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Series 24 MS > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

Are market makers allowed to accept any payments from issuers to act as a market maker in their stock?

A

NO

can only receive payment for investment banking services

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2
Q

What is the minimum share price listing for the NYSE?

A

$4/share at time of listing.

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3
Q

What is the minimum EPS requirement for listing on the NYSE?

A

None

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4
Q

Which liquidity providers can provide price improvement for retail orders?

A

DMMs an SLPs

Supplemental Liquidity Providers & Designate Market Makers

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5
Q

Can a DMM accept a ‘Market Not Held’ Order?

A

NO

a not held order allows the trader to execute it when they feel the timing is best.

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6
Q

Unless there is an order imbalance of 50,000 shares, what is the cut off time for entering a Market On Close (MOC) Order?

A

3:50pm
order imbalance precludes the cut off time.

if the bid was 21.10-21.12 with 10,000 x 60,000 then a MOC order could be placed. (50K displacemetnt)

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7
Q

What happens to open orders during a reverse stock split?

A

All Open orders, both above and below the market, are cancelled

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8
Q

In the event of a trading halt, what happens to orders that are pending? and new orders received after the halt begins?

A

Should all be treated as Good Until Cancelled and held by the firm for execution at the opening the next day.

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9
Q

In the event of a trading halt, what happens to Market On Close (MOC) orders?

A

should all be cancelled or declined if newly received.

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10
Q

Under SEC 201, what are the circumstances that must happen for a Short Seller to be prevented from Selling stock on a downward trend?

A

If a security declines by 10% or more from the prior close, short selling is restricted for the remainder of the day + the following day. To allow long holders the opportunity to sell off.

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11
Q

Do ADR’s trade on an Exchange?

A

Yes - American Depository Receipts generally trade on the NASDAQ

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12
Q

Who can terminate or suspend an issuers inclusion in NASDAQ?

A

FINRA:

issuer files for bankruptcy, accountants can’t render an opinion on financials, or it is in publics best interest.

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13
Q

Excused withdrawals for a Market Maker on NASDAQ generally cover how many days?

A

no more than 5 business days.

if granted based on legal considerations, the time frame can be up to 60 calendar days.

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14
Q

Where a Market Maker has withdrawn from a particular security, how long must they wait before reregistering?

A

20 business days

Failure to enter quotes within 5 business days identifies termination as market maker.

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15
Q

What does a Level 2 service display differently than level 1?

A

Size of the Order 200 x 10 (depth of the market)

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16
Q

Are riskless and simultaneous transactions considered Principal or Agency?

A

Agency

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17
Q

What is the reporting requirement (time) for OTC Transactions?

A

10 Seconds

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18
Q

What is the Timeframe under which Locking Markets is Prohibited?

A

8:00am - 6:30pm ET

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19
Q

What is a Locked Market?

A

Inside Bid and Insider offer are the Same

Bid 12.50 - 12.50 Ask

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20
Q

What is a Crossed Market?

A

Inside Bid is Higher than the Insider Offer

Bid 12.52 - 12.50 Ask

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21
Q

Whose responsibility is it to comply with Reg SHO during a Short Sale: the Introducer or the Clearing Firm?

A

The Introducer is responsible for locating the borrow before placing the short sale with the Clearing Firm.

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22
Q

Where a convertible, option or warrant has been tendered but is taking far longer than normal settlement, how many days extension can be provided under a Failed Delivery?

A

35 Days
- Locate is not required when conversion has been instructed
-

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23
Q

Other than Short Sales, when a security is sold long and fails to be delivered, when must a buy in take place?

A

S+10

Must buy in 10 Business days after settlement or apply for an extension from its DEA.

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24
Q

Under the Manning Rule, if a Dealer has a client limit order of 100 XYZ at 20.00 an goes to fill an order for its own book (200 XYZ at 20.00) what must the Dealer do?

A

The Dealer must execute the client limit order at the same price within 1:00min.

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25
Q

Is a Member-to-Member limit order covered under the Manning Rule?

