Ch. 19 S7

Question 1

The ex dividend date occurs ____ business day(s) _______ the record date.

Answer 1

One; before

Question 2

T/F: For a 500 share trade, two stock certificates each for 250 shares is considered good delivery.

Answer 2

F; certificates must be in multiples of 100 shares

Question 3

What are the specifics regarding the expiration of equity options?

Answer 3

They expire at 11:59 pm ET on the third Friday of the expiration month

Question 4

Who is qualified to endorse a mutilated certificate or coupon?

Answer 4

The issuer or one of its agents (transfer or paying agent or trustee)

Question 5

Why would a trade have “when issued” settlement?

Answer 5

Most likely because it’s a primary market (new issue) trade and the certificates have yet to be created

Question 6

________ is the settlement for cash transactions (also referred to as cash trades or cash settlement)

Answer 6

Same day

Question 7

What is TRF?

Answer 7

The Trade Reporting Facility. TRF reports trades in Nasdaq and Third Market securities.

Question 8

The term _________ refers to the form of issuance where there are no physical certificates delivered.

Answer 8

Book Entry

Question 9

When is a due bill required?

Answer 9

A due bill is required if a trade occurs before the ex dividend date, but the seller delivers after the record date.

Question 10

The _____________ issues and guarantees option contracts.

Answer 10

OCC

Question 11

For physical certificates to be in good deliverable form, stock and bond powers must be ____________.

Answer 11

Signature guaranteed

Question 12

Secondary market trades involving US Government securities settle ______________.

Answer 12

Next business day (T+1)

Question 13

When a BD reports a trade to the TRF, what type of information is included?

Answer 13

Nasdaq stock symbol, number of shares, price, whether a buy/sell/cross, execution time

Question 14

What are the advantages provided by the DRS?

Answer 14

It reduces turnaround delays, mail losses, and the risk associated with stolen, forged, or counterfeit securities

Question 15

To constitute good delivery, whose validations must be obtained for mutilated certificates?

Answer 15

The trustee, registrar, transfer agent, paying agent, or issued of the securities

Question 16

What method does the OCC use when issuing an exercise notice to a BD?

Answer 16

Random selection

Question 17

If directly held securities are registered in the clients name on the issuers books, with whom are they held?

Answer 17

With either the company or it’s transfer agent in book entry form

Question 18

How do investors receive interest on fully registered bonds?

Answer 18

Interest is mailed to the owner of record

Question 19

ABC sets a record date of Wednesday, Oct 19. Would a buyer of ABC on Tuesday, Oct. 18 be entitled to the dividend?

Answer 19

No, the investor must own (trade settles) on or before the record date. This trade would not settle until Oct. 20

Question 20

_____________ following the trade date is settlement for trades of Us Government securities or option contracts.

Answer 20

1 business day (T+1) following the trade date is settlement for trades of US Government securities or option contracts.

Question 21

How often is an OATS report required to be transmitted?

Answer 21

Daily

Question 22

Whose authentication is acceptable for mutilated securities?

Answer 22

The transfer agent, registrar, trustee, or issuer

Question 23

The OCC will automatically exercise any option that is in the money by $_____.

Answer 23

$.01

Question 24

If an equity option is exercised, when does the transaction in the underlying security settle?

Answer 24

In two business days (T+2)

Question 25

How often must OATS reports be submitted to FINRA?

Answer 25

Daily

Question 26

By what time must equity options be exercised?

Answer 26

5:30 pm ET on the third Friday of the expiration month

Question 27

How does OATS define an order?

Answer 27

Any oral, written, or electronic instructions to effect a trade received from clients, the member, or another firm

Question 28

Give some examples of TRACE eligible securities.

Answer 28

Depository-eligible, US dollar denominated debt of US and foreign companies, investment of non investment grade debt

Question 29

How do investors holding bearer bonds receive interest?

Answer 29

By clipping the attached coupons

Question 30

T/F: Debt issued or guaranteed by a US Government agency or enterprise is TRACE eligible.

Answer 30

T

Question 31

Under Regulation T, does the payment date requirement apply to cash or margin accounts?

Answer 31

Payment is required within four business days for both (100% in a cash account, but 50% in a margin account)

Question 32

When will a cash trade for a municipal bond settle?

Answer 32

Same day

Question 33

For municipal bearer bonds, what factors determine good delivery?

Answer 33

All unpaid coupons attached and the bonds denominated in $1,000 or $5,000 increments

Question 34

T/F: Trades executed on the NYSE floor are reported to the TRF and then the Consolidated Tape.

Answer 34

F; NYSE trades are reported directly to the Consolidated Tape

Question 35

For good delivery, what multiple of shares must be delivered?

