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Series 24 - New Session Four > Series 24 New Sessions Four > Flashcards

Series 24 New Sessions Four Flashcards

1
Q

There are 6 trading markets. Name the first three.

A

1) florr based stock exchanges
2) OTC stock exchanges
3) OTC markets

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2
Q

There are 6 trading markets. Name 4,5,6.

A

4) Negotiated market/algorithmic
5) Third market - exhange listed that trade OTC
6) Alternative Trading System - ATS

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3
Q

The Electronic Communication Netowkr (ECN) is used on the ATS. Member firms use this to accept orders from whom?

A

institutional customers

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4
Q

What are the hours for ECN?

A

They are open 24 hours a day

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5
Q

Who is the regulatory authority for the floor based exchanges?

A

NYSE and FINRA

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6
Q

Who is the regulatory authority for the OTC, third and fourth market?

A

FINRA

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7
Q

What is required of a company to be listed on the NYSE?

A

1) a specific number of shares
2) a minimum market value
3) no minimum EPS - no profit required
4) national interest
5) voting stock and solicitation of proxies

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8
Q

A firm is delisted from the NYSE if what?

A

1) they file bankruptcy

2) they fail to meet the minimum maintenance criteria

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9
Q

A firm can voluntarily delist from NYSE by doing what?

A

1) getting approval from their BOD

2) Filing Form 25 with the SEC

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10
Q

Circuit Breaker Rules (80B), says what?

A

a decline of 10%, the market is halted for 1 hour; a decline of 20%, the market is halted for 2 hours; a decline of 30%, the market is halted for the rest of the day

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11
Q

What happens to pending orders, limit orders and new orders if the market is halted for the rest of the day?

A

They are moved to the next day

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12
Q

What happens to market on close orders if the market is halted from the rest of the day?

A

They are cancelled.

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13
Q

The alternate uptick rule (SEC RULE 201) is triggered when?

A

if the stock drops 10% or more from the previous close

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14
Q

Cannot cross stock unless what?

A

It is first offered on the floor at 1 cent higher than the current bid.

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15
Q

What is the DMMs responsibility?

A

1) sets the opening price

2) maintains a fair and orderly market in the assigned stock

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16
Q

Can the DMM carry inventory in his stock?

A

yes

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17
Q

what is considered a block trade?

A

10,000 or more shares or $200,000 or more in value

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18
Q

Block orders usually means someone is what?

A

dumping stock

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19
Q

When are block orders reported during the day?

A

at the end of the day

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20
Q

What happens to orders on the book if there is a reverse split?

A

they are canceled

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21
Q

What happens to orders on the books if there is a positive split in a stock?

A

all orders are adjusted

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22
Q

On the exchanges,market on close orders can be entered up until what time (unless there is an order imbalance)?

A

3:45

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23
Q

On Nasdaq, market on close orders can be entered up until what time (unless there is an order imbalance)?

A

3:50

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24
Q

If an issuer wants to delist from the NYSE, what two things are required?

A

1) approval of the board of directors

2) filing of form 25 with the SEC

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25
Q

Nasdaq OTC has three tiers. Name them.

A

1) Global Select Market
2) Global Market
3) Capital Market

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26
Q

Non-Nasdaq OTC requires quotes from a minimum of how many dealers?

A

3

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27
Q

When is it not required that you get 3 quotes for Non-Nasdaq OTC?

A

When there are 2 or more firm priced quotes (other than yours).

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28
Q

Level One of the Nasdaq data feed provides what?

A

The best price - the inside price

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29
Q

Level Tw of the Nasdaq data feed provides what?

A

The top three prices

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30
Q

Nasdaq Total View of the Nasdaq data feed provides what?

A

A more comprehensive view of prices available to all market participants

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31
Q

Level Three of the Nasdaq data feed provides what?

A

an interactive view for Market Makers

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32
Q

Nasdaq accesses liquidity across multiple markets if better prices can be found. True or False

A

True

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33
Q

Intermarket Sweep Order on Nasdaq does what?

A

Does not route so it gets the best Nasdaq price but doesn’t look at other markets

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34
Q

What is the MM’s spread?

A

the difference between the price at which he is willing to buy and the price at which he is willing to sell.

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35
Q

There are two types of customer purchase transactions. What are they?

