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Series 7 Top Off Trading Markets > NYSE Trading > Flashcards

NYSE Trading Flashcards

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1
Q

Under NYSE rules, a company moving its listing from another market must meet which requirements?

I 100,000 publicly held shares
II 1,100,000 publicly held shares
III $10,000,000 aggregate market value of publicly held shares
IV $100,000,000 aggregate market value of publicly held shares

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is D.

Under NYSE rules, the numerical standards for a company wishing to move its listing from another market include 2,200 or more shareholders, with an average monthly trading volume of 100,000 shares for the past 6 months. There must be 1,100,000 publicly held shares with an aggregate market value of $100,000,000.

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2
Q

All of the following are requirements for a company to move its listing from another market to the NYSE EXCEPT:

A. 2,200 shareholders
B. Minimum of 1,100,000 shares outstanding
C. $100,000,000 aggregate market value of outstanding shares
D. Minimum debt to equity ratio of 50%

A

The best answer is D.

The NYSE does not set a maximum debt to equity ratio for a company that wishes to move its listing. It does require that the company have 2,200 or more shareholders; an average monthly trading volume of 100,000 shares for the past 6 months; $100,000,000 aggregate market value of outstanding shares; and at least 1,100,000 shares outstanding. Also, there must be a national interest in trading the stock and the company must agree to distribute proxies to be listed.

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3
Q

Which of the following individuals trades on the New York Stock Exchange Floor?

I Specialist (DMM)
II Floor Broker
III Two Dollar Broker
IV Registered Representative

A. I and II only
B. III and IV only
C. I, II, III
D. I, II, III, IV

A

The best answer is C.

The Specialist (now renamed the DMM - Designated Market Maker) is the assigned market maker in a security on the NYSE floor. The Floor Broker handles orders as agent for retail member firms. The Two Dollar Broker executes orders for retail member firms, usually when its Floor Brokers are too busy. Registered representatives cannot trade on the NYSE floor.

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4
Q

All of the following trade securities on the New York Stock Exchange EXCEPT:

A. Two dollar broker
B. Floor broker
C. Specialist (DMM)
D. Order Book Official (OBO)

A

The best answer is D.

Two dollar brokers, Specialists, and Floor brokers execute transactions on the NYSE. The Specialist (now renamed the DMM - Designated Market Maker) is the assigned market maker in a security on the NYSE floor. The Floor Broker handles orders as agent for retail member firms. The Two Dollar Broker executes orders for retail member firms, usually when its Floor Brokers are too busy. The name comes from the fact that they used to charge $2 per trade. Order Book Officials, who solely handle the book of public orders, are only used on the Chicago Board Options Exchange.

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5
Q

Under NYSE rules, every “responsible broker or dealer” who communicates bids and offers on the exchange floor (also known as “addressing the crowd”) must comply with all of the following rules EXCEPT:

A. any bid or offer for less than the normal trading unit has no standing in the trading crowd
B. the highest bid and the lowest offer have precedence in all cases
C. bids and offers must be publicly announced
D. bids and offers are set by floor officials during unusual situations

A

The best answer is D.

Under NYSE trading rules, bids and offers must be for the minimum 100 share size trading unit; the highest bid and lowest offer have priority (the same as NASDAQ’s “inside market” - now renamed the NBBO - National Best Bid and Offer); and all bids and offers must be publicly announced (no secret bids and offers, or side deals allowed). Bids and offers are always set by market participants; they are not set by floor officials (the regulators) under any circumstances.

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6
Q

Under NYSE rules, every “responsible broker or dealer” who communicates bids and offers on the exchange floor (also known as “addressing the crowd”) must comply with all of the following rules EXCEPT:

A. any bid or offer must be for at least the normal trading unit in that security
B. the highest bid and the lowest offer have precedence in all cases
C. bids and offers must be publicly announced
D. if two bids (or offers) are made at the same time and price, the smaller order has precedence

A

The best answer is D.

