markets, checked, accessibility of quotes, terms/conditions of the order are all examples of:
Factors considered when attempting to obtain best execution
172
A broker dealer holds a client order to buy 500 shares at $15. What would trigger an obligation to fill the clients order?
A broker dealer purchasing for its own account at $15 or lower
173
“ sell some of my RST position today if the news is bad”
Is this a not held order?
No, because the client did not specify the number of shares to sell
174
As it relates to TRACE eligible securities, what does split rated mean?
Securities are given an investment grade rating from one rating organization, and non-investment grade from another
175
True or false: having unrealized profits or losses on unsettled trades may indicate rogue trading
True
176
What is the number of market makers needed to qualify for listing on a NASDAQ capital market?
At least three market makers
177
A broker dealer sends its client orders to an exchange for execution and is rebated for executed trades. What is this practice?
Payment for order flow
178
Sharing client order information, selectively backing away from quotes, coordinating prices with other market makers are all examples of:
Broker dealer practices that are prohibited via the Department of Justice
179
In the manning rule, what is the order size that warrants an exception?
10,000 shares or $100,000
180
The Limit Up Limit Down rules address sudden price movements in ____stocks
NMS
181
To buy or sell at their publicly quoted prices, to trade from inventory, and to provide liquidity are all roles of_______
Nasdaq Marker Makers
182
What orders are exempt from the limit order protection rule?
Orders from institutional accounts and orders of 10,000 shares or more worth at least $100,000
183
What does the best execution rule require a member firm to do?
Use reasonable diligence to obtain the best price possible for a client
184
The customer limit order protection rule applies during___ hours and_______ hours, and when orders are sent to the ECN or another entity for execution
Normal and extended trading hours
185
What events may cause the prevailing market for a debt security to be different than the contemporaneous cost?
Change in ISSUERS credit rating, a change in market interest rates , or significant news reports about the issuer
186
What does level lll NASDAQ give market makers the ability to do?
Change their quote
187
A market maker executes an order either before or at the time of presentation and revised it’s quote immediately upon completion is an exemption to what rule?
Trade ahead exemption to the firm quote rule
188
a BD sends an order to Market Center A whose offer is $14.85, while Market Center B’s offer is $14.83. Is this allowed?
No because the order should be routed to market center B, which is quoting the stock at a superior a.k.a. lower price
189
Market centers are required to create_______ reports disclosing the measure of the quality of order execution
Monthly
190
The consolidated quotation system provides quotes for_______ and ______ listed securities including third market quotes
NYSE and AMEX
191
Related to the order protection rule (NMS rule 611) what is the protected quote?
Any quotation that is immediately accessible through an automated execution system
192
An absence of a prevailing market price____________ is used in determining the markup on corporate bonds
Contemporaneous cost
193
True or false: the locate requirement of regulation SHO applies when a sell order ticket is marked long or short
False – it is only relevant when the sell order ticket is marked short
194
In order to complete Form 211 prior to quoting a stock, where may the issuer information be obtained ?
From the issuers current prospectus or offering circular, it it’s most current 10-K and subsequent 10-Q and 8-K forms
195
Along with the stock price, what orders are reduced on the ex dividend date
Buy limit and sell stops
196
What’s the minimum bid price AND number of market makers required to remain listed on the NASDAQ global and capital markets?
A minimum bid price of one dollar with at least two market makers
197
Splitting clients securities orders into multiple smaller orders to maximize payments or rebates to the member is_____
Trade shredding
198
Prior to initiating quotes for an OTC equity, with whom must the information collected about the issuer will be filed?
FINRA
199
Prior to initiating quotes for an OTC equity, with whom must the information collected about the issue will be filed?
FINRA
200
If contemporaneous cost is not used to determine a debt security’s markup, what method would be the least important?
An economic model developed by regulators of the bond market (this is the last resort method)
201
True or false: BD’s may not enter proprietary orders through the Nasdaq Market Center Execution System?
False – both agency and proprietary orders may be entered into the system
202
When a firm dominates or controls the market for security, on what is a markup based?