A

1) market maker (dealer/principal) where the MM sells net with a markup
2) Non market maker (broker/agency) where the firm buys at the inside market and sells at that price with a commission or where the firms buys at the inside market and sells with a markup - this is a riskless principal transaction and you have to show the markup

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36
Q

When you register as a MM with FINRA, you have to wait for what before entering quotes? If you register today, you can start entering quotes when? What is you fail to enter quotes for 5 days?

A

approval - apply today and you can enter quotes befinning tomorrow unless it is an IPO - if you don’t enter quotes within 5 days, you will be canceled and will have to re-apply

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37
Q

MM trading rules include two things?

A

1) maintain a two-sided market (bid/ask)

2) all quotes must be firm

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38
Q

Failure to honor a firm quote is called what?

A

backing away

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39
Q

Market Makers have obligations. One involves reporting trades. What is the time limit for reporting trades?

A

within 30 seconds

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40
Q

Market Makers have obligations. How often are volume reports to be filed?

A

Daily

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41
Q

Market Makers have obligations. How often must they report on short positions?

A

Twice monthly for customer and proprietary accounts

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42
Q

Can a MM accept a payment from an issuer to make a market in a stock?

A

no

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43
Q

A market maker can obtain an excused withdrawal from Nasdaq for up to 5 business days. He must apply and receive permission. What are considered acceptable reasons?

A

1) personal or personnel-related
2) equipment issues
3) Insider information
4) Involuntary failure to maintain a clearing agreement
5) becomes a member of a syndicate

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44
Q

A MM can be terminated from Nasdaq involuntarily if what happens?

A

He fails to follow the rules - like backing away

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45
Q

A MM can voluntarily request termination from Nasdaq by what?

A

simply withdrawing his quotes from Nasdaq

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46
Q

If a MM voluntarily withdraws from Nasdaq, we can he re-register?

A

20 days

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47
Q

To trade on Nasdaq, the Nasdaq book is the order and display executive system. What does it show?

A

The highest 5 bids and the lowers 5 asks

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48
Q

What is the maximum order size on Nasdaq?

A

999,999 shares

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49
Q

On Nasdaq, quotes can be MPID and SIZE. What does that mean?

A

MPID is attributed to the MM; SIZE is not attributable.

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50
Q

NAsdaq book is open to whom?

A

Market Makters and ECNs (institutions)

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51
Q

What is a nondirected order?

A

one executed in rotation

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52
Q

What is a preferenced order?

A

one that goes to a specific market maker

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53
Q

Preferenced orders go through what execution system?

A

ACES

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54
Q

Market Makers pay for access to ACES. True or False

A

True

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55
Q

What a directed orders?

A

ones that go to a specific MM and the MM must respond with 1) accept 2) counter 3) reject 4) partial fill

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56
Q

What is a broadcase order?

A

One that is sent to all MMs and they can respond if interested but they can also ignore it.

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57
Q

What is the default option on Nasdaq?

A

Price / Time

58
Q

What are pegged orders?

A

a limit order that tracks the inside market. you can set the system to always be inside

59
Q

ACES is the order entry firm that can access a MMs internal order book for placement and execution.. ACES handles what kind of orders for Nasdaq securitie?

A

1) market and limit orders

2) preferenced orders

60
Q

If no option is specified, orders placed in the Nasdaq book are filled based on what?

A

Price then time

61
Q

If no option is specified on the exchange, orders are filled based on what?

A

Time then price

62
Q

FINRA has two audit trail systems. One (developed as a result of Oct 1987) is called what? What is the other one called?

A

1) OATS - Order audit trail system

2) TRACE

63
Q

What does the OATS system do?

A

1) accepts trades from acceptance to execution on all NMS (National Market Securities)
2) time stamps to provide hour, minute, and second
3) trades cannot be aggregated

64
Q

What does the TRACE system do?

A

It is the reporting system for OTC trades of most corporates and agencies

65
Q

TRACE was the first system for what?

A

bonds

66
Q

TRACE reports within how many minutes to FINRA?

A

15 minutes

67
Q

FINRA Reports to the public all TRACE bonds how quickly?

A

immediately

68
Q

Does TRACE report investment or non-investment grade bonds?

