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

Series 24 - Sessions Four Flashcards

1
Q

You cannot cross stock unless first offered on the floor at what price?

A

one cent above the current bid

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2
Q

NYSE Rule 127 defines a block of stock as what?

A

At least 10,000 shares or $200,000 or more

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3
Q

NYSE market-on-close (MOC) orders cannot be entered after what time?

A

3:45 unless there is an order imbalance

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4
Q

What is required to delist a stock?

A

approval of the board of directors and filing of form 25 with the SEC.

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5
Q

A stock is considered delisted how many days after filing?

A

10 days

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6
Q

An OTC stock is generally considered to be what?

A

any equity security that is not an NMS stock traded on a national securities exchange.

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7
Q

equity and equity equivalent securities are listed where?

A

NASDAQ

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8
Q

Name the six quote systems.

A

1) NYSE 2) NASDAQ 3) OTC - BB 4) PINKS 5) CQS 6) ECNS

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9
Q

Name the five reporting systems.

A

1) consolidated tape 2) ACT 3) TRACS 4) TRACE 5) OATS

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10
Q

Name the five execution systems

A

1) Auction/Exchange 2) NASDAQ book 3) ACES 4) CAES 5) ATS

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11
Q

Name the two floor based exchanges.

A

1) NYSE 2) AMEX

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12
Q

Name the 3 OTC stock exchanges

A

1) Nasdaq 2) BATS (virtual exchange) 3) Direct Edge

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13
Q

Name the 2 OTC markets

A

1) OTCBB 2) OTC Pink

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14
Q

NASDAQ Market Maker registration is effective when?

A

upon approval

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15
Q

Quotes on the NASDAQ must be entered within how many days?

A

5 business days

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16
Q

You can withdraw from NASDAQ with an excused withdrawal and it requires approval from whom?

A

NASDAQ

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17
Q

To voluntarily terminate registration with NASDAQ as wait is required. How many business days?

A

20 business days

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18
Q

Volume Weighted Average Price is computed how?

A

$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

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19
Q

Short interest reporting is reported how often ?

A

twice monthly

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20
Q

Short interest reporting is twice per month on which dates of the month?

A

15th and the last day of the month

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21
Q

When short interest is reported, you report on trades that have settled …?

A

as of the reporting date

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22
Q

What does OATS stand for?

A

Order Audit Trail System

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23
Q

OATS applies to what securities?

A

stock and convertible bonds

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24
Q

On an order-by-order basis, OATS reporting is required how often?

A

daily

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25
Q

Trading halts: T1 stands for what?

A

news pending

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26
Q

Trading halts: T2 stands for what?

A

news released

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27
Q

Trading halts: T3 stands for what?

A

five minute window when quotes can be entered and trading can begin

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28
Q

A non-regulatory trading halt on an exchange floor does not preclude other markets , such as the third market or the ECN from what?

A

trading the stock…

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29
Q

Prospectus offerings are exempt from the 5% markup policy. True or False

A

True

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30
Q

The 5% mark-up policy is calculated how

A

from inside market price

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31
Q

The 5% mark-up policy applies to what?

A

corporate and US government debt

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32
Q

The 5% mark-up policies does not apply to what?

A

securities sold by prospectus and municipal debt

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33
Q

What is a trade through? (Rule 611)

A

when a firm executes a customer order at a price when a better price is available in another market

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34
Q

What are the minimum increments for pricing stocks priced at $1 per share or more? (Rule 612)

A

one cent

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35
Q

What is the minimum increment for stocks trading under $1? (Rule 612)

A

sub-penny pricing is allowed

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36
Q

Market centers that trade listed and NASDAQ securities prepare reports on execution quality how often? (Rule 605)

A

monthly

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37
Q

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?

A

quarterly

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38
Q

Manning II says firms cannot trade ahead of what type of orders?

A

customer limit orders

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39
Q

If market maker receives, as principal, a better price that an unexecuted customer limit order must what?

A

be passed along to the customer

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40
Q

Trading ahead rules applicable during what hours?

A

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

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41
Q

Trading along is allowed if what?

A

if an agreement is in place and a blanket agreement is not allowed

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42
Q

A market maker is required to display a customer order priced better than its current quote within what time frame?

A

30 seconds of receipt

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43
Q

What is front running?

A

trading ahead of customer block orders

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44
Q

Cannot adjust inventory in advance of non-public knowledge of issuance of research reports.