A

Yes!
Member to Member orders are considered Customer Orders not proprietary orders.
They are protected from 9:30am to 6:30pm

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26
Q

What is the Dollar Value an Order Size that exempts a client from the Order Protection Rule (Manning Rule)

A

10,000 share or more and value of $100,000 or more,

must be communicated to the client and accepted before engaging in trading.

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27
Q

At what price must a customer limit order be protected where they wish to puchase 200 ZYS at 20.00 with a .25 markup?

A

19.75 is where the order must be protected.

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28
Q

Under SEC Order Display rule, how long does a Market Maker have to Update the Displayed Quote upon ‘receiving’ the order from an RR

A

MM must update the quote immediately - within 30 Seconds.

does not apply to market openings or just after a halt

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29
Q

What is Front Running

A

if a member or RR has nonpublic knowledge of an impending block order to buy or sell that member or person cannot place an order in front of the block order.

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30
Q

What is Trading Ahead?

A

Members cannot trade ahead of Research Reports being released- where it could influence buying or selling.

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31
Q

What is a T1 Trading Halt?

A

News Pending

trading normally resumes 30mins after the halt

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32
Q

What is a T2 Trading Halt?

A

News Released

trading normally resumes 30mins after the halt

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33
Q

What is a T3 Trading Halt?

A

T3 identities that news has been disseminated and times are displayed when trading will resume.

a) First Time is when traders can start entering quotes
b) Second time is when trading will resume

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34
Q

What are NonDirected Orders?

A

Order matched with the highers ranked quote at the inside market

Its a liability order that creates an obligation for recipient to either buy or sell. Market or market limit orders.

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35
Q

For Regulation NMS - what is the Sub-Penny Rule?

A

for NMS stocks trading at $1 or above, the minimum price increment is $0.01. Sub-penny pricing is permitted for NMS stocks trading at less than $1.

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36
Q

Can a Stock be traded on NASDAQ and OTCBB at the same time?

A

No

OTBCC is NOT a LISTED market place.

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37
Q

For OTCBB Quotes, what is the standard $ range for 100 share blocks?

A

1.00 - 179.99

less than $1 = 1000 shares for 0.51-0.99
175+ = 1 share quote

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38
Q

Do Penny Stock Rules apply to NASDAQ NMS stock trading at less than $5 / share?

A

NO

Penny Stock rules only apply to NON- NMS Securities under $5/share: Pink Open Market or Bulletin Board.

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39
Q

True or False: CQS (consolidated quotation system) provides listed quotes for Convertible debt securities?

A

FALSE

CQS provides quotes for NYSE and other listed exchange equity securities.

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40
Q

A trader at a large firm calls a counterpart at another firm and strongly suggests that the firm lower its bid on WXYZ by .05. In return, the trader promises order flow. This action is

A

prohibited

The SEC’s 21(A) report outlined collusive and manipulative practices by certain market makers.

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41
Q

Level I Nasdaq service provides subscribers with:

A

the inside market, last sale, and volume

it does not provide the market depth or list of each market makers quotes

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42
Q

What is the Threshold on a Market Sweep Order?

A

a single order sweep to 10% + 0.01 away from the current insider market. It will sweep everything up to that point
- the remainder of the order will be sent back.

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43
Q

What is ACES?

A

ACES (Advanced Computerized Execution System) ACES It is a Routing System that allows order entry firms access to a market maker’s internal trading system for order placement and execution.

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44
Q

A Reverse Pegged Buy order would be placed at what

Bid 24.00 - 24.10

A

It pegs to the opposed side of the market.

Reverse-pegged buy order would be priced at a penny less than the insider offer 24.09

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45
Q

Unlinked or Ineligible ECNs display quotes where?

A

ADF - NASDAQs Alternative Display

eligible or linked systems automatically update NASDAQ

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46
Q

Trade Reporting: In what scenario does the Buy Side Report the trade?

A

The only time a Buy side reports the trade is when the Buyer is a Market Maker and the Seller is Not.
- Sellers or Market Makers always do the reporting of trades.

