Series 24 - Sessions Four Flashcards
You cannot cross stock unless first offered on the floor at what price?
one cent above the current bid
NYSE Rule 127 defines a block of stock as what?
At least 10,000 shares or $200,000 or more
NYSE market-on-close (MOC) orders cannot be entered after what time?
3:45 unless there is an order imbalance
What is required to delist a stock?
approval of the board of directors and filing of form 25 with the SEC.
A stock is considered delisted how many days after filing?
10 days
An OTC stock is generally considered to be what?
any equity security that is not an NMS stock traded on a national securities exchange.
equity and equity equivalent securities are listed where?
NASDAQ
Name the six quote systems.
1) NYSE 2) NASDAQ 3) OTC - BB 4) PINKS 5) CQS 6) ECNS
Name the five reporting systems.
1) consolidated tape 2) ACT 3) TRACS 4) TRACE 5) OATS
Name the five execution systems
1) Auction/Exchange 2) NASDAQ book 3) ACES 4) CAES 5) ATS
Name the two floor based exchanges.
1) NYSE 2) AMEX
Name the 3 OTC stock exchanges
1) Nasdaq 2) BATS (virtual exchange) 3) Direct Edge
Name the 2 OTC markets
1) OTCBB 2) OTC Pink
NASDAQ Market Maker registration is effective when?
upon approval
Quotes on the NASDAQ must be entered within how many days?
5 business days
You can withdraw from NASDAQ with an excused withdrawal and it requires approval from whom?
NASDAQ
To voluntarily terminate registration with NASDAQ as wait is required. How many business days?
20 business days
Volume Weighted Average Price is computed how?
$2000 of shares + $6300 = $8300; $8300 divided by 400 shares equals $20.75. compare that to average which is computed like this: 100 shares at $20; 300 shares at $21 means the average price is $20.50
Short interest reporting is reported how often ?
twice monthly
Short interest reporting is twice per month on which dates of the month?
15th and the last day of the month
When short interest is reported, you report on trades that have settled …?
as of the reporting date
What does OATS stand for?
Order Audit Trail System
OATS applies to what securities?
stock and convertible bonds
On an order-by-order basis, OATS reporting is required how often?
daily
Trading halts: T1 stands for what?
news pending
Trading halts: T2 stands for what?
news released
Trading halts: T3 stands for what?
five minute window when quotes can be entered and trading can begin
A non-regulatory trading halt on an exchange floor does not preclude other markets , such as the third market or the ECN from what?
trading the stock…
Prospectus offerings are exempt from the 5% markup policy. True or False
True
The 5% mark-up policy is calculated how
from inside market price
The 5% mark-up policy applies to what?
corporate and US government debt
The 5% mark-up policies does not apply to what?
securities sold by prospectus and municipal debt
What is a trade through? (Rule 611)
when a firm executes a customer order at a price when a better price is available in another market
What are the minimum increments for pricing stocks priced at $1 per share or more? (Rule 612)
one cent
What is the minimum increment for stocks trading under $1? (Rule 612)
sub-penny pricing is allowed
Market centers that trade listed and NASDAQ securities prepare reports on execution quality how often? (Rule 605)
monthly
Rule 606 requires firms to disclose their order routing methods to identify centers to which they route a significant % of their non-directed orders and payment for order flow. How often do they have to report?
quarterly
Manning II says firms cannot trade ahead of what type of orders?
customer limit orders
If market maker receives, as principal, a better price that an unexecuted customer limit order must what?
be passed along to the customer
Trading ahead rules applicable during what hours?
9:30 a.m. to 6:30 p.m.
Trading along is allowed if what?
if an agreement is in place and a blanket agreement is not allowed
A market maker is required to display a customer order priced better than its current quote within what time frame?
30 seconds of receipt
What is front running?
trading ahead of customer block orders
Cannot adjust inventory in advance of non-public knowledge of issuance of research reports.
This applies to any security
Interpositioning is prohibited unless what?
it results in better execution for the customer
Regulation SHO mandates what?
a locate requirement prior to the short sale of any security
Regulation SHO requires close out of “fails to deliver” after how many days?