A

both

69
Q

TRACE provides dual side reporting. True or False

A

True

70
Q

ACT is a reporting system for what kinds of trades?

A

1) OTC interdealer and third market trades
2) convertible bonds listed on Nasdaq
3) Non- Nashdaq securities

71
Q

Who does ACT submit data to?

A

NSCC - National Securities Clearing Corp

72
Q

What is ACT data used for?

A

to compare and submit trasnsactions and to disseminate last sale information

73
Q

Do ACT report include or exclude markups or commissions?

A

excludes

74
Q

ACT report used modifiers. What is a .z trade?

A

.z reported late

75
Q

ACT reporting uses modifiers. What is a .t trade?

A

.t is executed outside normal hours and reported same day

76
Q

ACT reporting uses modifiers. What is a as/of trade?

A

as/of is executed outside normal business hours and reported the next day

77
Q

What are Nasdaq hours?

A

9:30 a.m. to 6:00 p.m.

78
Q

What are ACT hours?

A

8:00 a.m. to 8:00 p.m.

79
Q

What is TRACS?

A

It is used to report Alternate Display FAcility Trades - coms that can’t use ACT

80
Q

How many seconds after ADF eligible securities are sold are they reported by TRACS?

A

30 seconds

81
Q

What are TRACS hours?

A

9:30 a.m. to 4:00 p.m.

82
Q

TRACS reports transactions between who?

A

between members

83
Q

TRACS reports transactions between members and who?

A

non members

84
Q

Does TRACS report commission?

A

no

85
Q

TRACS is never used for what three trasnactions?

A

1) primary distributions
2) transactions on an exchange
3) private placements

86
Q

To register as a Non - Nasdaq MM, you must file Form 211 with FINRA how many days before entereing quotes on OTC PInk or OTC BB?

A

3 business days

87
Q

You can avoid Form 211 by piggybacking. What does this mean?

A

If a MM has published quotes on at least 12 business days out of the last 30 calendar days, he can piggyback a previous filing.

88
Q

In order to piggyback, in addition to publishing quotes on at least 12 business days out of the last 30 calendar days, how many days can you go without a quote in order to still qualify?

A

No more than 4 consecutive business days without a quote

89
Q

If a MM has been delisted from Nasdaq, he can still be a Bulletin Board MM without filing form 211 if he was a Nasdaq MM for how many days before delisting?

A

30

90
Q

The OTC BB is an electronic quotation medium for issues that don’t meet the listing rqeuirements fof NAsdaq. Quotes are provided for what securities?

A

1) domestic securities not listed elsewhere
2) foreign equity securities and ADRs
3) securities being delisted

91
Q

The OTC Market (Pinks) provide real time quotes on the Web. There are no rules. The OTC Market (pinks) allows what two things?

A

1) one-sided or two-sided quotes

2) securities are not required to be current with regulatory filings

92
Q

Which of the following is true regarding TRACE?

A

1) It is a execution system for OTC corporate debt securities
2) Trades must be reported within 15 minutes of execution.
3) Both the buyer and the Sell report the trade
4) convertible corporate bonds report through TRACE
(Number 2 & 3 are true)

93
Q

FINRA’s 5% policy guideline does not apply to what?

A

1) prospectus offerings - circulars

2) exempt securities - munis & govts

94
Q

FINRA’s 5% policy applies whether agency or principal. True or False

A

True

95
Q

Do you have to reveal fees charges to customers?

A

yes

96
Q

Do you have to reveal original cost of a security?

A

no

97
Q

Interpositioning is allowed when?

A

when it results in a better execution for the customers

98
Q

What is front running?

A

Trading in front of the customer

99
Q

If you are a MM, you can mark up. In this case you take ownership. If you never take ownership and act as an agent, it is called what?

A

commission

100
Q

Sell tickets must be marked what?

A

long or short

101
Q

What is a limit order?

A

An order to buy or sell at security at a stated price….I won’t pay more than $10.

102
Q

A customer is long the stock if he has a convertible security and has issued conbversion instructions. True or False

A

True

103
Q

A customer is long a security if he owns a call and has issued exercise instructions. True or False

A

True

104
Q

A customer is long a security if he owns a warrant and has issued exercise instructions. True or False

A

True

105
Q

Members cannot trade ahead of customer orders at what?