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47
Q

In how many Seconds must a Trade be reported to FINRA/NASDAQ

A

within 10 seconds of execution.

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48
Q

Are OTC trades required to be reported and if yes, Where are OTC Equity Trades reported?

A

YES - OTC trades must be reported.

ORF - OTC Reporting Facility

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49
Q

Under FINRA rules, if a member wants to have the terms of a clearly erroneous trade adjusted, it must notify Nasdaq Market Operations

A

within 30 minutes of the execution

If a member wants to have a clearly erroneous trade adjusted or nullified, the member must make the request of Nasdaq within 30 minutes of the execution.

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50
Q

Who gets the Dividend on the ex-date?

A

The Seller will receive the Dividend,

The ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

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51
Q

What does the Uniform Practice Code Apply to

A

Dealer to Dealer Transaction in the OTC Market

  • does not apply to Exchange Transactions
  • exempt securities
  • Transactions settled outside USA
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52
Q

For an Erroneous Trade on the NASDAQ, who must you notify and by when?

A

Nasdaq Market Operations

must be notified within 30 mins!

APEAL to Nasdaq Market Operation Review Committee within 30 minutes

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53
Q

Who gets Accrued Interest on Settlement day? Purchaser or Seller?

A

Purchaser - settlement day is when new owner takes possession.

Accrued interest does not count settlement date.

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54
Q

What is the Earliest Date for a Buy In to happen because of failed delivery?

A

Settlement + 3 (must give 2 business days written notice and that would happen when settlement passes and they don’t deliver)

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55
Q

What is a Due Bill?

A

Due bills are sent Dealer to Dealer when wrong party receives the dividend from the issuer.

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56
Q

What is the first day that a stock trades without a due bill?

A

The Ex-Date (a purchase on the Ex date does not entitle the buyer to receive the dividend) The Buyer would not be due the dividend because of late settlement.

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57
Q

Is there an Early Warning for first year firms?

A

NO

FINRA is already watching 1st year firms and they have a min requirement of 8:1 AI.

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58
Q

Can market makers pay other broker dealers to send them their order flow?

A

Yes - this is called ‘Payment for Order Flow’ and is a permissible practice

Market Makers cannot accept any payment from an ISSUER to act as a market maker in its stock.

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59
Q

What is deemed ‘Hidden Profit”?

A

When a dealer charges both a Mark Up and a Commission.

Can’t do Both

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60
Q

What 3 situations could lead to Delisting from NYSE?

A
  1. Bankruptcy
  2. Abnormally low share price or volume
  3. Corporate actions not deemed to be in the public best interest
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61
Q

What is required if an Issuer chooses to delist from the NYSE?

A

Approval from the Board of Directors

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62
Q

What is a Supplemental Liquidity Provider?

A

It is an off-floor market maker that competes with a DMM

  1. It only has to take one sided market quote
  2. required to maintain round lot bid or offers, at the NBBO or NBB
  3. Rewarded with a rebate
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63
Q

What is a key obligation of a DMM

A

to quote at the NBB or NBBO a specific percentage of the time.

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64
Q

Who has discretion to trade a Market Not-Held Order

A

Floor Brokers/Trader have discretion to place a Market-not Held order.

DMM’s can never accept a MNH order

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65
Q

What is the purpose of a MOC order?

A

The purpose of a MOC order is to get the last available price of that trading day.

A market-on-close (MOC) order is a non-limit market order, which traders execute as near to the closing price as they can—either exactly at, or slightly after the market close.

Must enter by 3:50pm

66
Q

Under FINRA rules, a firm will be prohibited from selling a security as principal and buying that security as agent for a customer if it has a fail to deliver in that security that is

A

If, for whatever reason, a firm is unable to close out a customer fail to deliver within 60 days of settlement date, the firm will be prohibited from selling that security as principal and buying that security as agent for a customer.

Note that fails to deliver should be bought in after 10 business days from settlement.

