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Series 7 > Trading > Flashcards

Flashcards in Trading Deck (19):
0

Hi trading volume and narrow bid/ask spreads would be characteristics of a what?
A. Consolidated market
B. Efficient market
C. In efficient market
D. Centralized market

The correct answer is B

1

Which of the following orders are accepted on the NYSE automated trading system?
A. Day and GTC orders
B. Market orders
C. Limit orders
D. Large block orders

The correct answer is C
The super display book system cannot handle any size order. Their maximum order sizes for example 3 million shares for limit orders. The system excepts market limit and stop orders whether the duration specified is a day or good to close

2

A customer has an open order to sell 200 shares of aBC at $50 stop. ABC declares a 10% stock dividend. As of the EX date, the adjusted order on the specialist book will be what?
A. Sell 200 shares of ABC at 45.45 stop
B. Sell 220 shares of ABC at 45.45 stop
C. Sell 200 shares of ABC at 50.00 stop
D. Sell 220 shares of ABC at 50.00 stop

The correct answer is a
This is a very subtle question. When there is a stock dividend or a split, the order must be adjusted in the specialists book on EX date the price of the stock is reduced and the number of shares covered by the order is increased. The trick is if the adjusted oversize results in an odd lot occurring the order size is adjusted to the lower round lot figure. For example, if a 600 share order is adjusted for a 20% stock dividend, the new order would be 600×1.2 equals 720 shares, rounded to 700 share adjusted order. In this case the 10% stock dividend results in a new price of $50/1.1 equals 45.45. Adjusting the order for the 10% stock dividend would result in 1.1 X 200 equals 220 share order the extra 20 shares are an odd lot so the order is left at 200 shares

3

Under NYS E rules, a company moving it's listing from another market must meet which requirements?
A. 100,000 publicly held shares
B. 1,100,000 publicly held shares
C. 10 million Dollar aggregate market value of publicly held shares
D. 100 million Dollar aggregate market value of publicly held shares

The correct answer is B and D
Under NYSE rules, the numerical standards for a company wishing to move it's listing from another market include 2200 or more shareholders, with an average monthly trading volume of 100,000 shares for the past six months. There must be 1,100,000 publicly held shares with an aggregate market value of $100 million

4

If a firm effects trades solely on an agency basis, the firm:
A. Carries inventory
B. Does not carry inventory
C. Is a market maker
D. Is not a market maker

The correct answer is B and D
The firm effects trades solely on an agency basis, it carries no inventory and is not a marketmaker

5

Which of the following describes a proceeds transaction?
A. Buying a security into inventory directly from a customer with a markdown.
B. Purchases the stock into inventory and resells it to the customer
C. Simultaneously buying and selling short the same or equivalent security
D. Selling stock at the direction of a customer and using the proceeds to buy another stock for that customer

The correct answer is D
Any proceeds transaction, a customer direct that the firm seller position owned by the customer and uses the "proceeds" to buy another position.

6

All of the following are considered to be a good delivery for 500 shares trade of stock except which?
A. Two 250 share certificates
B. Twenty 25 share certificates
C. Ten 50 share certificates
D. Fifty 10 share certificates

The correct answer is a
To be a good delivery dealer to dealer, stock certificates must be delivered in multiples of 100 on one certificate or in certificates of less than 100, where the certificate can be added exactly to 100 share units. Two 250 are not multiples of 100 share certificates

7

Which orders guarantee execution but not price?
A. Buy limits
B. Buy stops
C. Sell limits
D. Sell stops

The correct answer is B and D
If a "stop" order is selected, it becomes a market order to be filled at the first opportunity. Thus, the actual price at which the order is executed is not known. On the other hand, a "limit" order specifies that the execution must comply with the limit price specified or better. Thus, limit orders are filled at that price or better

8

Retail member firms that route orders to marketmakers in return for compensation on what?
A. Markups
B. Markdowns
C. Commissions
D. Payments for order flow

The correct answer is D
If a retail member firm chooses a marketmaker to execute its orders in return for compensation from that marketmaker, then the retail firm is earning so-called "payment for order flow" the SEC PERMITS THIS PRACTICE, SUBJECT TO THE RETAIL MEMBER FIRM ALWAYS EXECUTING IT'S TRADES AT THE BEST AVAILABLE PRICE

9

When the standard and poors 500 index is at 1230 on a given day, the US listed equities market will close it's markets for the rest of the day if the index declines by a total of how many points?
A. 62 points
B. 86 points
C. 160 points
D. 246 points

The best answer is D
Under the circuit breaker rule, if the standard and poors 500 index falls by a cumulative 20% in a given trading day, the market will be shut for the balance of the day.

