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Series 24 > Market Making And Trading STC Flashcards > Flashcards

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)

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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

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3
Q

Regulations consider riskless principal trades as ______ trades since the executing broker dealer is not exposed to______ risk

A

Agency ; market

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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

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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

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6
Q

A client who is long 500 shares of XYZ and short 600 shares of XYZ us net short ____shares

A

100 shares

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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

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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

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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

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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

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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

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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

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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

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14
Q

Securities quoted through the CQS are _______ securities trading over-the-counter

A

Listed securities

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15
Q

Is this a not-held order? :
Buy 500 shares of XYZ this morning if it looks good

A

Yes

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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

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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

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18
Q

What’s the pink market?

A

A real time electronic quotation system for OTC equities

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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

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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)

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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

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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

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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

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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

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25
Q

What is the maximum size order that can be entered into the NASDAQ market center execution system?

A

999,999 shares

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26
Q

FINRA disseminates _________ trade information for TRACE eligible securities

A

Real time

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27
Q

True or false : once a firm files an application for market making , it may immediately begin to quote specific stocks

A

False - after filing an application for market making, the firm must be notified by FINRA of its effectiveness

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28
Q

For trades effected between a member firm and a nonmember firm or customer , the _______ reports the trade

A

The member firm reports

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29
Q

For what transactions does TRACE NOTTT disseminate real time trade information?

A

Rule 144A with QIBs

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30
Q

Sales of new issues and mutual funds and trades between members are_____ from the 5% policy

A

Exempt

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31
Q

If a security is listed from Nasdaq , it may begin trading on the pink market_______

A

Immediately

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32
Q

What is CAT?

A

Consolidated audit trail

It enables FINRA to review all treating activity in the US equity and option markets

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33
Q

True or false : executions may occur against a market maker’s displayed and reserve (undisplayed ) size

A

True

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34
Q

How often must BDs publish reports summarizing their order routing practices

A

Quarterly

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35
Q

what’s an example of an alternative trading system ATS?

A

ECNs, trade crossing networks, firms internal execution system

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36
Q

A firms trading desk may buy at a price that will fill a client order of another desk if_________ exist

A

Information barriers

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37
Q

True or false: TRF is used to execute trades in NASDAQ securities

A

False – it is used to report not execute

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38
Q

Where would do not reduce DNR instructions appear?

A

On the order ticket

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39
Q

On a net basis trade, BD capacity is reported as______ on the confirmation, but ______ is NOT disclosed

A

Reported as principal on the confirmation, but markup is NOT disclosed

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40
Q

Block trades of _____ shares or more, or $______ or more, are exempt from the Limit Order Display Rule

A

10,000 shares or $200,000

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41
Q

True or false: for principal trades, commission must be disclosed

A

False - principals charge markups or markdowns NOT commissions

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42
Q

If a new market maker enters a quote with the asked price lower than the highest bid, the market is_______

A

Crossed

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43
Q

True or false: some transactions may justify a markup higher than 5% while for others 5% may be too high

A

True

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44
Q

When is a firm generally prohibited from entering proprietary orders?

A

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.

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45
Q

Rather than displaying an order, what alternatives are available to firms?

A

Execute it upon receipt or deliver it to an ECN or another firm that is complying with the limit order display role

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46
Q

For NMS stocks priced at less than $1 what access fee may market centers charge market participants?

A

0.3% of the dollar value of the quote

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47
Q

True or false: trade confirmations must disclose details of trades affected through a payment for order flow agreement

A

True

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48
Q

Not held orders may be placed by both_____ And_______ customers

A

Retail and institutional customers

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49
Q

What information must be included in a broker dealers quarterly routing report?

A

The security and the option market center to which the orders are routed

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50
Q

To establish a give-up relationship , which BD is required to file the appropriate forms with Nasdaq ?

A

Both broker dealers are required to file

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51
Q

To establish a give-up relationship , which BD is required to file the appropriate forms with Nasdaq ?

A

Both broker dealers are required to file

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52
Q

True or false: TRACE disseminate information on debt securities sold under rule 144A and transaction between two QIBs

A

False – although the trade information is reported to TRACE, it will not be disseminated

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53
Q

What is the system that provides quotes for the third market?