After 13 consecutive settlement days
Domestic securities not listed on any exchange and foreign equities, ADRs, and equities in the process of being delisted fromo NASDAQ or exchanges are sold where?
OTCBB - Over the counter bulletin board
Which OTC market has no minimum listing standards?
OTCBB
Before entering quotes on OTCBB and OTC Pink markets, a non-NASDAQ market maker must file form 211 how many business days before entering quotes
3 business days
what is piggybacking?
Allowed is an existing MM has published quotes on at least 12 business days out of the last 30 days. No more than 4 days without a quote. Called continuous quote rule
What is TRACE and what does it stand for?
Trade Reporting and Compliance Engine - reporting system for secondary market OTC trading.
TRACE reports what?
eligible nonconvertible corporate bonds and US Agency debt
Trade reports are made within how many minutes of execution?
15 minutes
FINRA reports trade to the public, how often?
Immediately
What is a penny stock?
Non-NASDAQ stocks that trade under $4 per share
What type of suitability disclosures are required for penny stock?
customers must sign a suitability statement
What type of customers do not have to sign a suitability statement to buy penny stock?
an establish customer
Customers who purchase penny stocks must receive statements how often?
monthly
What must be disclosed to the customer regarding penny stock?
commissions made by the RR and the firm
What firms are exempt from penny stock rules?
If less than 5% of total revenue is from penny stock
What is the NASDAQ book?
The trading platform for NASDAQ securities
On the NASDAQ book, attributable order show what?
the firms that entered the order
On the NASDAQ book, non-attributable orders shows how?
under anonymous MPID NSDQ
Are locking/crossing orders displayed on the NASDAQ book?
not displayed – routed for execution
NASDAQ book system show the top how many price levels?
5
What is the maximum order size on NASDAQ book?
999,999
What is the assumed priority on trading the NASDAQ book?
price/time
What is TIF?
Time in Force
What are the market day hours?
9:30 a.m to 4:00 p.m. ET
What are the system day hours?
7:00 a.m. to 8:00 p.m. ET
Good to close orders are entered according to market day or system day?
either
On-the-open orders can be entered up until what time?
9:28 a.,m.
On-the-close orders can be entered up until what time?
3;50
Which system reports non-NASDAQ trades?
ACT
Which system reports NASDAQ and third market trades?
TRF - Trade Reporting Facility
ACT and TRF are open from what time?
8:00 a.m. to 8:00 p.m.
ACT and TRF reports must be made within what time frame?
30 seconds
In interdealer trades, when is the only time the buyer side reports?
when the buyer is a market maker in the stock and the selling firm is not
How are T trades reported?
same day but outside normal hours
How are as/of trades reported?
next business day outside normal hours
For NASDAQ IPOs, what is the first bid in NASDAQ book?
POP - public offering price
The Securities Act of 1933 is known as what?
The paper act
The Securities Act of 1933 deals with what kinds of issues?
new issues
If a mutual fund has been registered for more than 5 years, is a prospectus required to be delivered during a sale?
yes
The Securities Act of 1934 deals with what?
registration of people and places
Who determine margin requirements?
Board of Governors of the Federal Reserve
What are rules/requirements for margin called?
Reg T
A fixed annuity is not a security so a seminar dealing exclusively with them cannot result in securities fraud. True or False
True
Variable annuities are not suitable for short-term investing. Why?
surrender charges
Variable annuities are a tax free way to participate in the equities market. True or False
True
Variable annuities typically carry higher or lower expenses than a mutual fund with the same objective?
higher
What is the DMM’s job?
to maintain a fair and orderly market in assigned stocks
Circuit breaker rules have to do with a pause/halt in trading. If the market is down 10%, 20% or 30%, what are the pause requirements?
10% = 1 hour; 20% = 2 hours; 30% = rest of the day
If there is a reverse split, what happens to the open orders on the book?
they are cancelled
What is a limit order?
an order to buy or sell a security at a state price
What constitutes an established customer so that they are exempt from penny stock disclosures?