A

the same price

106
Q

A market maker is holding a customer buy limit order for 600 shares at $30.30. As principal, the firm buys 200 shares at $30.30. What must the firm do?

A

Execute the customer order for 200 shares and protect the remaining 400 shares.

107
Q

Members can trade ahead of customer limit orders if what?

A

1) the customer is an institution
2) the order is for 10,000 shares or more and has a value of more than $100,000
3) not held orders - orders places when you think the timing is right.

108
Q

Members must display customer bid or offer and size if better than the b/d/quote. They must be displayed and filled how quickly?

A

Immediately

109
Q

On Nasdq, GTC orders are good for how long?

A

1 year

110
Q

On NYSE, GTC orders are good for how long?

A

never expire

111
Q

Trading along is permitted if what?

A

1) if there is an agreement in place with the customer and it cannot be a blanket agreement

112
Q

What is the dollar limit on a penny stock?

A

$4 (or $5)

113
Q

In order to purchase a penny stock, the customer must sign what?

A

a suitability statement prior to confirmation

114
Q

Established customers are exempt from the suitability statement but not what?

A

the disclosure

115
Q

To be egilible exampt from the penny stock suitability statment, the customer must have what?

A

1) held an account for at least one year

2) has made at least 3 penny stock trades of different issuers on different days

116
Q

How often do penny stock holders receive statements?

A

monthly if they hold penny stock

117
Q

How often are customer statements typically mailed?

A

quarterly unless there is activity or unless there are penny stocks, then it must be monthly

118
Q

The CQS (consolidated quote system) was developed in response to what?

A

the third market - listed on the exchange and traded OTC

119
Q

The CQS shows bid and ask quotes with size for what kinds of securities?

A

listed equity securities

120
Q

What are listed equity securities?

A

1) common and preferred stock
2) ADRs
3) rights
4) warrants

121
Q

The CQS shows quotes from the who?

A

from all MMs and the exchange (DMMs)

122
Q

CQS follows the same rules as Nasdaq except when voluntarily terminating for CQS, you must wait how many days?

A

only 1 - Nasdaq is 20

123
Q

The consolidated tape prodice last sale information on listed equity securities from what markets?

A

1) exchanges
2) 3rd market
3) 4th market

124
Q

The SEC can suspend trading on any exchange for up to how many days by giving notice to the United States President?

A

90 calendar days

125
Q

The SEC can suspend trading on any one security for up to how many days?

A

10 business days

126
Q

For a Nasdaq trading halt, what does T1 mean?

A

news pending

127
Q

For a Nasdaq trading halt, what does T2 mean?

A

news released

128
Q

For a Nasdaq trading halt, what does T3 mean?

A

Two times are displayed - the first is the time MM can begin quoteing; the second is the time MM can begin trading

129
Q

SEC halts apply to what exchanges?

A

all

130
Q

Nasdaq can initiate a trading halt on what exchange?

A

their own

131
Q

For nonregulatory trading halts, trading can continue in which market?

A

ECD or third market

132
Q

Regulation SHO is the short sales locate requirement. It mandates locate requirements for all short sales in all equity securities. The rule mandates a close out of short sales not resulting in delivery if the MM fails in a threshol security for how many consecutive settlement days?

A

13

133
Q

National Market System (NMS) promotes efficient and fair price information. Several rules fall under Regulation NMS. What are the rule numbers?

A

604,605,606,611 & 612

134
Q

Rule 604 is the what rule?

A

limit order display rule

135
Q

Rule 605 is what rule?

A

monthly execution reports by exchanges and Nasdaq

136
Q

What is Rule 606?

A

quarterly reports where non-directed orders are routed and compensation

137
Q

What is Rule 611

A

prohibition on trade throughs

138
Q

What is Rule 612?

A

no subpenny pricing unless the stock is less than $1 per share

139
Q

For Nasdaq IPOs, what is the POP?

A

The first bid in the book

140
Q

Nasdaq IPOs provide for a quotation only period for how many minutes?

A

15

141
Q

A T1 modifer displayed on a Nasdaq terminal means what?

A

news is pending

142
Q

If a CQS MM voluntarily withdraws as a MM, how long is the wait to reregister?

A

1 day

Series 24 - New Session Four (1 decks)

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