Answer 35

100 shares (round lots)

Question 36

If a trade occurs on the Nasdaq Market Center Execution System, who report me the trade to the TRF?

Answer 36

NMCES trades are automatically reported by the system and do not need to be manually reported by the executing BD

Question 37

What does the Direct Registration System (DRS) do?

Answer 37

The DRS allows registered owners to hold their assets in book entry form with the transfer agent.

Question 38

If an option is purchased, Regulation T requires payment to be made within ____ business days.

Answer 38

Four

Question 39

Once a firm is randomly selected by the OCC to revive the exercise notice, how will it in turn assign the notice?

Answer 39

Random selection, FIFO, or any other fair and equitable method

Question 40

Corporate bond trades are reported through TRACE within ____ minutes.

Answer 40

15

Question 41

RTRS requires firms to report municipal trades within ______ minutes.

Answer 41

15

Question 42

T/F: Five stock certificates that have 300 shares each is considered good delivery.

Answer 42

T; since each certificate is in multiple of 100 shares, this is good delivery.

Question 43

Identify the acronym: DRS

Answer 43

Direct Registration System

Question 44

What information is included in an OATS report?

Answer 44

The life of an order including receipt, routing, display, modification, cancellation, execution

Question 45

T/F: An OATS report will only include details on orders that have been executed.

Answer 45

F; an OATS report tracks an order from its receipt, to medication, to execution, or it’s cancellation

Question 46

When do municipal bond trades settle?

Answer 46

Two business days after the trade date (T+2)

Question 47

OATS is used to track the life of orders for what types of securities?

Answer 47

Nasdaq and OTC equity securities, but not NYSE or AMEX securities

Question 48

At what time do equity options stop trading?

Answer 48

4:00pm ET on the third Friday of the expiration month

Question 49

A stock or bond power grants a third party (usually a BD) the ability to ________ or ________ a customers security.

Answer 49

Transfer ; re-register

Question 50

The ___________ date is the date by which a stock must be owned to receive the dividend.

Answer 50

Record

Question 51

When are DK notices used?

Answer 51

When a trade comparison is received by one firm, but there is no corresponding trade

Question 52

T/F: An OATS report must be transmitted weekly.

Answer 52

F; OATS reports are transmitted daily

Question 53

T/F: TRF is used to execute trades in Nasdaq securities.

Answer 53

F; TRF is a reporting, not execution, system for Nasdaq securities

Question 54

What does the term good delivery mean?

Answer 54

The security is in proper form and endorsed or accompanied by a stock power

Question 55

If a firm uses another firm to report transactions to RTRS, which firm is responsible for timely and accurate reporting?

Answer 55

The firm that executed the order

Question 56

What is the trade reporting system for OTC equities?

Answer 56

OTC Reporting Facility

Question 57

List some of the order information that would appear on an OATS report.

Answer 57

Entry party, date/time received, order terms, routing information, any modifications, execution details, firm capacity

Question 58

What is TRACE?

Answer 58

The Trade Reporting and Compliance Engine. TRACE is a reporting system for corporate bonds

Question 59

When do options trades settle between BD and the OCC?

Answer 59

Next business day (T + 1)

Question 60

The name of the customer on a stock power and the name on the stock certificate must be ________.

Answer 60

Identical

Question 61

Customers are given _____ business days after settlement date to pay for their portion of the trade.

Answer 61

Two

Question 62

T/F: when stock is sold, stock certificates must be endorsed with a signature or stock power.

Answer 62

T; similar to when cashing a check, stock must be endorsed before it’s sold

Question 63

When do corporate bond trades settle?

Answer 63

T+2 (two business days after the trade date)

Question 64

Trades involving corporate or municipal securities settle by the ________ day following the trade date (T+__).

Answer 64

Second; 2

Question 65

T/F: Money Market instruments are TRACE eligible securities.

Answer 65

F

Question 66

T/F: Trades executed through the Nasdaq Market Center Execution System do not have to be manually reported.

Answer 66

T; they are automatically reported by the system

Question 67

T/F: A security that is directly held may be transferred using the DRS.

Answer 67

T; the DRS enables an investor to electronically move a security between the issue and the investors BD

Question 68

XYZs record date is Thursday May 3. With a regular way trade, when could Emma sell her stock, but keep the dividend?

Answer 68

On Wednesday, May 2 or later. She must remain the owner at least through May 3 to keep the dividend

Question 69

What is the trade reporting system for Nasdaq securities?

Answer 69

Trade reporting Facility (TRF) formerly the Automated Confirmation Transaction system (ACT)