Under NYSE trading rules, bids and offers must be for the minimum 100 share size trading unit; the highest bid and lowest offer have priority (the same as NASDAQ’s “inside market” - now renamed the NBBO - National Best Bid and Offer); and all bids and offers must be publicly announced (no secret bids and offers, or side deals allowed). If 2 equivalent price bids (or offers) are made at the same time, the larger order has precedence and will be filled first.

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7
Q

The Specialist (DMM) on the exchange performs which of the following functions?

I Acts as a dealer trading for his own account
II Executes orders for other brokers
III Executes round lot orders
IV Executes odd lot orders

A. I, II, IV
B. I, III, IV
C. II, III, IV
D. I, II, III, IV

A

The best answer is D.

The Specialist (now called the DMM- Designated Market Maker) is a dealer on the exchange floor trading for his own account. He trades both round lots and odd lots. The DMM also acts as agent for other brokers, running a book of open orders to be filled if the market moves up or down.

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8
Q

Specialists (DMMs) on the New York Stock Exchange can perform which of the following functions?

I Act as a market maker
II Act as a broker’s broker
III Handle odd lot transactions
IV Act as an underwriter

A. I and II only
B. III and IV only
C. I, II, III
D. I, II, III, IV

A

The best answer is C.

Specialists (now renamed DMMs - Designated Market Makers) cannot deal with the public, so they cannot act as underwriters. They are wholesale members of the NYSE who deal only with other member firms. DMMs act as market makers and broker’s brokers. DMMs also act as the odd lot dealers for trades of NYSE listed stocks that are less than a round lot.

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9
Q

Which statements are TRUE about the Specialist (DMM) on the NYSE?

I The Specialist (DMM) has a negative obligation to stand aside from trading for his own account if retail customers are present to trade with each other
II The Specialist (DMM) has a positive obligation to interposition itself between retail customers that are present to trade with each other
III The Specialist (DMM) has a negative obligation to stand aside from trading with a customer if there are no other retail customers present to trade
IV The Specialist (DMM) has a positive obligation to trade with a customer if there are no other retail customers present to trade

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is B.

The Specialist (now renamed the Designated Market Maker or DMM), as the assigned market maker in the stock, is obligated to make a continuous market in the stock. If there are customers that wish to sell and there are no other buyers for that stock, then the Specialist/DMM must “step-in” and buy that stock into its inventory account. If there are customers that wish to buy and there are no other sellers for a stock, then the specialist must “step-in” and sell that stock out of its inventory account. This is called the Specialist’s “positive obligation” - that is, the obligation to be the buyer or seller of last resort.

On the other hand, if there are buyers and sellers ready to trade at a given price, then the Specialist/DMM has a “negative obligation” not to interposition itself between these willing traders. Thus, if the market is active, then the Specialist/DMM should not be performing many trades for its own account. Note, however, that the specialist can still execute trades from its book as the market moves, since these are trades for the account of customers.

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10
Q

The Specialist (DMM) accepts which of the following orders on his book?

A. Day
B. Good Through Week
C. Good Through Month
D. Good Til Canceled

A

The best answer is A.

The Specialist (now called the DMM - Designated Market Maker) only accepts “Day” orders on his book. If a customer wants an order with a longer “Time in Force,” the member firm accepts it into its own internal system and feeds it to the exchange as a new order each day, until either the order expires or the “Time in Force” expires.

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11
Q

An order is placed on the NYSE to buy 100 ABC shares at $50 Day. If the order is not executed on that day, who cancels the order?

A. the customer
B. the Specialist (DMM)
C. the registered representative
D. ABC corporation

A

The best answer is B.

It is the responsibility of the Specialist (now renamed the DMM - Designated Market Maker) to cancel any “Day” orders at the end of the day that have not been filled.

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12
Q

A Specialist (DMM) on the NYSE shows the following orders for ABC stock on his book:

                    $50.05 - $50.07
                            30 X 60

The Specialist/DMM in ABC stock receives a market order to sell 1,000 shares. The Specialist/DMM can take which of the following actions?