A

CQS

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54
Q

If the highest bid is above the lowest ask, the market is____

A

Crossed

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55
Q

What are the three orders that are reduced on the ex dividend date?

A

Buy limits, sell stops, and sell stop limits (unless marked DNR)

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56
Q

What is the trade reporting system for NASDAQ securities?

A

TRF which used to be ACT

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57
Q

What is the difference in reporting a risk less principal trade and a net basis trade?

A

A restless principle trade may be reported as one trade, while net basis trades require two separate reports

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58
Q

Fails-to-deliver and threshold securities that have existed for________ settlement days must be closed out

A

13 consecutive settlement days

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59
Q

What is an ATS – alternative trading system?

A

an SEC approved, non exchange, electronic trading system designed to match the buy and sell orders of its subscribers

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60
Q

Form 211 is required for those initiating quotes in______

A

Non exchange (OTC) securities

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61
Q

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?

A

With no size indicated, the “represents a willingness to buy 100 shares at its bid or sell 100 shares at its offer

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62
Q

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?

A

Miss Gray written consent must be obtained prior to executing the trade

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63
Q

True or false: if executed, MOC orders receive the closing price

A

True

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64
Q

When providing a firm quote for a NASDAQ stock, the minimum size is_____ shares

A

100 shares

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65
Q

True or false: if the security is delisted from NASDAQ, it may no longer trade in any market

A

False – a delisted NASDAQ security may begin trading on the OTC markets immediately

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66
Q

Before initiating quotes for a non-exchange stock what is the member firms responsibility?

A

The coding firm must collect and review certain information about the issue – i.e. complete form 211

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67
Q

True or false: firm at the inside market receives a client limit order equal to the firms quote must add to its size

A

True – it must increase the size of its “, unless de minimus (order size is 10% or less of market makers current size)

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68
Q

If a market maker decides to raise its bid on what NASDAQ level does this occur?

A

Level lll

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69
Q

True or false: a memorandum of each trade must show the terms of the transaction along with any modifications

A

True – trade tickets will also show the account name or number and the person accepting the order

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70
Q

True or false: SEC rule 606 requires a broker dealers quarterly order flow report to include pink market equities

A

False – pink market, and other OTC equities are not included

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71
Q

What trades are covered by the 5% policy?

A

Secondary market trades of stocks, corporate bonds, and treasuries

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72
Q

Is a riskless principal trade reported to FINRA as one or two transactions?

A

One

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73
Q

True or false: form 211 must be filed by firms that intend to make markets in NASDAQ securities

A

False – form 211 is required for firms that intent to initiate quotes for non-exchange securities

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74
Q

Prior to initiating quotes for an OTC equity, how many specific items about the issue may be required?

A

16 items that must be reasonably current

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75
Q

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?

A

No, this is interposition Ing and is not advantageous to the client

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76
Q

If not, a market maker, a NASDAQ member may have access to what level of NASDAQ to view quotes?

A

Level ll

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77
Q

Is the net basis trade reported to FINRA as one or two transactions?

A

It is reported as two separate transactions

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78
Q

True or false: non-displayed orders are NOT subject to price protection rules

A

False

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79
Q

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?

A

If client interest is 10% or less of the market makers size no changes made (de minimis)

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80
Q

True or false: the capacity in which the firm is acting in a transaction is found on the order ticket

A

False – firm capacity is found on the confirmation

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81
Q

Where would information regarding an order’s time of entry and execution (time stamps) be found?

A

Order ticket

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82
Q

How long are not-held orders considered to be in effect for?

A

One trading day

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83
Q

According to the limit order display rule, what is a block sized order?

A

10,000 shares or with the value of at least $200,000

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84
Q

“ sell 300 shares of XYZ today if it starts to rise”

What kind of order is this?

A

A not held order

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85
Q

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

A give up

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86
Q

If an ECN is unable to match a subsubscribers order internally, it will most likely display the order on the____

A

ADF

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87
Q

True or false: market makers, and ECNs must display their quotes on the NASDAQ market center execution system

A

False – market participants may display their quotes on the ADF

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88
Q

To comply with the best execution rule, is a broker dealer always required to obtain the best market price available for clients?

