NYSE Trading

Question 1

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%

Answer 1

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.

Question 2

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

A. Two dollar broker
B. Floor brokers
C. Specialist (DMM)
D. Registered Representative

Answer 2

The best answer is D.

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 securities - they can enter orders on behalf of customers to be executed by traders in the market.

Question 3

Under NYSE rules, every broker or dealer who communicates bids and offers on the exchange floor must comply with which of the following rules?

I The highest bid and the lowest offer have precedence in all cases
II Bids and offers must be publicly announced
III Any bid or offer for less than the normal trading unit has no standing in the trading crowd
IV Bids and offers must be set by floor officials

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

Answer 3

The best answer is C.

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.

Question 4

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

Answer 4

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.

Question 5

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

Answer 5

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.

Question 6

Specialists (DMMs) on the New York Stock Exchange can perform all of the following functions EXCEPT:

A. act as a market maker
B. act as a broker’s broker
C. handle odd lot transactions
D. act as an underwriter

Answer 6

The best answer is D.

Specialists (now called 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 members. DMMs act as market makers and broker’s brokers.

Question 7

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

Answer 7

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.

Question 8

A customer owns 100 shares of an NYSE listed preferred stock and notices that the typical daily trading volume in the issue is less than 1,000 shares. The customer wants to sell the stock and asks his broker what will happen if there is no ready buyer for the stock. The broker should respond that the Specialist (DMM) on the NYSE floor:

A. is obligated to buy the stock at the current market
B. is obligated to buy the stock at the limit price, if one is specified by the customer
C. must look for a buyer for the shares on the NYSE floor
D. is not obligated to buy the stock at the market

Answer 8

The best answer is A.

Specialist/DMMs (Designated Market Makers) are obligated, under NYSE rules, to make a continuous market in the assigned stock. Thus, on the NYSE floor, a customer is always assured that the trade will be executed - however the price at which the trade is executed is always subject to market conditions.

Question 9

Which statement is TRUE regarding a customer’s order to buy 400 XYZ @ $34.50 Day placed on the New York Stock Exchange?

A. The order is entered on the Specialist’s book (DMM’s book)
B. The floor broker must stay with the order until it is executed
C. The order must be executed in full
D. The order must be executed at the exact price specified

Answer 9

The best answer is A.

This order to buy specifies a price, so it is a limit order. Limit orders to buy are placed lower than the current market and will be executed if the market falls. On the NYSE, the order is placed on the Specialist/DMM’s book for execution if the market drops. The order is to be filled at a price of $34.50 or better, making Choice D wrong. If only part of the order can be filled at the specified price, this will be done, making Choice C wrong.

Question 10

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

Answer 10

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.

Question 11

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 buy 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 $50.06
II The Specialist/DMM can fill the order from his own account at $50.07
III The Specialist/DMM can fill the order against the book at $50.06
IV The Specialist/DMM can fill the order against the book at $50.07

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

Answer 11

The best answer is B.

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 buy for 1,000 shares, the Specialist/DMM can either fill that order at the current ask price of $50.07 against the book; or, if the Specialist/DMM wishes, the Specialist/DMM can “improve” the price of the order by selling to the customer out of its inventory price at a price that is better (lower) than $50.07, such as at $50.06.

Question 12

Odd lot transactions on the NYSE are:

I orders for less than 100 shares
II orders for multiples of 100 shares
III handled by the Specialist (DMM)
IV handled by the $2 Broker

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

Answer 12

The best answer is A.

The Specialist (now renamed the DMM - Designated Market Maker) acts as the “odd lot” dealer on the NYSE for orders in the assigned stock that are less than 100 shares. Note that these orders are handled separately from the Specialist’s (DMM’s) “book.”

Question 13

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

Answer 13

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.

Question 14

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

Answer 14

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.

Question 15

Which of the following actions were taken by the NYSE in response to large increases in trading activity experienced in the 1980s?

A. The establishment of more stringent listing requirements
B. The expansion of trading hours
C. The introduction of automated routing and execution systems
D. The admission of more specialist members

Answer 15

The best answer is C.

To handle the greatly increased trading volume that occurred in the 1980s, the NYSE introduced the SuperDOT system - an automated order routing and execution system, which was replaced in late 2009 by the Super Display Book system. The Exchange has kept its listing requirements at about the same levels as in the past; has forced the Specialist/DMM firms to merge to increase their capital so that they could take larger trading positions; and has considered expansion of trading hours but has not taken any action as of yet. Expansion of trading hours will occur because of increased global competition - not because of the Exchange’s inability to handle large trading volumes. Currently, the Exchange can comfortably handle over 10 billion share trading days - well in excess of the 4 billion share daily trading average.