67
Q

What is a Level 1 Circuit Breaker under NYSE Rule 80B

A

7% drop from previous day close = 15mins

68
Q

What is a Level 2 Circuit Breaker Halt under NYSE Rule 80B

A

13% drop from previous day close = 15mins

69
Q

What is a Level 3 Circuit Breaker Halt under NYSE Rule 80B

A

20% Drop from previous day close = rest of the day

70
Q

If a BD provides an inaccurate confirmation or report of a trade - what price will be binding? confirm or executed price?

A

The price the security was executed is binding on the customer, even if the member provides an inaccurate report.

71
Q

If a trade was reported to a customer but never took place - what is binding on the customer.

A

The non-trade action is binding. If no trade took place, no trade is bound to the customer, regardless of what was reported by the BD.

72
Q

What is OATS

A

OATS is the Order Audit Trail System designed to give FINRA transparency to reconstruct markets, conduct surveillance and enforce its rules.

73
Q

A market maker needs to withdraw from MM activity for a short period, what approvals if necessary are required?

A

MM must apply to FINRA for excused withdrawal and receive permission.

Generally 5 business days / can be up to 60 for legal considerations.

74
Q

Upon receiving approval as a Market Maker, within how many days must a firm post quotes before FINRA will involuntarily terminate them as MM

A

5 Business Days.

If failure to enter quotes within five business days after registration FINRA will terminate MM.

choosing to terminate, simply pull quotes and 5 days later you’re out. You must then wait 20 days before you can reapply on that security.

75
Q

What is a Riskless & Simultaneous Transaction?

A

When a Dealer acts as Agent and simultaneously buys from MM and Sells to Client.

Transaction is subject to 5% markup Policy and disclosure is required on the Confirmation.

76
Q

Under TRACE rules, secondary market transactions in corporate bonds must be reported to FINRA within how many minutes?

A

A report must be submitted within 15 minutes of execution.

77
Q

Disclosure of payment for order flow is required on

a) Trade Ticket
b) Confirmation?
c) Both?

A

If applicable, payment for order flow must be disclosed on the customer’s confirmation, not the order ticket. This disclosure is required for trades in any Nasdaq security.

78
Q 
Any appeal of Nasdaq's written determination regarding a clearly erroneous trade must be made within 30 minutes to the:
NAC
MORC
DBCC
SEC
A

Market Operations Review Committee (MORC)

79
Q

Under the penny stock rules, an established customer is exempt from:

A

Suitability Statement; established customer does not need to sign it.

They are NOT exempt from the disclosure rules. They must provide customer with a written disclosure document.

80
Q

A trade in WXYZ stock between two WXYZ market makers takes place at 5:00 pm ET. A transaction report must be made to the appropriate trade reporting facility:

A

Within 10 seconds

Transactions as well as cancellations within this time frame must be reported no later than 10 seconds.

81
Q

What are the 3 types of orders that can be entered into the NASDAQ (besides market/limit/and stop)

A

Non-Directed, Preferenced & Directed

82
Q

What criteria determines an Established Customer (under the Penny stock rule)

A

An established customer is one who has:

  • effected a securities transaction,
  • made a deposit of funds or securities in an account at least 1 year before the proposed penny trade, or
  • made 3 purchases of penny stocks on 3 separate days involving 3 different issuers.
83
Q

Where a firm has been approved by FINRA as a market maker, what is the latest time that they can enter a quote to prevent FINRA terminating their market making?

A

No later than the OPENING on the 5th business day after FINRA has approved its registration.

84
Q

the requirement to close out a failure to deliver under SEC 204 for a Short Sale, must take place when?

A

The beginning of regular trading hours on the settlement day following the settlement date, referred to as S+1.

85
Q

What is the requirement to close out a failure to deliver under SEC 204 for a Long Position, when must action take place ?