A

No, but broker dealers are required to use reasonable diligence to obtain the best price possible

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89
Q

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?

A

They must fill a minimum of 300 shares

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90
Q

What is the difference between NMS securities and OTC equities?

A

NMS securities are those listed on NASDAQ or other national exchanges while OTC equities are not

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91
Q

To enable them to compete with market makers, customer limit orders are subject to______ rules

A

Display

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92
Q

What steps should be taken when a registered rep executes a trade, but uses the wrong account number?

A

Do a cancel and rebill – transfer the trade to the correct account number with permission of a supervising principal

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93
Q

What are the regular hours for the ADF trading center?

A

9:30 AM to 4 PM

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94
Q

What does selling short mean?

A

Selling securities that are not owned, but are borrowed from a broker dealer

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95
Q

When a broker dealer buys ABC calls for itself before executing a buy order it is holding for an institution, it is known as____

A

Front running

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96
Q

Which market does the CQS consolidate codes for?

A

NYSE

NOTTTTTT NASDAQ OR OTC

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97
Q

Sally converts her XYZ bonds and enters in order to sell XYZ stock. How would the cell order ticket be marked?

A

Since the tender for conversion has been entered prior to the sale, the order ticket may be marked long

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98
Q

Unauthorized trading by a registered person is also referred to as______ trading

A

Rogue

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99
Q

What transactions are exempt from the debt markup policy?

A

Municipals, treasuries, or QIBs buying non-investment grade debt

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100
Q

“ buy some ABC shares today if it’s price begins to fall”

Does this type of order require prior discretionary authorization?

A

Yes, because this is NOTTT a not held order since the client did not specify the quantity of shares to be purchased

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101
Q

Current quotes of all market makers for a specific security can be found where?

A

On level ll of NASDAQ

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102
Q

What securities are quoted on the CQS?

A

Common and preferred stock, convertible, bonds, warrant, rights

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103
Q

The life of an order, including receipt, routing, display, modification, cancellation, and execution is all information that is included in what report?

A

CAT

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104
Q

A _____ Order indicates quantity, security, and whether to buy or sell and is executed at the best price available

A

Market

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105
Q

What concern would a firm have if a traitor repeatedly requests that the firms internal controls be relaxed?

A

Rogue trading

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106
Q

What securities are not TRACE eligible?

A

Money market, securities, foreign government, and municipal

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107
Q

How long will a day limit order remain on the display book?

A

Until executed or end of the day if un executed

108
Q

True or false: an order ticket will indicate if an order was discretionary, solicited, or unsolicited

A

True

109
Q

What is the initial bid price requirement for a stock listed on any level of NASDAQ?

A

$4

110
Q

A client with the future’s contract has decided to sell stock. When may the order ticket be marked long?

A

Before the sale and the client is notified that the future’s contract will be settled, resulting in delivery of shares

111
Q

To be considered a THRESHOLD security, excessive fails to deliver must occur for_____ consecutive settlement days

A

5 consecutive settlement days

112
Q

Our exchanges considered auction markets or negotiated markets?

A

Auction markets

113
Q

Where would a firm disclose whether an order was solicited or unsolicited?

A

On the order ticket – not the confirmation

114
Q

Under the customer limit order protection rule, what is considered a large order?

A

10,000 shares or more unless the value is less than $100,000

115
Q

NASDAQ market maker normal market hours are from______

A

9:30 AM to 4 PM

116
Q

In order to NOT file form 211, no more than _____ business days may have elapsed without a quote for the stock

A

4 business days

117
Q

What does the order protection rule (NMS Rule 611) prohibit ?

A

A market center is ability to trade through the best protected quote in an automated market

118
Q

True or false: executing a client’s trade outside of the US would be an acceptable use of interpositioning

A

True

119
Q

A broker dealer, practice of providing monetary incentive for routing orders to a broker dealer or exchange is defined as________

A

Payment for order flow

120
Q

True or false: do not display requests may be entered by clients

A

True

121
Q

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_______

A

Contemporaneous cost

122
Q

According to the Department of Justice, what activities of BDs would not be considered collusive?

A

Executing some trades outside of the inside market or executing large block trades outside of normal hours

123
Q

How does NMS rule 611, the order protection rule, seek to prohibit the trade through practice?