I The Specialist/DMM can fill the order from his own account at $50.05
II The Specialist/DMM can fill the order from his own account at $50.06
III The Specialist/DMM can fill the order against the book at $50.05
IV The Specialist/DMM can fill the order against the book at $50.06

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is C.

The Specialist (now called the DMM - Designated Market Maker) is quoting the stock at $50.05 Bid with a size of 30 (good for 30 x 100 = 3,000 shares); and $50.07 Ask with a size of 60 (good for 60 x 100 = 6,000 shares). These are the next orders to be filled on the Specialist’s/DMM’s book. If the Specialist/DMM receives a market order to sell for 1,000 shares, the Specialist/DMM can either fill that order at the current bid price of $50.05 against the book; or, if the Specialist/DMM wishes, the Specialist/DMM can “improve” the price of the order by buying from the customer into its inventory price at a price that is better (higher) than $50.05, such as at $50.06.

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13
Q

On the New York Stock Exchange, which of the following persons will handle odd lot transactions?

A. Specialist (DMM)
B. Floor Broker
C. $2 Broker
D. Competitive Trader

A

The best answer is A.

Odd lot transactions on the NYSE are handled by designated “Odd Lot” dealers - who happen to be the Specialists (Designated Market Makers) in the assigned stocks.

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14
Q

A Specialist (DMM) “stops stock” for a floor broker. Which of the following statements are TRUE regarding the Specialist’s (DMM’s) action?

I The Specialist/DMM guarantees the price of the stock
II The Specialist/DMM stops trading in the stock
III The Specialist/DMM takes this action for a short period of time
IV The Specialist/DMM takes this action for the balance of the trading day

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is A.

When a Specialist (now renamed the DMM - Designated Market Maker) “stops stock,” he gives a guaranteed price for a short time period to a floor trader. The trader is free to try and get a better price, but if he fails, he can return to the Specialist/DMM for the stock at that price. This can only be done for public orders.

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15
Q

A floor broker goes to the trading post to buy 10,000 shares of ABC at the market-not held. The Specialist (DMM) says to the trader “One hundred shares are stopped at 19.” This means that:

A. the trader is stopped from trading with anyone else
B. trading has been stopped in the issue
C. the Specialist/DMM has guaranteed that the price will not change for a short period
D. the Specialist/DMM will not trade with anyone else at the $19 price

A

The best answer is C.

When a Specialist (now renamed the DMM - Designated Market Maker) “stops stock,” he gives a guaranteed price for a short time period to a floor broker. The floor broker is free to try and get a better price, but if he fails, he can return to the Specialist/DMM for the stock at that price. This can only be done for public orders.

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16
Q

The Specialist (DMM) can stop stock for:

I proprietary orders
II public orders
III brief time periods
IV that trading day

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is C.

The Specialist (now renamed the DMM - Designated Market Maker) can only stop stock - guaranteeing a price for a brief time period to a floor broker - for public orders. This is a Specialist/DMM courtesy function that allows floor brokers to “shop around” for the best price, knowing that they have a guaranteed price from the Specialist/DMM in hand if they cannot locate a better deal.

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17
Q

Super Display Book is the automated trading system for the:

A. NASDAQ Stock Market
B. American Stock Exchange (NYSE American)
C. New York Stock Exchange
D. Instinet Stock Market

A

The best answer is C.

The NYSE automated trading system is called the Super Display Book. This replaced the previous DOT (Designated Order Turnaround) system in late 2009.

18
Q

Which of the following statements are TRUE about computerized trading of securities on exchanges as compared to manual trading?

I Trades are effected more rapidly
II Trades are effected less rapidly
III Trades are effected at lower cost
IV Trades are effected at higher cost

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is A.

Electronic trading systems, such as the NYSE Super Display Book system, are faster, cheaper, and more efficient than manual trading by floor brokers. These systems have size limitations, and cannot handle orders that require human judgment such as a “Not Held” order. It is these systems that allow the NYSE to trade, on average, 1 billion shares a day.