A

S+3

If a participant has a failure to deliver that the participant can demonstrate on its books and records resulted from a long sale, or that is attributable to bona fide market making activities, the participant must close out the failure to deliver by no later than the beginning of regular trading hours on the third consecutive settlement day following the settlement date, referred to as T+6

86
Q

If a security sold from a long position is not delivered by settlement date - what action must the dealer take?

A

If a security sold long has not been delivered withing 10 business days AFTER the settlement date, the broke dealer must either buy the customer in, or seek an extension from its Designated Examining Authority.

87
Q

What are the only orders not protected under the Manning Rule? (Order Limit Protection)

A

Dealer Prop Trades

Member to Member limit orders are considered customer orders, not proprietary orders.

88
Q

Under what trading times are Limit orders protected by Manning Rule?

A

9:30am - 6:30pm

89
Q

Are Member Firms required to accept customer limit orders?

A

NO - if such orders are accepted, reasonable fees may be charged with adequate disclosure.

Market Makers are not required to accept limit orders. (if they do, they are required to follow Manning Rule.)

90
Q

Upon receiving a customer limit order< how quickly must a market maker updates its Quote?

A

30 seconds

91
Q

What kinds of Trades are exempt from the Order Display Rule? (requiring market makers to update their display)

A
  • All or None orders
  • Odd-Lot Orders
  • Block size orders (10,000 share or more)
  • orders that are delivered to an eligible ECN
  • customers who request not to be displayed
92
Q

What type of ECN is connected to the NASDAQ community for information dissemination?

A

Eligible ECNs

  • entering a quote into an Eligible ECN means that the MM does not have to update their quote.
93
Q

What are the market makers conditions for ‘Trading Along”

A

Must be in writing and on an order by order basis.

94
Q

Distinguish between Trading Ahead and Front Running

A

Trading Ahead is based on research reports (Market Maker may juice up its inventory)

Front Running is based on a block of institutional stock - prop accounts buying before the block get worked.

95
Q

When are broker dealers required to submit trading data to OATS?

A

OATS reports for each trade in a NMS security must be submitted to FINRA Daily!

96
Q

Under what system is the reporting of Non-NASDAQ trades done?

A

Reporting for non-Nasdaq securities is done through ACT.

97
Q

When executing an OTC agency transaction for a customer, a member may Inerposition themselves under what condition?

A

interpositioning is not a violation if it results in a better price for the customer.

98
Q

The modifier .Z appended to FINRA/Nasdaq trade report indicates that the transaction:

A

Is being made late - later than 10seconds

The modifier .Z indicates that the trade report is being made late (after 10 seconds).

99
Q

After accepting as good delivery securities that have minor irregularities, a buying dealer can return the securities to the delivery dealer through

A

Reclamation

Reclamation is available if a member inadvertently accepts a delivery on settlement date and later discovers that the securities were not in good deliverable form.

100
Q

In a seller’s option, securities may be delivered before the date specified if the seller

A

gives 1 day’s written notice to the buyer

In a seller’s option trade, the seller may (at his option) give the buyer written notice 1 day before making delivery.

101
Q

A customer is long 500 shares of ABCD in a cash account and short 200 shares of the same stock in a margin account. If the customer wants to sell the 500 shares in the cash account, the order ticket must be marked:

A

sell 300 long, sell 200 short

the customer is long only to the extent of the net long position. Since the customer is selling 200 shares over his net long position, he will be increasing his short position by 200 shares.

102
Q

For OTC Bulletin Board Quotes, can

a) Subject Quotes be entered?
b) Indications of interest be entered?

A

Yes and Yes

The OTC Bulletin Board permits participants to enter firm quotes, subject quotes, and indications of interest. The electronic service displays the telephone numbers of securities market makers.

103
Q

what do the works ‘eligible’ and ‘active’ mean when they are beside an OTCBB Quote?

A

Active = means the market maker has met the continuous requirements and can be Piggybacked

Eligible = means the market maker has not met the continuous eligibility (12d/30) and 30d/4missing)

104
Q

Do the minimum quotation sizes differ for the OTBCC?