A

By requiring a market center to route orders to the automated market displaying the best price

124
Q

True or false: large orders may not be split to enter them into the NASDAQ market center execution system

A

False – large orders may be split to enter into the system

125
Q

Who has the authority to stop stock in NYSE?

A

The designated market maker may stop stock

126
Q

Who publishes a list of all threshold securities?

A

A self regulatory organization SRO

127
Q

Beyond bid price and market makers, list some other considerations for a stock to be able to list on a market platform?

A

Public float
Round lot shareholders
Market cap
Revenues

NOT OFFERING PRICE

128
Q

True or false: for trades negotiated manually not electronically reporting is done by the member firm

A

False – negotiated manual executions are reported by the executing firm

129
Q

An order that does not have a specific market center designated by the client and has chosen by the broker dealer is a _____ order

A

Non directed

130
Q

While holding a large block order to buy from a client, what action would be prohibited for the market maker?

A

Executing in order for its own account in an option on the security a.k.a. front running

131
Q

ABC’s inside market is 15.15–15.40. May a new market maker enter a quote of 15.40–15.75?

A

No, because the high bid 15.40 and the low offer 15.40 would be the same price resulting in a locked market

132
Q

True or false: a sell order ticket may be marked long if the client or his agent has title to the security

A

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
Q

TRF reports trades in which securities?

A

Nasdaq and third market

134
Q

For agency trades,________must be disclosed

A

Commissions

135
Q

True or false: in a step-out transaction a clearing report, but not a trade report, is submitted

A

True

136
Q

Trades involving US government securities effected by any type of client are _____ from the debt markup policy

A

Exempt

137
Q

How long will a GTC good till call limit order remain on the display books

A

Until executed or cancelled by the customer

138
Q

What are the system hours of operation for the ADF?

A

8am to 630pm

139
Q

What is a threshold security

A

A reporting company’s stock that has substantial fails to deliver positions in existence for 5 consecutive business days

140
Q

After the initial requirement is met, what bid price is required to continue to be listed on an level of Nasdaq

A

$1.00

141
Q

Though acting in good faith a customer sells securities but does not deliver. When must the BD close out the trade

A

All fails-to-deliver must be closed out within 35 calendar days

142
Q

What is the minimum quote size for a Nasdaq market maker ?

A

100 shares or one round lot

143
Q

True or false: to be exempt from the debt markup policy , municipal bonds trades must involve only investment grade debt

A

False - the municipal bonds trades may include both investment and non investment grade debt

144
Q

What does the following quote of a Nasdaq market maker indicate it is willing to do ? 15.30- 15.35, 6 x 10

A

Buy up to 600 shares at 15.30 or sell up to 1,000 shares at 15.35

145
Q

The inside market for an NMS security is 12.56 - 12.62, 10 x 15.
May a BD place a bid $12.58?

A

Yes the broker dealers bid at $12.58 would serve to narrow the spread

146
Q

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

A

Net basis trade

147
Q

What securities are included in a monthly market center reports

A

NASDAQ and exchange securities for which information is sent through an automated quotation system

148
Q

To prevent rogue trading, a BD may limit an employees access to only trading systems that are ______to his job

A

Appropriate

149
Q

Nasdaq system hours are ___am to ____pm

A

4am to 8pm

150
Q

What type of transaction transfers the trade from one broker dealer to another for clearing purposes

A

A step out

151
Q

A narrowing market means its______

A

Liquid

152
Q

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?

A

The market makers quote is improved, it must display the clients interest. Its quote is now 21.05–21.30, 15 x 7.

153
Q

In Nasdaq level ll, what does TotalView provide members ?

A

Additional depth and aggregate size at the five best price levels

154
Q

According to the piggyback exception, when is the filing of form 211 not require required?

A

When the stock has been quoted on a regular and continuous basis for the past 30 days

155
Q

True or false: customer selling stock are considered long if they own a preferred or bonds convertible into the stock

A

False – the convertibles must already have been tendered for conversion

156
Q

True or false: a market makers quote represents the maximum number of shares it will buy or sell

A

False – the market maker may buy or sell more shares than it’s bid and offer displays

157
Q

Nasdaq Level lll allows a market maker to ____ and ______ its quote

A

Enter and change its quote

158
Q

What does it mean to indicate that NASDAQ market center execution system trades are locked in?

