CH 12 Reporting Flashcards
What is the ADF reporting system?
The ADF reporting system reports trades in securities quoted in the Alternative Display Facility (ADF).
True or False: In a step-out transaction, a clearing report, but not a trade report, is submitted.
True
What is the difference in reporting a riskless principal trade and a net basis trade?
Riskless principal trades may be reported as one trade, while net basis trades require two separate reports.
True or False: Trades executed between 8:00 p.m. and 8:00 a.m. ET must be reported within 10 seconds of execution.
False. The 10-second reporting requirement applies to trades executed between 8:00 a.m. and 8:00 p.m. ET.
True or False: TRACE disseminates information on debt securities sold under Rule 144A and transacted between two QIBs.
False. Although the trade information is reported to TRACE, it will not be disseminated.
If a transaction is reported at a clearly erroneous price, when will review and action be taken by FINRA?
Under normal circumstances, within 30 minutes.
What system is used for reporting corporate bond trades?
TRACE (Trade Reporting and Compliance Engine)
To establish a give-up relationship, which BD is required to file the appropriate forms with Nasdaq?
Both BDs are required to file.
True or False: An order-entry firm has 10 seconds to accept or reject a trade report submitted to FINRA.
False. The order-entry firm has 20 minutes to accept or reject a trade report submitted to FINRA.
What system facilitates the mandatory reporting of secondary-market trades in eligible fixed-income securities?
TRACE (Trade Reporting and Compliance Engine)
What is TRF?
The Trade Reporting Facility. TRF reports trades in Nasdaq and Third Market securities.
Regulations consider riskless principal trades as ______ trades since the executing BD is not exposed to _______ risk.
Regulations consider riskless principal trades as agency trades since the executing BD is not exposed to market risk.
True or False: Money-market instruments are TRACE-eligible securities.
False
What type of transaction transfers the trade from one BD to another for clearing purposes?
A step out.
What is CAT?
The Consolidated Audit Trail; it enables FINRA to review all trading activity in the U.S. equity and option markets.
For a trade involving OTC securities, the __________ firm is responsible for reporting.
For a trade involving OTC securities, the executing firm is responsible for reporting.
A firm buys 1,000 shares of ABC at $20 as a principal and sells the shares to a client at $20. What is this trade?
Since the price is the same, it is a riskless principal trade (the markup is required to be disclosed).
Corporate bond trades are reported through TRACE within _____ minutes.
Corporate bond trades are reported through TRACE within 15 minutes. (TRACE then disseminates information in real time)
What is TRACE?
The Trade Reporting and Compliance Engine. TRACE is a reporting system for corporate bonds.
What two situations would require a trade to be reported to TRACE within 15 minutes of the next TRACE opening?
A trade occurs within 15 minutes of TRACE closing or a trade occurs when TRACE is not open.
True or False: In a step-out relationship, only a client’s complete position may be transferred to another BD.
False. All or part of a client’s trade may be transferred to another BD for clearing purposes.
True or False: Debt issued or guaranteed by a foreign government is TRACE-eligible.
False. Only debt issued or guaranteed by a U.S. Government agency or enterprise is TRACE-eligible.
A trade in a TRACE-eligible security is executed at 2:55 p.m. When is the trade required to be reported?
By 3:10 p.m. (within 15 minutes)
For trades that occur between 8:00 a.m. and 6:29:59 p.m. ET, when is a TRACE report made?
Within 15 minutes of the trade.
Is a riskless principal trade reported to FINRA as one or two transactions?
It is reported as one transaction.
True or False: CQS transactions must be reported within 10 seconds of completion.
True. CQS transactions must be reported within 10 seconds.
Explain a give up transaction.
When one broker executes a trade on behalf of another broker and reports the trade to the clearing corporation.
Once a TRACE report is made, when is the information available to the public?
Immediately.
What is the trade reporting system for Nasdaq securities?
Trade Reporting Facility (TRF) - formerly the Automated Confirmation Transaction system (ACT).
When do CAT reports need to be submitted to FINRA?
On the trading day after the data is recorded.
When would the following trades be reported to TRACE? One was executed at 6:20 p.m., the other at 8:40 p.m.
Both need to be reported within 15 minutes of TRACE opening on the next business day.
True or False: TRF is used to execute trades in Nasdaq securities.
False. TRF is a reporting, not execution, system for Nasdaq securities.
What information is included in a CAT report?
The life of an order including receipt, routing, display, modification, cancellation, and execution.
True or False: Only a FINRA member involved in a trade with a nonmember is required to report it to TRACE.
True. The FINRA member reports the entire trade.
Between 8:00 a.m. and 6:29:59 p.m. ET, two FINRA members are involved in a trade. Who reports it to TRACE?
Each FINRA member is required to report its side of the trade.
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.
For trades effected between a member firm and a nonmember firm or customer, the ________ reports the trade.
For trades effected between a member firm and a nonmember firm or customer, the member reports the trade.
Explain a step-out transaction.
An executing BD allocates all or part of a trade to another BD for clearing purposes.
FINRA disseminates __________ trade information for TRACE-eligible securities.
FINRA disseminates real-time trade information for TRACE-eligible securities.
What is the trade reporting system for OTC equities?
Over-the-Counter Reporting Facility (ORF).
When must trades executed between 8:00 a.m. and 8:00 p.m. be reported?
Within 10 seconds of execution.
Give some examples of TRACE-eligible securities.
Depository-eligible, U.S. dollar-denominated debt of U.S. and foreign companies, investment or non-investment-grade debt.
If a trade is effected between two member firms, who is responsible for reporting the trade?
The executing firm.
Transactions effected on an exchange or OTC must be reported within ____ seconds.
Transactions effected on an exchange or OTC must be reported within 10 seconds.
True or False: If a give-up transaction is not reported appropriately, neither firm is responsible.
False. If reporting is not done appropriately, both firms are responsible.
True or False: Government bond trades are reported through TRACE.
True.
What securities are NOT TRACE-eligible?
Money-market securities (with maturities of less than one year), foreign government securities and municipal securities.
For what transactions does TRACE not disseminate real-time trade information?
Rule 144A debt transactions between qualified institutional buyers (QIBs).
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.
True or False: Trades executed through the Nasdaq Market Center Execution System do not have to be manually reported.
True. They are automatically reported by the system.
On a riskless principal trade, the _______ on the trade must be disclosed to the client.
On a riskless principal trade, the markup on the trade must be disclosed to the client.
Two Nasdaq member firms effect a third-market trade. Who is responsible for reporting the trade?
The executing firm.
What is required of U.S. and foreign corporate debt for it to be TRACE-eligible?
It must be registered with the SEC or purchased or sold under Rule 144A of the Securities Act of 1933.
Generally, TRACE reporting is required within ____ minutes of a trade.
Generally, TRACE reporting is required within 15 minutes of a trade.
Trades executed through an electronic system are reported _______________.
Trades executed through an electronic system are reported automatically.
True or False: Debt issued or guaranteed by a U.S. government agency or enterprise is TRACE-eligible.
True.
What’s the ORF?
The OTC Reporting Facility (ORF) reports trades in OTC markets (e.g., the Pink Market).
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.
True or False: In order to have a give-up relationship, an agreement must exist between the two firms.
True.
A TRACE-eligible corporate bond trade occurs at 6:20 p.m. When is the trade required to be reported?
It may be reported within 15 minutes of TRACE opening on the next business day.