A

Yes
.20-.50 = 2500 shares
0-.50-0.99 = 1000shares
1.01-174.99 = 100 shares

105
Q

beside an OTCBB Quote - if there is an “E” modifier - what does this mean?

A

Financials are Delinquent.

issuer has 30 days if SEC or 60 days if reporting to banking / insurance

106
Q

In what markets is the Piggybacking exemption available?

A

OTCBB and Pink Markets

so long as there is an Active market maker, a new MM is not required to file form 211.

107
Q

What is the Suitability Statement for Penny Stocks?

A

if not meeting the established customer, Advisor must have the client sign a statement identifying why the trade is suitable for the client.

Trade Cannot take place until the document is returned to the Advisor.

A BD whose revenue is less than 5% or less from penny stocks is EXEMPT from Penny Stock Rule.

108
Q

What is meant by NADQ MPID

A

this is the NASDAQ Book - where an order has been placed as anonymous.

109
Q

what is the impact on trade priority when a MM adjusts the quantity of an order, but not the price.

A

Original quantity will keep original time stamp (order) and if ADDING, additional quantity will get a new time stamp.

110
Q

what does the modifier ‘d’ represent for a market maker posting a quote?

A

It means they will accept ‘directed liability orders’

111
Q

When the word Total is added to an order or it has an X identifier, what is meant by this?
Total day order
Total GTC order
Total IOX

A

Total indicates that it can be traded in the after hours market (until 8:00pm)

112
Q

What is the limit for a sweep order?

A

the rule limits a single order’s sweep to 10%+ $.01 away from the current inside market.

113
Q

IN preparation for the open, what 3 types of orders can be entered up until 9:28am?

A

MOO - market on open
LOO - limit on open
IO - imbalance only orders

114
Q

What is the designated identifier .T

A

modifier designating that the execution did not occur during normal market hours

115
Q

what is unique about Imbalance Orders? IO’s?

A

they can be entered between 9:28-9:30 and between 3:50-4:00pm.

However, they cannot be adjusted during this time.

116
Q

If no execution algorithm is entered for a trade, what will the system assign?

A

Price / Time

117
Q

What is the ADF

A

Alternative Display facility- set up by FINRA to display quotes for all the unlinked ECN’s.

118
Q

What are the differences between

NASDAQ - TRF and ORF

A

TRF is the reporting facility for NMS stocks and listed exchanges
ORF is for Pink and Open market OTCBB

this is a trade reporting center - where trades must be reported within 10 seconds or they are late/ requiring a .Z modifier

119
Q

For Trade Reporting, who’s responsibility is it for reporting trades?

A

Sell Side: 2 executing brokers, two non-market makers
Market Maker: when only 1 market maker and non market maker
Executing Broker - executing broker and a customer

120
Q

How would you report a trade that is both Late and Not on the ‘trade date’

A

As/of , and .T for being outside market hours

121
Q

Was is the identifier for a trade marked as Late during normal trading hours

A

.Z

122
Q

In the sale of 144A restricted stock - to whom does the dealer member report the trade to?

A

ORF - OTC reporting Facility

because the stock is restricted, it must be reported to the ORF within 10 seconds.

123
Q

Where would one conduct trade reporting for; Primary and Secondary market transactions for Fixed Income, corp, agency, gov, cmo, asset backed paper….

A

TRACE - is trade reporting system

reporting within 15mins of transactions.

NO MUNIS, no US Treasury T-‘s, Money Market Instruments

124
Q

Which sides conduct fixed income reporting to TRACE?

A

Both Sides must report.

125
Q

if a fixed income trade is effected at 6:20pm, when and to who doe sit need to be reported?

A

Reporting to Trace within 15mins, but can be done the next day as reporting closes at 6:30pm.

126
Q

What is the requirement for listed issuers on the nasdaq to report material news?

A

Between 7am - 8pm, listed issuers must report material news at least 10mins before disemination.

127
Q

Under the UPC, what does Cash settlement mean?