1) has held an account for at least 1 year 2) has at least 3 penny stock trades of different issuers on different days
The consolidated tape reports what type of securities?
listed securities
The SEC can suspend trading on any exchange for up to how many days?
90 calendar
The SEC can suspend trading on any securities for up to how many days?
10 business days
What is the function of the NMS and what does it stand for?
National Market System promotes efficient and fair price information
What are the requirements to be listed on the NYSE?
1) a minimum number of shares in round lots; 2) minimum market value; 3) No minimum earnings (EPS) 4) national interest 5) voting stock and proxy solicitations
If circuit breaker rule 80B is in effect, what happens to pending orders, limit orders, and new orders?
They are moved to the next day
What rule restricts short sells to display on the next day so long owners can get out before short sellers?
The alternate uptick rule that is triggered if stock drops 10% or more from the previous close.
Who sets the opening price for a stock?
The DMM
A DMM can compete the with public. True or False
True
What is the first market?
Listed securities. floor based exchanges with membership
What is the second market?
Unlisted securities - OTC exchanges - negotiated market which is electronic
What is the third market?
Exchange listed securities that trade OTC. There are not enough memberships in NYSE so this is the alternative
What are ECNs?
for big institutions. member firms accept oders from their institutional customer; open 24 hours per day
What are the three tiers of NASDAQ order system?
1) global select market 2) global market 3) capital market
For Non-NASDAQ Market Pink and OTCBB how many dealers must you obtain a quote from?
At least three other market makers
When do you not have to call three other market makers for quotes on the Non-NASDAQ OTC Market Pink and OTCBB?
when there are two or more priced quotes
What is considered non-NASDAQ - OTC?
Pinks and OTCBB
What is the Bid Price?
What the MM is willing to pay to buy
What is the Ask Price?
What the MM is willing to sell at
f this is level two NASDAQ data feed what would level one be?
MM1 33.40 - 33.70 (10x12)
MM2 33.45 - 33.65 (15x10)
MM3 33.30 - 33.60 (20x16)
Level One is the best so it would be
MM2 33.45 - 33.60 since the MM is willing to buy at 33.45 which is the highest bid and 33.60 which is the lowest sell price (Two different MM)
What is unique about Level III of NASDAQ?
It is interactive and available only to MM to allow them to make changes in their quotes
NASDAQ accesses across multiple markets for better prices. True or False
True
What is ISO Intermarket Sweep Orders?
they do no route. will settle at NASDAQ’s best prices
If you are a market maker can you be an agent?
Not on that stock.
What is the following an example of:
MM1 9.50 - 10.00
MM2 9.05 - 9.50
Locked market - Inside bid = inside ask
The MM is willing to buy at 9.50 and another MM is willing to sell at 9.50.
What is the following an example of:
MM 1 9;50 - 10.00
MM 210.10 - 10.30
Crossed Market - inside bid > inside ask
The MM Is will to buy at 10.10 but another MM is willing to sell at 10.00
What is the inside quote?
The most favorable
Where are bonds reported?
Through TRACE. It provides the date, time, quantity (# of bonds) and price (yield to call or yield to materity.
Where are stocks and convertible bonds reported?
OATS
What is ACT?
a comparison tract: to compare and submit transactions to NSCC exclusive of markup and commission and for corporate equities not on an exchange
what is the MM’s obligation to report trades? Within what time frame?
30 second
What are MM’s obligations for reporting on short positions?
twice monthly
What are MMs obligations related to volume reports? how often?
daily
MM may not accept payment from an issuer to make a market. True or False
True
Who reports trades when buyer and seller are equal dominance?
seller
Who reports trades is unequal dominance?
The most dominant report
Who never reports a trade?
customer
what is backing away?
not honoring a firm quote
What is front running?
Running your trades before a customer trade
What is trading ahead of research reports?
exactly what it says it is
What is interposition and when is it allowed?