Question 16

All of the following statements are true about computerized trading of securities on exchanges EXCEPT:

A. trades can be effected more efficiently and at lower cost
B. trades bypass the floor broker
C. orders are prioritized with member firm orders having priority over public orders
D. orders can be accepted up to certain size limits

Answer 16

The best answer is C.

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. FINRA and NYSE rules require that public customer orders get priority over member firm orders. Thus, the statement that member firm orders are given priority over public orders is false.

Question 17

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

I Orders are routed directly to the NYSE DMM for execution
II Only round lots are permitted; odd lot orders cannot be entered into the system
III Member firms prefer to use the system because it is more efficient and cheaper than manually handling the orders
IV Executed trades are directly reported to the member firm that entered the order

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

Answer 17

The best answer is D.

All of the statements are true regarding the Super Display Book System. It 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 (e.g., 3,000,000 shares for limit orders). Odd lots (orders for less than 100 shares) cannot be entered into the system - these are handled by a separate order entry system to the DMM - Designated Market Maker. Over 90% of NYSE trading now goes through Super Display Book. Firms prefer to use it because it is cheaper and faster than having a floor trader manually handle the order.

Question 18

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

Answer 18

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.

Question 19

The Network A Consolidated Tape reports all trades of:

A. AMEX (NYSE American) Securities
B. U.S. Government Securities
C. NASDAQ Securities
D. NYSE Securities

Answer 19

The best answer is D.

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.

Question 20

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

Answer 20

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.

Question 21

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)

Answer 21

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.

Question 22

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

Answer 22

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!

Question 23

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

Answer 23

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.

Question 24

The Master Manufacturing Company has just announced a tender offer for its own common stock. Which of the following customers would be allowed to tender 100 shares?

I Customer whose account is long 100 shares of Master stock and short 100 shares of Master stock
II Customer whose account is long 100 Master warrants who has exercised those warrants
III Customer whose account is long 5 Master convertible bonds, convertible at 20:1

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

Answer 24

The best answer is B.

Under the “short tender” rule, a customer is prohibited from tendering unless he has a net long position in the stock. In the first choice, the customer is long 100 shares and short 100 shares for a net position of 0. The customer cannot tender because he doesn’t have a net long position. In the second example, the customer is considered long the 100 shares once the warrants have been exercised. Since the stock is in the process of being delivered, he is long 100 shares and can tender. In the third example, the customer who owns convertible bonds is not considered to be long the stock until irrevocable instructions are given by the customer to convert.

Question 25

If a corporation is making a tender offer for all of its common shares, which of the following individuals can tender 100 shares?

I An individual who is long 100 shares of ABC in a custodian account
II An individual who is long 100 shares of ABC in a cash account
III An individual who is long 100 shares of ABC, and short 200 shares of ABC in a margin account
IV An individual who is long 200 shares of ABC, and short 100 shares of ABC in a margin account

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

Answer 25

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.

Choice I is long 100 shares and can tender - the fact that the shares are held in a custodian account is of no relevance.

Choice II is long 100 shares and can tender.

Customer III has a net short position and cannot tender.

Choice IV has a net position that is long 100 shares and can tender as well.

Question 26

Under the short tender rule, a customer is prohibited from tendering common shares unless the customer is long a:

I call option for that security and intends to exercise the call
II call option for that security and has exercised the call
III warrant for that security and intends to exercise
IV warrant for that security and has exercised the warrant

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

Answer 26

The best answer is B.

Under the “short tender” rule, a customer is prohibited from tendering unless he has a net long position in the stock. The customer is not considered to be long the common stock until the call option, warrant, rights to buy that security are exercised.

Question 27

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 the customer were to tender the shares held long, the customer is assured of receiving:

A. $0
B. $250
C. $1,875
D. $2,000

Answer 27

The best answer is A.

Since the offer is contingent on 64% of the shares being tendered, the customer has no assurance of being paid for the shares if he decides to tender.

Question 28

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. A customer has 100 shares of Master stock in his cash account. The customer tells you that he wishes to “cash out” his position. You should recommend that the customer:

A. tender the shares
B. sell long
C. sell short
D. hold the shares for a better offer

Answer 28

The best answer is B.