The firms contemporaneous cost
203
The inside market for an NMS security is 12.56–12.62, 10 x 15 . May a broker dealer place a bid at $12.65?
No because a bit of $12.65 with the inside offer of $12.62
204
If not using contemporaneous cost, IN ORDER what are the three factors a broker dealer may use to determine fair value on a bond trade?
1. Recent prices of trades between dealers
2. Interdealer quotes
3. prices of equivalent securities
205
When is a market maker’s application considered effective ?
When notified by FINRA
NOTTT NASDAQ
206
When are trades in foreign securities excluded from the reporting requirement?
When executed on and reported through a foreign exchange
or when executed OTC and reported to a foreign regulator
207
Trading without approval in a product outside their expertise or an unusual pattern of cancelled trades by traders are all examples of________
Rogue trading
208
FINRA’S5% policy addresses transactions executed in the_______ market
secondary
209
True or false: in order to will identify the broker on the other side of the trade, a.k.a. the contra broker
False
210
What does a firm need to obtain in order to get an exception from the customer limit order protection rule?
It must obtain client consent and it must disclose that it may potentially trade ahead before an order is accepted
211
True or false: an ATS is NOT required to register with the SEC
False - under regulation ATS, an ATS is generally required to register as a broker dealer
212
If a broker dealer holds a client order to sell 500 shares at $21, what would trigger an obligation to fill the clients order?
The broker dealer selling from its own account at $21 or higher
213
The issuer’s current prospectus or offering circular, or its current form 10-k and all subsequent 10-Q and 8-K forms must be obtained for information about the issuer before initiating quotes for a ________ stock
Non-exchange stock
214
For debt transactions, how is markup generally determined?
It is based on the dealers contemporaneous cost
215
A market maker is quoting ABC at 21.05-21.35, 15 x 10. What happens if it receives a client order to buy 200 at 21.10?
If the market makers quote is improved, it must display the client’s interest. Its quote is now 21.10 - 21.35, 3 x 10
216
What type of orders are accepted by the NASDAQ market center execution system?
Market and limit orders
217
True or false: clients must provide verbal or written consent to a broker dealer concerning payment for order flow arrangements
False – broker dealers are required to provide disclosure of the arrangement
218
The Manning rule relates to______
Customer limit order protection
219
The ECN is one of several systems that permits the entry and________ of quotes
Dissemination
220
If a broker dealer receives a client order to sell 20,000 BBB at $54, WHEN may its proprietary trader sell the BBB at the same price?
When the firm implements the system to prevent the misuse of information regarding client orders – basically information barriers
221
An executing broker dealer allocates all or part of the trade to another broker dealer for clearing purposes. This is a._______
Step out transaction
222
What are the two ways order tickets can be marked when selling securities ?
Long or short
223
For what type of firm would employee vacations qualify as an excused withdrawal for market making purposes?
A small firm with three or fewer level lll terminals
224
The NASDAQ market center execution system is in order display and execution system for what securities?
NASDAQ and CQS a.k.a. third market securities
225
What is exempt from the 5% policy besides IPO’s?
Municipal bonds, registered, secondary offerings, and mutual funds
226
Before initiating quotes for an OTC equity, what is the quoting firms responsibility?
To collect, review, and ultimately submit certain information about the issuer to FINRA
227
If a new market maker enters a quote with the bid equaling, the lowest asked price, the market is___
Locked
228
A _____ order indicates quantity, security, and whether to buy or sell but only at a particular price or better
Limit
229
When a client designates a specific market center to which her order is routed, it is a______order
Directed
230
The security involved, it’s availability, it’s Pryce, the total money involved, and the pattern of markup are all factors to be considered when determining the____
Mark up on a transaction
231
A market maker may withdraw its quote for up to___business days for issues beyond its control such as a system outage
5 business days
232
Which orders may be entered as either good to cancel GTC or as day orders?
Limit and stop orders
233
What type of order only permits discretion related to the time and or price of execution?