A

The terms have been agreed to by the parties, and the transaction is ready for clearance and settlement

159
Q

Name a type of transaction that is exempt from FINRA debt markup policy

A

Transactions in municipal securities

160
Q

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

A proceeds transaction

161
Q

If a trade is effected between two member firms, who is responsible for reporting the trade?

A

The executing firm

162
Q

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______

A

The markup of a security under the 5% policy

163
Q

True or false: under the limit of limit down rules, a trading pause may occur if the security enters a straddle state

A

True – the primary listing market may declare a trading pause when the security is in a straddle state

164
Q

True or false: national best offers below the limit up limit down upper price band are non-executable

A

False –an NBO below the limit up limit down upper price band is executable

165
Q

What is the first priority used by a dealer when determining the markup on debt securities?

A

The contemporaneous cost of the dealer

166
Q

Do not display requests should be_______ in the request maybe on a______ basis

A

Documented, trade by trade

167
Q

To be a threshold security, how many shares must be in a failing position?

A

10,000 shares or more

168
Q

NMS rule 612 generally prohibits market participants from displaying orders and pricing increments of ______\

A

Less than one cent

169
Q

True or false : ECNs use the ADF to display orders

A

True

170
Q

To obtain consent for affecting net basis trades for non-institutional clients, as a negative consent letter allowed?

A

No, they are only allowed for institutional clients

171
Q

Size/type of transaction, number of markets, checked, accessibility of quotes, terms/conditions of the order are all examples of:

A

Factors considered when attempting to obtain best execution

172
Q

A broker dealer holds a client order to buy 500 shares at $15. What would trigger an obligation to fill the clients order?

A

A broker dealer purchasing for its own account at $15 or lower

173
Q

“ sell some of my RST position today if the news is bad”

Is this a not held order?

A

No, because the client did not specify the number of shares to sell

174
Q

As it relates to TRACE eligible securities, what does split rated mean?

A

Securities are given an investment grade rating from one rating organization, and non-investment grade from another

175
Q

True or false: having unrealized profits or losses on unsettled trades may indicate rogue trading

A

True

176
Q

What is the number of market makers needed to qualify for listing on a NASDAQ capital market?

A

At least three market makers

177
Q

A broker dealer sends its client orders to an exchange for execution and is rebated for executed trades. What is this practice?

A

Payment for order flow

178
Q

Sharing client order information, selectively backing away from quotes, coordinating prices with other market makers are all examples of:

A

Broker dealer practices that are prohibited via the Department of Justice

179
Q

In the manning rule, what is the order size that warrants an exception?

A

10,000 shares or $100,000

180
Q

The Limit Up Limit Down rules address sudden price movements in ____stocks

A

NMS

181
Q

To buy or sell at their publicly quoted prices, to trade from inventory, and to provide liquidity are all roles of_______

A

Nasdaq Marker Makers

182
Q

What orders are exempt from the limit order protection rule?

A

Orders from institutional accounts and orders of 10,000 shares or more worth at least $100,000

183
Q

What does the best execution rule require a member firm to do?

A

Use reasonable diligence to obtain the best price possible for a client

184
Q

The customer limit order protection rule applies during___ hours and_______ hours, and when orders are sent to the ECN or another entity for execution

A

Normal and extended trading hours

185
Q

What events may cause the prevailing market for a debt security to be different than the contemporaneous cost?

A

Change in ISSUERS credit rating, a change in market interest rates , or significant news reports about the issuer

186
Q

What does level lll NASDAQ give market makers the ability to do?

A

Change their quote

187
Q

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?

A

Trade ahead exemption to the firm quote rule

188
Q

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?

A

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
Q

Market centers are required to create_______ reports disclosing the measure of the quality of order execution

A

Monthly

190
Q

The consolidated quotation system provides quotes for_______ and ______ listed securities including third market quotes

A

NYSE and AMEX

191
Q

Related to the order protection rule (NMS rule 611) what is the protected quote?