A

it means Same Day Settlement and must be done before 2:30pm

128
Q

What are 3 characteristics of a When Issued (WI) Trade? Contract:

A

Paper Based as security is not yet in the market:

  1. description of the security
  2. designation of FINRA
  3. Procedure for Marking the contract to the market
129
Q

When a dealer borrows stock from another dealer, what are 2 requirements?

A
  1. borrowing member must put up 100% of the market value

2. borrowed stock is marked to market daily

130
Q

What is the process for a dealer to deal with an erroneous trade?

A
  1. Report to Nasdaq Market Operations (NMO)
  2. Must report within 30mins of execution

Appeals must be made to MORC within 30mins of receiving NASDAQ’s M.O decision.

131
Q

What are the 3 main points for dealing with accrued interest in a Bond Sale?

A
  1. Work with 30 day months for Corporate Bonds
  2. Count the prior interest payment day
  3. Do not count Settlement day

Buyer pays the seller accrued interest at settlement

132
Q

In what name can a stock certificate be endorsed for someone who has passed away?

A

Name of the Executor or the decedent’s estate

133
Q

If I want to buy a foreign security in US Dollars on a US Exchange, what would I buy?

A

ADR’s - American Depository receipts.

They receive dividends, are highly liquid, and give the holder the right to claim the actual shares.

134
Q

What is Reclamation (rejection)

A

Reclamation is available if a member accepts a delivery and later discovers that the securities were not in good delivery form.

minor issues = must be done within 15 days from delivery date

Stolen or Counterfeit / rejected by transfer agent - 30 months.

135
Q

What is the earliest a dealer member can buy-in a failed to Deliver?

A

S+3. Dealer must give the client 2 days notice that they will buy in at noon on the 2nd day. Notice would be issued after Settlement day.

136
Q

Where a buying client fails to pay, when can a sell-out take place?

A

Sellouts can be executed anytime after settlement

No notice is required to be given to the client.

137
Q

Does the account number or account name need to be on the trade ticket?

A

One or the Other - no requirement for both

Trade tickets are 3 year documents

138
Q

The P modifier next to a market maker’s identifier indicates that the firm is:

A

A P modifier indicates that a firm is a primary market maker and is exempt from the locate requirement of Regulation SHO.

Avoid confusion with the .P trade report modifier

139
Q

ABC Company has announced a 50% stock dividend to be distributed on Friday, October 15, to all shareholders of record on Friday, September 10. On which of the following dates will the stock trade ex-dividend?

A

October 18
When the number of shares in a stock dividend or stock split represents a 25% or more increase, the ex-date is 1 business day after the payable date.

140
Q

What are the 3 types of Orders that can be entered into the NASDAQ

A

nondirected,
preferenced, and
directed.

141
Q

If a market maker’s bid or offer is decremented to zero, and the firm is not using Automatic Quote Refresh, the firm must update its quote and size within how many seconds?

A

MM has 30 seconds to update or NASDAQ qill automatically refresh its quote to 10 shares $0.01 off the worst displayed price.

142
Q

A stock or bond power represents which of the following?

A

Stock powers are substitute forms for signatures on the back of actual certificates. A person can sign this separate document to satisfy transfer rules.

Limited power of assignment and substitution

143
Q

The minimum quote size for Bulletin Board issues with priced quotes

A

varies based on each side quoted, which could create a different minimum size requirement for both the bid and the offer.

The minimum size for Bulletin Board priced quotes range widely, depending on the bid and offer price. A different minimum size requirement could apply to the bid and the offer.

144
Q

When is inter-positioning allowed?

A

When the client gets better execution

Inter positioning (placing a third party between a member and the best available market) is prohibited unless it results in a better execution for the customer.

145
Q

Would an issuer on NASDAQ be subject to delisting if the accountants issued a disclaimer opinion?

A

YES -

disclaimer opinion means that they are unable to render an opinion on the issuer’s financial statements)

146
Q

An institutional buy-side customer trades algorithmically requiring trade routing of certain limit orders to a specific market despite the price improvements that may be found on an alternate market. This is best described as an example of a

A

Intermarket Sweep Order

placed for customers requiring trade execution in a specific market - though there may be better prices in other market centres

147
Q

What is Trade Shredding?