10

On the network tape for the NYSE the symbol S/S stands for what?
A. 10 share unit of stock.
B. 100 units of stock
C. 10 shares sold short
D. 100 shares sold short

The correct answer is a. The symbol S/S stands for a 10 share unit of stock so-called cabinet stock which are in frequently traded. The symbol S stands for 100 share units

11

Which of the following individuals trades on the New York Stock Exchange floor?
A. Specialist (DMM)
B. Floor broker
C. Two dollar broker
D. Registered representative

The best answer is a B and C

12

Which of the following are disclosed on a customer confirmation?
A. Commission if an agency trade was executed
B. Mark up if a principal transaction in a non-NASDAQ OTC security
C. inventory position of the dealer
D. Amount of accrued interest for a bond trade

The correct answer is a and D
Customer confirmations must disclose the commission agency trade. The markup is not disclosed in principal transactions and it is included in a net price. However it must be disclosed for principal transactions in NASDAQ stocks.

13

Which of the following are considered in determining a fair and reasonable price in a municipal agency transaction?
A. Availability of the security
B. Expenses associated with affecting the transaction
C. Value of services rendered by the municipal broker
D. Value of any other compensation received in connection with this transaction

The best answer is all of the above
In a municipal agency trade the MSRB states that there are four factors to be considered in determining a fair price.
• availability of the security, meaning how difficult was it to complete the trade?
• expenses associated with affecting the transaction
• value of services rendered by the municipal broker
• value of any other compensation received in connection with this transaction for example a customer direct a municipal dealer to sell one bond and use the proceeds to buy in a bond swap. The dealer is performing two trades instead of one and so should charge a bit less for each trade.

14

Which of the following securities are traded in the secondary market?
A. US government bonds
B. US government savings bonds
C. Municipal bonds
D. Municipal bond funds

The correct answer is a and C
US government bonds and municipal bonds are traded "over-the-counter" there is no trading for these on exchange floors. There is no trading on US government saving bonds because they are nonnegotiable. There is no trading of mutual fund shares either these are redeemable securities

15

Trading of securities on regional stock exchanges is most similar to trading, as it takes place, on the:
A. NYSE
B. CBOE
C. NASDAQ
D. MSRB

The correct answer is a

16

To open an options account, the customer must be sent the options disclosure document:
A. 15 days prior to opening the account
B. Five days prior to opening the account
C. At or prior to opening the account
D. 15 days after opening the account

The correct answer is C
The customer must be sent an options disclosure document at or prior to opening and options account. The date the customer was sent the disclosure document is noted on the options new account form. A copy of the options new account form is part of the options agreement that is sent to the customer, to be signed and returned within 15 days

17

When a custodian account is opened under UTMA (uniform transfers to minors act) the assets in the account must be:
A. Transferred to the new adult at legal age
B. Transferred to the new adult at the age specified by the custodian
C. Liquidated when the new adult reaches legal age and the proceeds given to the new adult
D. Transferred to a trust if no action is taken by the new adults at the legal age

The best answer is B
The main difference between UGMA AND UTMA is that while the assets in a UGMA account transfer to the new adults at legal age, and a UTMA account the custodian sets the transfer age up to the maximum age set by that state, in most states the maximum ages 25

18

Which of the following are defined as products offered by investment advisors
A. Non-managed fee-based accounts
B. Managed fee-based accounts or wrap accounts
C. Per trade commission charge accounts

The correct answer is a and B
Fixed fee accounts only cover trading costs. They do not include charges for asset allocation and portfolio management. Wrap accounts include asset allocation and portfolio management. Any fixed fee product is defined as an investment advisor product. Per Trade Commission charge accounts are brokerage products.