A

Any quotation that is immediately accessible through an automated execution system

192
Q

An absence of a prevailing market price____________ is used in determining the markup on corporate bonds

A

Contemporaneous cost

193
Q

True or false: the locate requirement of regulation SHO applies when a sell order ticket is marked long or short

A

False – it is only relevant when the sell order ticket is marked short

194
Q

In order to complete Form 211 prior to quoting a stock, where may the issuer information be obtained ?

A

From the issuers current prospectus or offering circular, it it’s most current 10-K and subsequent 10-Q and 8-K forms

195
Q

Along with the stock price, what orders are reduced on the ex dividend date

A

Buy limit and sell stops

196
Q

What’s the minimum bid price AND number of market makers required to remain listed on the NASDAQ global and capital markets?

A

A minimum bid price of one dollar with at least two market makers

197
Q

Splitting clients securities orders into multiple smaller orders to maximize payments or rebates to the member is_____

A

Trade shredding

198
Q

Prior to initiating quotes for an OTC equity, with whom must the information collected about the issuer will be filed?

A

FINRA

199
Q

Prior to initiating quotes for an OTC equity, with whom must the information collected about the issue will be filed?

A

FINRA

200
Q

If contemporaneous cost is not used to determine a debt security’s markup, what method would be the least important?

A

An economic model developed by regulators of the bond market (this is the last resort method)

201
Q

True or false: BD’s may not enter proprietary orders through the Nasdaq Market Center Execution System?

A

False – both agency and proprietary orders may be entered into the system

202
Q

When a firm dominates or controls the market for security, on what is a markup based?

A

The firms contemporaneous cost

203
Q

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?

A

No because a bit of $12.65 with the inside offer of $12.62

204
Q

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?

A
  1. Recent prices of trades between dealers
  2. Interdealer quotes
  3. prices of equivalent securities
205
Q

When is a market maker’s application considered effective ?

A

When notified by FINRA

NOTTT NASDAQ

206
Q

When are trades in foreign securities excluded from the reporting requirement?

A

When executed on and reported through a foreign exchange

or when executed OTC and reported to a foreign regulator

207
Q

Trading without approval in a product outside their expertise or an unusual pattern of cancelled trades by traders are all examples of________

A

Rogue trading

208
Q

FINRA’S5% policy addresses transactions executed in the_______ market

A

secondary

209
Q

True or false: in order to will identify the broker on the other side of the trade, a.k.a. the contra broker

A

False

210
Q

What does a firm need to obtain in order to get an exception from the customer limit order protection rule?

A

It must obtain client consent and it must disclose that it may potentially trade ahead before an order is accepted

211
Q

True or false: an ATS is NOT required to register with the SEC

A

False - under regulation ATS, an ATS is generally required to register as a broker dealer

212
Q

If a broker dealer holds a client order to sell 500 shares at $21, what would trigger an obligation to fill the clients order?

A

The broker dealer selling from its own account at $21 or higher

213
Q

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

A

Non-exchange stock

214
Q

For debt transactions, how is markup generally determined?

A

It is based on the dealers contemporaneous cost

215
Q

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?

A

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
Q

What type of orders are accepted by the NASDAQ market center execution system?

A

Market and limit orders

217
Q

True or false: clients must provide verbal or written consent to a broker dealer concerning payment for order flow arrangements

A

False – broker dealers are required to provide disclosure of the arrangement

218
Q

The Manning rule relates to______

A

Customer limit order protection

219
Q

The ECN is one of several systems that permits the entry and________ of quotes

A

Dissemination

220
Q

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?

A

When the firm implements the system to prevent the misuse of information regarding client orders – basically information barriers

221
Q

An executing broker dealer allocates all or part of the trade to another broker dealer for clearing purposes. This is a._______

A

Step out transaction

222
Q

What are the two ways order tickets can be marked when selling securities ?

A

Long or short

223
Q

For what type of firm would employee vacations qualify as an excused withdrawal for market making purposes?

A

A small firm with three or fewer level lll terminals

224
Q

The NASDAQ market center execution system is in order display and execution system for what securities?

A

NASDAQ and CQS a.k.a. third market securities

225
Q

What is exempt from the 5% policy besides IPO’s?