19
Q

Which of the following statements are TRUE about the NYSE Super Display Book system?

I Market and Limit orders are accepted
II There is no limitation on order size
III Execution reports are routed directly to the firm via computer
IV Orders cannot be placed on the Specialist’s book (DMM’s book) through the system

A. I and III
B. II and IV
C. I, III, IV
D. II, III, IV

A

The best answer is A.

The Super Display Book system accepts market and limit orders by routing them directly to the DMM’s Display Book for execution. Market orders are executed immediately while limit orders are placed on the Display book. The system is limited in the size of orders that it can handle. For example, an order to sell 10,000,000 shares at the market is too large for Super Display Book and must be handled through a floor broker.

20
Q

All of the following statements are true regarding the Super Display Book system EXCEPT:

A. orders are routed directly to the NYSE DMM for execution
B. odd lot orders cannot be entered into the system; only round lots are permitted
C. customers must request use of the system, otherwise the trades are directed to floor brokers
D. executed trades are directly reported to the member firm that entered the order

A

The best answer is C.

The NYSE Super Display Book system is an electronic order entry, order matching, and trade reporting system. The system can only handle round lots (100 shares or more), with limits on the maximum order size permitted. Odd lots (orders for less than 100 shares) cannot be entered into the system - these are handled via a separate order entry system to the DMM - Designated Market Maker. Over 90% of NYSE trading now goes through Super Display Book. There is no requirement for customers to request the use of the system - firms prefers to use it because it is cheaper and faster than having a floor broker manually handle the order

21
Q

Which statements are TRUE about the NYSE automated trading system?

I Orders are routed directly to the Specialist (DMM) for execution
II Use of the system eliminates floor brokerage fees
III Any size order can be accommodated on the system
IV Completed trades are reported electronically without the use of floor generated execution tickets

A. I and III
B. III and IV
C. I, II, IV
D. I, II, III, IV

A

The best answer is C.

The Super Display Book system routes orders directly to the Specialist’s (now renamed the DMM - Designated Market Maker’s) post for execution, and execution reports are returned directly to the originating firm through the computer system, without the use of hand generated floor trading tickets. The system avoids floor brokerage fees and can only handle orders up to specified maximum sizes (e.g., 3,000,000 shares for limit orders).

22
Q

All of the following statements are true about the NYSE automated trading system EXCEPT:

A. completed trades are reported electronically without the use of floor generated execution tickets
B. any size order can be accommodated on the system
C. orders are routed directly to the Specialist (DMM) for execution
D. use of the system eliminates floor brokerage fees

A

The best answer is B.

The Super Display Book system can only handle orders up to specified maximum sizes. The system routes orders directly to the Specialist’s (now renamed the DMM - Designated Market Maker’s) post for execution, and execution reports are returned directly to the originating firm through the computer system, without the use of hand generated floor trading tickets. The system avoids floor brokerage fees, and so is both faster and cheaper to use.

23
Q

Which of the following orders are accepted on the NYSE automated trading system?

I Day orders
II Market orders
III Limit orders
IV Large Block orders

A. I only
B. II and III only
C. I, II, III
D. I, II, III, IV

A

The best answer is C.

The Super Display Book system cannot handle any size order. There are maximum order sizes (e.g., 3,000,000 shares for limit orders). The system accepts market and limit orders. It only accepts Day orders - any longer term order can only be accepted by that member firm into its internal system and routed to the NYSE as a new Day order each day.

24
Q

Trades of NYSE listed issues are reported via the:

A. Network A Consolidated Tape
B. Network B Consolidated Tape
C. Network C Consolidated Tape
D. Network D Consolidated Tape

A

The best answer is A.

The Network A Consolidated Tape reports all trades of NYSE listed issues, wherever they occurred. The Network B Consolidated Tape reports all trades of NYSE American (AMEX) and regional exchanged listed issues, wherever they occurred. The Network C tape reports trades of NASDAQ listed issues wherever they occur. There is no Network D tape.