If the customer wants to “cash out” the position, tender is not appropriate since the offer is contingent on 64% of the shares being tendered. The best procedure is simply to sell the long position at the new higher market price.

Question 29

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

Answer 29

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.

Question 30

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

Answer 30

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.

Question 31

Regulation SHO requires that:

I if a stock falls by 5% in a trading day
II if a stock falls by 10% in a trading day
III it can only be sold short on an up bid
IV it can only be sold short on a down bid

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

Answer 31

The best answer is C.

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.

Question 32

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

I is easy to borrow
II is hard to borrow
III cannot be sold short under any circumstances, but can be sold long
IV if sold short and not delivered within 13 consecutive settlement days, it must be bought-in

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

Answer 32

The best answer is D.

Threshold securities are those that are “hard to borrow” and the SEC does not want large outstanding short positions that are uncovered to build in these securities.

Customer short sales of threshold list securities not resulting in delivery must be bought-in under the rule. If the security was on the exchange’s threshold list as of trade date and remains on that list for “13 consecutive settlement days” (counting from trade date), then mandatory buy-in in required.

Question 33

The mandatory buy-in provision of Regulation SHO:

I applies to a fail to deliver of any equity security that is sold short
II applies to a fail to deliver of a threshold list security that is sold short
III must be completed within 3 consecutive settlement days
IV must be completed within 13 consecutive settlement days

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

Answer 33

The best answer is D.

If there is a short sale of a security on the threshold list of “hard to borrow” securities, and the seller fails to deliver on settlement, then Regulation SHO requires that the position be bought in no later than 13 consecutive settlement days from trade date.

Question 34

Quotes for which of the following are shown on the Consolidated Quotations Service (CQS)?

I American Stock Exchange (NYSE American) listed issues
II New York Stock Exchange listed issues
III NASDAQ Global Market issues
IV NASDAQ Capital Market issues

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

Answer 34

The best answer is C.

The Consolidated Quotations Service (CQS) displays bid and ask quotes, with sizes for NYSE and AMEX (NYSE American) issues. These are the quotes of the Specialists (now called DMMs - Designated Market Makers) on the stock exchanges that list these issues, as well as the quotes of over-the-counter “Third Market Makers,” who compete with the Specialists/DMMs in making markets in exchange listed issues. “CQS” only displays quotes for listed securities. In addition, all trades of exchange listed securities are reported to the Consolidated Tape (Network A Tape for NYSE or the Network B Tape for AMEX (NYSE American) and regional exchanges).

The UQDF (UTP Quote Data Feed) aggregates and displays quotes for all market makers in NASDAQ issues. UTP stands for “Unlisted Trading Privileges.” Not only do NASDAQ market makers quote and trade NASDAQ stocks, but exchange Specialists are now permitted to compete and trade NASDAQ stocks under a “UTP” plan. NASDAQ is divided into NASDAQ Global Market issues, which are the most actively traded NASDAQ stocks; and NASDAQ Capital Market issues, which are the smaller NASDAQ issues. All trades of NASDAQ stocks are reported to the Network C Tape.

Question 35

The Consolidated Quotations Service shows quotes from which of the following sources for NYSE listed issues?

I New York Stock Exchange Specialist/DMM
II Boston Stock Exchange Specialist
III Pacific Stock Exchange Specialist
IV Third Market Maker

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

Answer 35

The best answer is D.

The Consolidated Quotations Service 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).

Question 36

The Consolidated Quotations Service is open during the hours of:

A. 9:00 AM ET - 4:00 PM ET
B. 9:30 AM ET - 4:00 PM ET
C. 9:00 AM ET - 6:30 PM ET
D. 9:30 AM ET - 6:30 PM ET

Answer 36

The best answer is C.

The Consolidated Quotations Service (“CQS”) presents bid and ask quotes for exchange listed stocks - for both NYSE and AMEX (NYSE American) listed issues.

For NYSE listed issues, CQS shows the quote of the NYSE Specialist (now called the DMM - Designated Market Maker), regional exchange quotes where the stock is “dual listed,” and third market maker quotes (remember, the third market is OTC trading of NYSE listed securities and currently accounts for about 40% of NYSE trading volume).

CQS is open longer than the NYSE. The NYSE trades from 9:30 AM ET - 4:00 PM ET, however CQS is open from 9:00 AM to 6:30 PM. Much “third market” trading of NYSE listed issues happens before the NYSE opens or after it closes; and the longer hours of CQS helps facilitate third market trading. Also note that the NYSE is trying to expand its trading hours to compete, but has not yet done so.