A

Municipal bonds, registered, secondary offerings, and mutual funds

226
Q

Before initiating quotes for an OTC equity, what is the quoting firms responsibility?

A

To collect, review, and ultimately submit certain information about the issuer to FINRA

227
Q

If a new market maker enters a quote with the bid equaling, the lowest asked price, the market is___

A

Locked

228
Q

A _____ order indicates quantity, security, and whether to buy or sell but only at a particular price or better

A

Limit

229
Q

When a client designates a specific market center to which her order is routed, it is a______order

A

Directed

230
Q

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____

A

Mark up on a transaction

231
Q

A market maker may withdraw its quote for up to___business days for issues beyond its control such as a system outage

A

5 business days

232
Q

Which orders may be entered as either good to cancel GTC or as day orders?

A

Limit and stop orders

233
Q

What type of order only permits discretion related to the time and or price of execution?

A

A not held order

234
Q

Form 211 must be filed at least ______ business days prior to initiating quotes for an OTC security

A

3 business days

235
Q

On a quarterly basis, broker dealers must disclose their routing practices for________ orders in NMS securities

A

Non-directed

236
Q

Nonexchange is another term for___

A

OTC

237
Q

When is a VWAP order entered?

A

Prior to determination of the actual price which makes the broker dealer guarantee the VWAP as of a certain period

238
Q

What must declined by a specific percentage to trigger a trading halt?

A

The S&P 500 index

239
Q

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

A

Net basis trade since the price is different

240
Q

What is required of a US and foreign corporate debt for it to be TRACE eligible?

A

It must be registered with the SEC or purchased or sold under rule 144 a of the securities act of 1933

241
Q

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

A

Limit

242
Q

Form 211 is filed with ____

A

FINRA

243
Q

OTC equities are ____traded and prone to manipulation

A

Thinly

244
Q

For LULD rules, upper and lower price bands are set around the securities
_____ price

A

Reference

245
Q

True or false: the ADF displayed quotes for OTC equities

A

False – the ADF displays quotes for NASDAQ and CQS securities

246
Q

ABC inside market is 15.15–15.40. May a new market maker enter a quote of 14.90–15.25?

A

Yes, because it’s narrowing the spread to 15.15–15.25

247
Q

A broker dealer is required to post its order routing information on its_____

A

Website, which is free of charge and accessible to the public

248
Q

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?

A

Limit order display rule

249
Q

What must exist for the Manning rule to not apply to other trading desks of a broker dealer?

A

Information barriers

250
Q

Without causing a regulatory violation, why may a presented order not be honored by a market maker?

A

Either before or at the time of order presentation, the broker dealer execute an order and will immediately revise its quote

251
Q

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 ________

A

Prevailing market, a.k.a. contemporaneous cost

252
Q

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 ?

A

Customer market orders to buy are filled at the ask price of 15.00

253
Q

In order giving agents discretion as to execution time/price

This is all a _______

A

Not held order

254
Q

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?

A

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
Q

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?

A

Customer market orders to sell are filled at the bid price of 14.50

256
Q

When must clients be told about details of any payment for order flow practices?

A

They must be informed in writing at the opening of an account and an annually thereafter

257
Q

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?

A

After the client’s trade is reported on the tape

258
Q

_____ orders are to be executed at the clothes only if that price is at or better than the set limit

A

LOC

259
Q

True or false: the number of marketmakers for security is a key consideration when determining best execution

A

False

260
Q

Under the limit order display rule, how quickly must orders that improves the market makers’s quote be displayed?

A

Immediately, but no later than 30 seconds

261
Q

When do CAT reports need to be submitted to FINRA?

A

On the trading day after the data is recorded

262
Q

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

A

Limit state

263
Q

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

A

2 business days and then must notify the SIC on the next business day

264
Q

Does an RR who solely processes customer transactions need to be fingerprinted ?

A

No because they only prepare confirmations

265
Q

Do clerical employees of a BD who handle customer records need to be fingerprinted?

A

No because it’s not books/records of original entry that they’re handling

266
Q

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:

A

Unsolicited customer orders

267
Q

Under Rule 144, when is a security exempt from the six month holding period requirement?

A

If it is transferred to the estate of a person since deceased

Series 24 (6 decks)

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