25
Q

Third Market Makers must report their trades of exchange listed stocks to the Consolidated Tape:

A. within 10 seconds of execution during all hours of the day
B. within 10 seconds of execution during the hours that the NYSE is open
C. at the close of the trading day
D. at the opening of the trading day

A

The best answer is B.

Third market makers are over-the-counter firms who trade exchange listed stocks in competition with the exchange Specialists (now renamed DMMs - Designated Market Makers).

Equity trade reporting rules are consistent for all markets - trades must be reported by the executing member within 10 seconds of execution during regular market hours.

26
Q

Regarding reporting of trades that take place in NYSE listed issues:

I each trade must be reported within 10 seconds
II each trade must be reported within 60 seconds
III the executing member reports
IV the initiating member reports

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is A.

Equity trade reporting rules are consistent for all markets - trades must be reported by the executing member within 10 seconds of execution during regular market hours.

27
Q

Assuming that the Standard and Poor’s 500 Index closes at 2,460, the U.S. listed equities markets will close its market for the balance of the day if the index declines below:

A. 2,338
B. 2,288
C. 2,140
D. 1,968

A

The best answer is D.

Under the “circuit breaker” rule on the U.S. equities markets, if theStandard and Poor’s 500 Index falls by a cumulative 20% in a single day, the market will be shut for the balance of the day. If the Standard and Poor’s 500 Index closes at 2,460, a 20% drop is 493 points. 2,460 - 492 = 1,968.

28
Q

Under the circuit breaker rule, a trading halt in NMS stocks will be INITIATED if the Standard and Poor’s Index drops by:

A. 7% prior to 3:25 PM (EST)
B. 13% prior to 3:25 PM (EST)
C. 20% prior to 3:25 PM (EST)
D. 25% prior to 3:25 PM (EST)

A

The best answer is A.

Under the circuit breaker rule, if the Standard and Poor’s 500 Index moves down by 7% or more from the prior day’s closing price, the listed equity markets will be shut down for 15 minutes. After reopening, if the index falls by a total of 13% or more from the prior day’s closing price, the markets will close again for 15 minutes. This is intended to allow investors to calmly evaluate market conditions, so that a “domino effect” of panic selling does not occur. Finally, after reopening, if the index falls by a total of 20%, the markets will close until the next day.

Also note that any 7% or 13% drop that occurs after 3:25 PM will not close the markets - they will stay open until the 4:00 PM close. This is the case because funds base their NAVs on closing prices, and it was felt that having a lack of pricing to investors would be overly disruptive. On the other hand, any 20% drop at any time will shut the markets until the next day, since such a dramatic price drop is usually caused by a major news event.

29
Q

When the Standard and Poor’s 500 Index is at 2,460 on a given day, the U.S. listed equities markets will close its market for the rest of the day if the index declines by a total of:

A. 124 points
B. 172 points
C. 320 points
D. 492 points

A

The best answer is D.

Under the circuit breaker rule, if the Standard and Poor’s 500 Index falls by a cumulative 20% in a given trading day, the market will be shut for the balance of the day. 20% of 2,460 = 492 points.

30
Q

Which statements are TRUE regarding trading halts?

I If it is a regulatory halt, only that exchange stops trading the stock
II If it is a regulatory halt, all markets must stop trading the stock
III If it is a non-regulatory halt, only that exchange stops trading the stock
IV If it is a non-regulatory halt, all markets must stop trading the stock

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is C.

A “regulatory halt” is one imposed by either a regulator (the SEC stops trading in a stock) or one that occurs because the “circuit breaker” (7% drop in the S&P 500 Index) was tripped. If there is a regulatory halt, all trading in that stock must stop in the U.S. in all markets; and if the circuit breaker is tripped, all stock markets in the U.S. must stop all trading. This is a non-regulatory halt, which is different.

For example, in the “good old days,” the NYSE would routinely delay the opening of trading in a stock if there was a large opening order imbalance (many more opening sell orders than buy orders). During the halt, the Specialist would attempt to round up matching buy orders, so that there could be an orderly opening. The NYSE learned that this was not such a great idea, because institutions that could not trade the stock on the NYSE simply went to regional exchanges, Third Market Makers and ECNs to do their trades instead. So each time the NYSE did this, they lost market share! Needless to say, they don’t do this anymore - except in test questions of course!