A not held order
234
Form 211 must be filed at least ______ business days prior to initiating quotes for an OTC security
3 business days
235
On a quarterly basis, broker dealers must disclose their routing practices for________ orders in NMS securities
Non-directed
236
Nonexchange is another term for___
OTC
237
When is a VWAP order entered?
Prior to determination of the actual price which makes the broker dealer guarantee the VWAP as of a certain period
238
What must declined by a specific percentage to trigger a trading halt?
The S&P 500 index
239
A firm buys 1000 shares of ABC at $20 as a principle and sells the shares to a client at $20.50
This is a ____ trade
Net basis trade since the price is different
240
What is required of a US and foreign corporate debt for it to be TRACE eligible?
It must be registered with the SEC or purchased or sold under rule 144 a of the securities act of 1933
241
For LULD rules, if the NBB is on the upper band or the NBO is on the lower band, the market is in a _____state
Limit
242
Form 211 is filed with ____
FINRA
243
OTC equities are ____traded and prone to manipulation
Thinly
244
For LULD rules, upper and lower price bands are set around the securities
_____ price
Reference
245
True or false: the ADF displayed quotes for OTC equities
False – the ADF displays quotes for NASDAQ and CQS securities
246
ABC inside market is 15.15–15.40. May a new market maker enter a quote of 14.90–15.25?
Yes, because it’s narrowing the spread to 15.15–15.25
247
A broker dealer is required to post its order routing information on its_____
Website, which is free of charge and accessible to the public
248
Orders that are immediately executed, orders sent to a broker dealer or EC and that complies, customer requests do not display, and block orders are all exemptions to which rule?
Limit order display rule
249
What must exist for the Manning rule to not apply to other trading desks of a broker dealer?
Information barriers
250
Without causing a regulatory violation, why may a presented order not be honored by a market maker?
Either before or at the time of order presentation, the broker dealer execute an order and will immediately revise its quote
251
When a trade involving the same security has occurred at a time close to the dealers trade as used in a debt market policy provisions, this is a ________
Prevailing market, a.k.a. contemporaneous cost
252
A market maker quotes a stock at 14.50–15.00, 3 x 5, at what price wouldn’t customers market order to buy be filled ?
Customer market orders to buy are filled at the ask price of 15.00
253
In order giving agents discretion as to execution time/price
This is all a _______
Not held order
254
Market makers quote: 17.40-17.45, 8 x 7.
Will the quote change upon receipt of client order to buy 300 shares at 17.42?
Yes, it changes to 17.2- 17.45 , 3x7
A client’s buy limit order competes with broker dealer bid prices in the market
255
A market maker quotes a stock at 14.50–15.00, 3 x 5. At what price would a customers market order to sell be filled?
Customer market orders to sell are filled at the bid price of 14.50
256
When must clients be told about details of any payment for order flow practices?
They must be informed in writing at the opening of an account and an annually thereafter
257
A broker dealer receives a large buy order from a client. When may the broker dealer execute a trade for the same stock and its own account?
After the client’s trade is reported on the tape
258
_____ orders are to be executed at the clothes only if that price is at or better than the set limit
LOC
259
True or false: the number of marketmakers for security is a key consideration when determining best execution
False
260
Under the limit order display rule, how quickly must orders that improves the market makers’s quote be displayed?
Immediately, but no later than 30 seconds
261
When do CAT reports need to be submitted to FINRA?
On the trading day after the data is recorded
262
For LULD rules, if the NBB is on the upper band or the NBO is on the lower band, the market is in a_____ state
Limit state
263
If securities are suspected to be lost, the member firm has _____ business days to find the securities and then must notify the SIC on the next business day
2 business days and then must notify the SIC on the next business day
264
Does an RR who solely processes customer transactions need to be fingerprinted ?
No because they only prepare confirmations
265
Do clerical employees of a BD who handle customer records need to be fingerprinted?
No because it’s not books/records of original entry that they’re handling
266
The only time under Rule 103 of Reg M that passive market makers can display a bid higher than the highest current independent bid is:
Unsolicited customer orders
267
Under Rule 144, when is a security exempt from the six month holding period requirement?
If it is transferred to the estate of a person since deceased
