Missed / Confusing Questions Chapters 9-16 Flashcards
It is both an order display and order execution system describes what
The NASDAQ market center execution system
If there is a transaction involving an OTC equity security, which of the parties in the transaction reports to the ORF?
The executing member firm
What type of securities are quotable in the alternative display facility ADF?
Pretty much everything except OTC equities
So you can have exchange, traded funds, NASDAQ global market securities, and NASDAQ capital market securities
It is open between 8 AM and 6:30 PM ET
How long is the ADF open for?
From 8 AM to 6:30 PM
All transactions executed journeys hours must be reported within 10 seconds
The transaction in the same security that has occurred at a time close to the dealers transaction
The prevailing market price
The prevailing market price is used to determine what
The markup or markdown
On the New York Stock Exchange, market on close and limit on closed orders must be entered by____ET
3:50 PM et
When a bid is higher than an offer that’s already displayed
Or
When a offer is lower than a bid that’s already displayed
Crossed market
A NASDAQ market maker can withdraws quotes for a specific stock due to system outage for how many days
5 days
This activity is an attempt to push the closing price of a stock up or down based on the net position of the firm, in order to get a favorable mark to market, which is used to compute margin and net capital requirements
Marking the close
And ADF market participant reports transactions through which system
ADF
this is a FINRA own facility used for quoting, and the reporting of transactions in NASDAQ listed, and other exchange listed securities (like CQS securities)
What is CQS used for?
Exchange traded securities that are not listed on NASDAQ
It is also also a quotation system
Under the customer limit order display rule, how long does the market maker have to display the current quote?
Immediately (30 seconds)
When a broker dealer sells stock to a customer as a principal, how was the markup based?
It is based on the inside market market asking price
When a customer sells and a market maker buys, this is the ____
Bid
When a customer buys and a market maker sells, this is a___
Ask
Why did the SEC create rules regarding limit up/limit down?
In order to prevent trades in individual securities from occurring outside a specific trading band
According to the limit up/limit down rule, a trading pause of ___________ applies if the security enters a limit state
5 minutes
This happens if the national best bid is on or above the upper price band, or the national best offer is on or below the lower price band
Clearing firms often place limits on _______
The gross dollar amount of trades, or the size of any single trade, or Or limit based on a dollar amount
NOTTTT a specific number of trades
When a firm trades ahead of a customer who placed a held limit order, it can only be done legally if:
Another trading desk has no knowledge of the order
Which exchange has the most stringent listing requirements?
NASDAQ global select
TRACE needs to report within
15 minutes
How often are trading venues required to file market center reports regarding price improvement?
Monthly
How often are trading venues required to file market center reports regarding price improvement?
Monthly
Before they execute a short sale, a broker dealer needs to look at
The easy to borrow list
Which also needs to be less than 24 hours old
A market maker must protect the customer limit order from:
9:30 AM to 8 PM ET
Would an OTC equity security be found on the consolidated quotation system CQS?
No
The CQS provides quotations on all common stock, preferred stock, warrants, and rights which are registered on the regular exchanges
Prior to filling a customers by order, a dealer buys stock into inventory and resells it to the customer at a higher price
This is what
Net basis transaction
A level 3 market decline: 20% decline in the S&P 500 index will halt trading for the remainder of the day
This applies to which concept
Equity market circuit breakers
NYSC listed stock transactions in the over-the-counter market describes which market
The third market
Under regulation SHO, an individual is considered to be long a security for purposes of the short sale rule, if the investor or an agent has titled to the security
What is an example of a customer not being long the stock?
When a customer owns a convertible, preferred equivalent to the number of common shares being sold
Because the security remains unconverted, the customer is not considered to be long
True or false: SEC rules require that a customers limit order be displayed in a market maker quote if it improves that quote or if it does not improve the inside market
True
A broker dealer may use the NASDAQ market center execution system to execute transactions in:
NASDAQ and CQS
CAT reports must be generated by
8 AM ET on the next trading day
This is because a trading day starts after 4:15 PM and ends at 4:15 PM on the next trading day
When it comes to piggybacking, if marketmaker A piggyback on the quote of market maker B, and marketmaker be withdraws it’s quote eventually, what happens to MM A?
They may continue to publish a quote on the security in an inter-dealer quote system
True or false: they stopped order must be for the account of another broker dealer
False
A stopped order must be for the account of a customer - primarily for institutional customers
The customer order protection interpretation (a.k.a. the Manning rule) requires that:
The Market maker holding a customer limit order for a NASDAQ stock execute that order immediately upon executing an order for its own account that would have filled the customer order
A broker dealer may trade ahead of a customer by order:
If the firm is willing to pay at least $.01 more per share for the stock
When a broker dealer sends, it’s non-directed order flow to a third-party market center for execution, this routing order flow must be reported
Quarterly
Registration of any system that matches, buyers and sellers is it requirement of which regulation?
Regulation ATS
Under the firm quote rule, when is the market maker obligated to execute a transaction at its quote?
When the market maker has exceeded its trading volume for the previous day prior to the presentation of the order
Equity trades must generally be locked in within:
20 minutes
True or false: the 5% markup policy does not apply to fixed priced offerings sold within a prospectus
True
An executing broker dealer that previously submitted a trade to the TRF now elect to allocate a portion of that trade on behalf of another broker dealer. This is referred to as a:
Step out
A broker dealer must satisfy the locate requirement before allowing a customer to execute a short sale under which regulation?
Regulation SHO
NASDAQ prohibits a marketmaker from entering an offer _______ any other bid
Or
When a bid is ______ than an offer already displayed
Below ; above
When a broker dealer is unable to deliver stock by the settlement date and finds themselves in a fail to deliver position under regulation SHO, the broker dealer firm:
Must Immediately purchase or borrow the security
True or false: market makers can withdraw quotes without penalty in OTC equities
True
When a transaction has been held as a blockbuster trade, the hold will be lifted if the clearing firm does not respond within _______
15 minutes
In the NASDAQ market center execution system, market participants may enter odd lot, mix lot, and round lot orders. However, quotation and order sizes are displayed only in round lots. So when you get an odd lot or mixed lot order, what direction are they rounded to?
Rounded DOWN ( ex: 270 shares goes to 200)
A confirmation sent to a customer states that the security was bought for your account – this would indicate the broker dealer on this transaction acted as a :
Broker and charged a commission
Order entry firms use NASDAQ level 2 to ________
Monitor the market, but many institutional investors are also subscribers and it is not an order entry system because the firms send orders to market makers
True or false: While NASDAQ system accepts round lot orders, odd lot, orders, and mixed lot orders, they will not be displayed on the quote system yet are still available for execution.
True