Includes a middle man and is allowed when it results in a better price for the customer
What are trade throughs?
bypassing a market at a lower price to buy from someone else
What is reported to the consolidated tape?
if it is listed on the exhange, regardless of where it’s traded, it is report to the consolidated tape.
What is a nondirected order?
executed in rotations
what is a preferenced order?
one sent to a specific MM for execution at the inside price. (I will always give you the best deal.)
What is a directed order?
One sent to a specific MM which must reponsd and either 1) accept 2) counter 3) reject or 4) partially fill
What is a broadcase order?
One sent to all MMs and the MM can respond or ignore
What is the default option for orders placed in the book that are not specified?
price first, then time
What are pegged orders?
Those that track to the inside market
What is ACES?
a system that allows you to access a MM internal order book so I can automate the process
Reports cannot be aggregated on which system?
OATS
TRACE is the reporting system for what?
bonds and non-convertible debt
What is a .z trade
one report late
What is a .t trade
one executed outside normal business hours and reported the same day
What is a as/of trade?
one executed outside normal business hours and reported next day
What is TRACS for?
companies that cnanot use ACT
TRACS is used to report what kind of trades?
ADF - Alternative Display Facility trades
Does TRACs report commission?
no
What is the OTCBB is an electronic quotation medium for who?
issues that dont meet the listing requirements of NASDAQ
Where do quotes come from for the OTC Market (PInks)
on the web
For TRACE reporting, when must trades be reported?
within 15 minutes of execution
For Trace reporting, who reports the trade, the buyer or the seller?
both
Do you have to reveal fees charged to customers?
yes
Do you have to reveal original cost of a traded security?
no
When is the only time you can trade ahead?
You can trade ahead of institutional customers
When do GTC (good til cancelled) orders expire on the NYSE?
never
When do GTC (good to cancelled) order expire on NASDAQ?
12 months
A MM in ABCS is holding a customer limit order to buy 300 shares at $21.34. As principal, the firms buys 200 shares at $21.34. What happens to the customer order?
The firms must will 200 shares of the customer order at $21.34
What is CQS and why was it developed?
Consolidated Quotation System developed in response to third market
What kind of quotes are provided on CQS?
common stock; preferred stock; ADRs, rights, warrants for listed securities on the eschange or OTC
CQS has the same rules for registration and withdrawal as what? with one exception?
NASDAQ - except can re-register in 1 day if volutarily terminated - NASDAQ is 20 days
What does the consolidated tape include?
last sale informtion on listed equity securities from exchanges, third and fourth market - only for equities and convertibles
What is NMS and what does it do?
National Market Systems and it promotes efficient and fair price information
When is subpenny pricing allowed?
when the stock trades fro less than $1.00 per share
what are the two floor-based stock exchanges?
NYSE “& NYSE Market
There are six trading markets. Name the first three.
1) floor based exchanges
2) OTC stock exchanges (Nasdaq, BATS, Direct Edge
3) OTC markets (OTCBB OTC Pink
What are the trading markets on the OTC market called?
1) Nasdaq 2) BATS 3) Direct Edge
What are the two tradking markets on the OTC market called?
OTC BB & OTC Pink
what are the other three trading markets called? (not floor-based; not OTC exchanges and not OTC markets)
4) Negotiated market/algorithmic
5) Third Market (exchange listed securities that trade OTC)
6) Alternative Trading Systems - ATS
What is the Alternative Trading Systems?
The Electronic Communication Network (ECN)
What is the ECN? and what are the benefits?
Member firms accept orders from their institutional customer fro execution on an agency basis. Benefits: reduced costs and open 24 hours a day
who has regulatory authority over the exchanges?
NYSE and FINRA
Who has regulatory authority over OTC, third and fourth markets?
FINRA
If an issuer wants to voluntarily delist from the NYSE, what two things are required?
1) approved by the issuer’s BOD
2) Filing form 25 with SEC
ABC b/d has an order to buy and sell the same security at the same price. What must occur before the order can be crossed?
The firm must publicly offer the security at a price higher than its current bid by 1 cent.