A

the practice of splitting customer orders into multiple smaller orders (e.g., a 1,000-share order split into ten 100-share orders) to maximize payment for order flow from the market maker to which the orders are directed.

148
Q

What is a Non-Attributable Order and how is it marked?

A

Non-Attributable means that it is anonymous when it goes to the exchange.

NSDQ is the MPID marker for it

149
Q

When a firm enters an order and identifies a specific party to which the order should be delivered, it is termed a(n)

A

preferenced order

A preferenced order is directed to a specific market maker or ECN. A directed order is an order that a market participant uses to access a particular quote, not a specific market maker.

150
Q

Any exercise of time and price discretion must be reflected on the order ticket, which must be prepared before

A

the execution of the order

All order tickets showing the account name or number must be prepared before order execution. Any exercise of time and price discretion must be reflected on the order ticket.

151
Q

ACES is a service that allows order entry firms access to

A

a market maker’s internal trading system for order placement and execution.

ACES (Advanced Computerized Execution System) allows order entry firms access to a market maker’s internal trading system for order placement and execution.

152
Q

Are Bonds delivered subject to an in-whole call eligible for Reclamation?

A

Bonds subject to an in-whole call are NEVER subject to reclamation.

Reclamation is available if a member inadvertently accepts a delivery from another member as good and later discovers that the delivery should have been rejected

153
Q

Under the Uniform Practice Code, final settlement of syndicate accounts must be effected by the manager within 90 days following the

A

syndicate settlement date

Syndicate accounts must be settled within 90 days following the syndicate settlement date, which is the date on which the securities are delivered by the issuer to or for the account of the syndicate members.

154
Q

What are Preferenced Orders

A

Orders sent to a specific market participant at the inside market

155
Q

What are Directed Orders

A

Used to access a specific quote in the system

Mostly non liability orders ; can be rejected

Response must be sent in 5 seconds

156
Q

Accrued interest is:

  1. added to the buyer’s confirmation.
  2. subtracted from the buyer’s confirmation.
  3. added to the seller’s confirmation.
  4. subtracted from the seller’s confirmation.
A

It is Added to the Buyer’s purchase price

It is added to the sellers proceeds

Accrued interest is payable by the buyer to the seller.

157
Q

Which service below does not provide ‘Last Sale’ information?

a) TRF
b) CQS
c) OATS
d) TRACE

A

CQS: Consolidated Quotation Service

provides quotes on listed equity securities provided by third market makers as well as from DMMs on an exchange floor. CQS provided bid and ask quotes, with size, for listed equity securities. The system does not provide last sale information.

158
Q

A last sale report of a transaction in restricted equity securities effected under Rule 144A must be made to the ORF by:

A

The Seller

the seller no later than 10 seconds after execution

159
Q

Does a DMM trade with Algorithms?

A

YES - Absolutely

DMMs are supposed to maintain an orderly market and many will use algorithms to continue trading through the day.
Each DMM unit establishes certain proprietary parameters such as number of shares, time of trade under a variety of conditions and allow trades to take place with no human interaction.

160
Q

Under NASDAQ/TRF rules, an as/of trade is one executed

B) outside of normal market hours and reported on the following business day

C) outside of normal market hours and reported on the day of execution

A

B - Reported the next business day

An as/of trade is one executed outside of normal market hours and reported to the TRF using ACT technology on the following business day. For example, interdealer trades executed between 8:00 pm and midnight are reported on the following business day.

161
Q

Your firm is holding a customer order to buy 500 shares of WXYZ at $15.20. If WXYZ declares a cash dividend of $.065, the price of the limit order, on the ex-date, will be adjusted to?

A

$15.13

If cash dividends are fractions, they will be rounded up for ex-date reductions. so the 61/2 is rounded up to 7cents and reduced from 15.20

Series 24 MS (7 decks)

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