31
Q

Block trades for sales of NYSE listed issues that are too large for Super Display Book are:

A. given directly to the Specialist/DMM for execution
B. given to Floor Brokers, who may only execute them as “Fill or Kill” orders
C. only executable during normal trading hours
D. routed to Third Market Makers who effect the transaction on a principal basis

A

The best answer is D.

Block trades to sell that are too large for Super Display Book (e.g., trades of over 3,000,000 shares for limit orders) are not accepted in the Display Book. Competition from the Third Market has made it much more attractive for institutions to buy or sell large blocks of NYSE listed issues OTC (because the Third Market Makers do these transactions as “price leaders” to attract further institutional business).

Also note that orders that are too large for the Display Book can be routed to floor brokers on the NYSE floor for execution, but they are not required to be “Fill or Kill” orders. If anything, they would be routed to a floor broker as a “market-not held” order, which gives the floor broker discretion over price and time of execution.

32
Q

A customer places an order with a registered representative to sell 5,000,000 shares of ABC stock (NYSE listed) “at the market.” The registered representative should:

A. submit the order
B. contact the Specialist/DMM on the trading floor
C. contact a Third Market Maker
D. contact the firm’s large block trading desk

A

The best answer is D.

This order is too large to be handled in the regular order flow on the NYSE floor - for example, Super Display Book can only take limit orders up to 3,000,000 shares. Such an order would be submitted to the firm’s large block trading desk for execution. It is up to the firm’s trading desk to decide how an order should be handled; this is not the responsibility of the registered representative. The trading desk would probably give the order to one of the firm’s floor brokers for execution.

33
Q

A trade is considered to be a “block trade” if the amount is for a minimum of:

A. 100 shares
B. 1,000 shares
C. 10,000 shares
D. 100,000 shares

A

The best answer is C.

Once a trade hits 10,000 shares, it is considered a “block” trade. The full amount of the “block” is printed on the tape. Please note that as the NYSE continually expands the capabilities of Super Display Book, this definition is becoming obsolete - but may still be tested.

34
Q

A corporation is making a tender offer for all of its common shares. Which of the following customers CANNOT tender the shares?

A. Customer A, who is long 100 shares of ABC in a custodian account
B. Customer B, who is long 100 shares of ABC in a cash account
C. Customer C, who is long 200 shares of ABC, and short 100 shares of ABC in a margin account
D. Customer D, who is long 100 shares of ABC, and short 200 shares of ABC in a margin account

A

The best answer is D.

Under the “short tender” rule, tendering shares for a customer who is in a “net” short position in a security is prohibited. Tenders are permitted only to the extent of the customer’s net long position. Customer C is net long 100 shares and can tender. Customer D is net short 100 shares and cannot tender. Customer A is long 100 shares and can tender - the fact that the shares are held in a custodian account is of no relevance. Customer B is long 100 shares in a cash account and can tender as well.

35
Q

The Master Manufacturing Company has just announced a tender offer for its own common stock. Master is offering to buy up to 100% of the company’s stock at $20 per share contingent on at least 64% of the outstanding shares being tendered. After the announcement of the offer, the stock closed on the NYSE up 2.50 at $18.75. If a customer had 100 shares and sold at tomorrow’s opening price, what is the price that he would receive per share?

A. $18.75
B. $20.00
C. $20.50
D. $21.25

A

The best answer is A.

If the customer sold at the opening, he would receive $18.75 per share. This deal of $20/share is contingent upon 64% of the shares tendered.

36
Q

Under the provisions of Regulation SHO, before a security can be “sold short,” it must be determined that the security:

A. can be borrowed and delivered by settlement
B. has been traded on an + tick or a 0+ tick
C. is not on the threshold list
D. is subject to the short interest reporting rule

A

The best answer is A.

Regulation SHO (as in SHOrt sale rule) requires that, prior to effecting a short sale for a customer, it must be affirmatively determined that the security can be borrowed and delivered on settlement. This “locate” requirement must be documented.

Under Regulation SHO, any securities that are sold short that are on the “threshold” list of hard-to-borrow securities on trade date, if not delivered on settlement, must be bought-in no later than “13 consecutive settlement days” from trade date.

37
Q

An NMS stock can only be sold short on an up bid if its price falls by at least:

A. 1%
B. 2%
C. 5%
D. 10%

A

The best answer is D.

If an NMS (National Market System stock - NYSE, NYSE American (AMEX), or NASDAQ listed) falls by 10% or more, it can only be sold short on an “up bid” for the remainder of that trading day and the entire next trading day. Thus, it can only be sold short into a rising market. This stops the relentless short selling of stocks with the intent of driving market prices down - a market manipulation.

38
Q

Under Regulation SHO, a “threshold” security is one that:

A. cannot be sold short under any circumstances but long sales are permitted
B. can only be sold short at a price that is $.01 lower than the preceding trade
C. if sold short and not delivered within 13 business days of the trade, buy-in is required
D. if sold short on a down-tick, must be immediately bought-in on an up-tick

A

The best answer is C.

Regulation SHO (as in SHOrt sale rule) prohibits “naked” short selling. Before a short sale can be effected for a customer, the member must make an affirmative determination that the securities can be borrowed and delivered by settlement.

If the security is “difficult to borrow,” it is placed on the exchange’s threshold list. If a security on the threshold list is sold short, and there is a “fail to deliver” on settlement, Regulation SHO requires that the member firm buy-in the position in no later than “13 consecutive settlement days” from trade date.

39
Q

Under Regulation SHO, in order to sell short a stock for a customer, the member firm MUST:

I determine that the securities to be sold short can be borrowed and delivered on settlement
II determine that the issuer of the securities to be sold short is current in its SEC filings
III buy-in the securities sold short in 13 consecutive settlement days if the trade was not effected on an up-tick or up-bid
IV buy-in the securities sold short in 13 consecutive settlement days if there is a fail to deliver and the security was on the “threshold” list as of trade date

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is B.

Regulation SHO (as in SHOrt sale rule) prohibits “naked” short selling. Before a short sale can be effected for a customer, the member must make an affirmative determination that the securities can be borrowed and delivered by settlement. If the security is “difficult to borrow,” it is placed on the exchange’s threshold list.

If a security on the threshold list is sold short, and there is a “fail to deliver” on settlement, Regulation SHO requires that the member firm buy-in the position in no later than “13 consecutive settlement days” (counting from trade date).

40
Q

Quotes for NYSE listed issues from all of the following sources are shown on the Consolidated Quotations Service EXCEPT:

A. New York Stock Exchange
B. Boston Stock Exchange
C. Chicago Stock Exchange
D. Chicago Board Options Exchange

A

The best answer is D.

The Consolidated Quotations Service (CQS) shows bid and ask quotes for NYSE listed issues, from all market makers in that issue (including dual listings on regional exchanges; and over-the-counter market maker quotes for NYSE listed issues from Third Market Makers). Options quotes from the CBOE are not on CQS.

41
Q

Which statements are TRUE?
I NYSE operating hours are 9:00 AM - 6:30 PM ET
II NYSE operating hours are 9:30 AM - 4:00 PM ET
III CQS operating hours are 9:00 AM - 6:30 PM ET
IV CQS operating hours are 9:30 AM - 4:00 PM ET

A. I and III
B. I and IV
C. II and III
D. II and IV

A

The best answer is C.

Unlike the NYSE, which is open from 9:30 AM to 4:00 PM ET, CQS is open for a longer period of time. CQS hours are 9:00 AM ET to 6:30 PM ET. The longer hours accommodate Third Market Makers who do much of their trading in exchange listed securities before and after regular market hours.

Series 7 Top Off Trading Markets (4 decks)

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