A

This applies to any security

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45
Q

Interpositioning is prohibited unless what?

A

it results in better execution for the customer

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46
Q

Regulation SHO mandates what?

A

a locate requirement prior to the short sale of any security

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47
Q

Regulation SHO requires close out of “fails to deliver” after how many days?

A

After 13 consecutive settlement days

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48
Q

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?

A

OTCBB - Over the counter bulletin board

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49
Q

Which OTC market has no minimum listing standards?

A

OTCBB

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50
Q

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

A

3 business days

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51
Q

what is piggybacking?

A

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

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52
Q

What is TRACE and what does it stand for?

A

Trade Reporting and Compliance Engine - reporting system for secondary market OTC trading.

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53
Q

TRACE reports what?

A

eligible nonconvertible corporate bonds and US Agency debt

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54
Q

Trade reports are made within how many minutes of execution?

A

15 minutes

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55
Q

FINRA reports trade to the public, how often?

A

Immediately

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56
Q

What is a penny stock?

A

Non-NASDAQ stocks that trade under $4 per share

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57
Q

What type of suitability disclosures are required for penny stock?

A

customers must sign a suitability statement

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58
Q

What type of customers do not have to sign a suitability statement to buy penny stock?

A

an establish customer

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59
Q

Customers who purchase penny stocks must receive statements how often?

A

monthly

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60
Q

What must be disclosed to the customer regarding penny stock?

A

commissions made by the RR and the firm

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61
Q

What firms are exempt from penny stock rules?

A

If less than 5% of total revenue is from penny stock

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62
Q

What is the NASDAQ book?

A

The trading platform for NASDAQ securities

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63
Q

On the NASDAQ book, attributable order show what?

A

the firms that entered the order

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64
Q

On the NASDAQ book, non-attributable orders shows how?

A

under anonymous MPID NSDQ

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65
Q

Are locking/crossing orders displayed on the NASDAQ book?

A

not displayed – routed for execution

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66
Q

NASDAQ book system show the top how many price levels?

A

5

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67
Q

What is the maximum order size on NASDAQ book?

A

999,999

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68
Q

What is the assumed priority on trading the NASDAQ book?

A

price/time

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69
Q

What is TIF?

A

Time in Force

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70
Q

What are the market day hours?

A

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

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71
Q

What are the system day hours?

A

7:00 a.m. to 8:00 p.m. ET

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72
Q

Good to close orders are entered according to market day or system day?

A

either

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73
Q

On-the-open orders can be entered up until what time?

A

9:28 a.,m.

74
Q

On-the-close orders can be entered up until what time?

A

3;50

75
Q

Which system reports non-NASDAQ trades?

A

ACT

76
Q

Which system reports NASDAQ and third market trades?

A

TRF - Trade Reporting Facility

77
Q

ACT and TRF are open from what time?

A

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

78
Q

ACT and TRF reports must be made within what time frame?

A

30 seconds

79
Q

In interdealer trades, when is the only time the buyer side reports?

A

when the buyer is a market maker in the stock and the selling firm is not

80
Q

How are T trades reported?

A

same day but outside normal hours

81
Q

How are as/of trades reported?

A

next business day outside normal hours

82
Q

For NASDAQ IPOs, what is the first bid in NASDAQ book?

A

POP - public offering price

83
Q

The Securities Act of 1933 is known as what?

A

The paper act

84
Q

The Securities Act of 1933 deals with what kinds of issues?

A

new issues

85
Q

If a mutual fund has been registered for more than 5 years, is a prospectus required to be delivered during a sale?

A

yes

86
Q

The Securities Act of 1934 deals with what?

A

registration of people and places

87
Q

Who determine margin requirements?

A

Board of Governors of the Federal Reserve

88
Q

What are rules/requirements for margin called?

A

Reg T

89
Q

A fixed annuity is not a security so a seminar dealing exclusively with them cannot result in securities fraud. True or False

A

True

90
Q

Variable annuities are not suitable for short-term investing. Why?

A

surrender charges

91
Q

Variable annuities are a tax free way to participate in the equities market. True or False

A

True

92
Q

Variable annuities typically carry higher or lower expenses than a mutual fund with the same objective?

A

higher

93
Q

What is the DMM’s job?

A

to maintain a fair and orderly market in assigned stocks

94
Q

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?

A

10% = 1 hour; 20% = 2 hours; 30% = rest of the day

95
Q

If there is a reverse split, what happens to the open orders on the book?

A

they are cancelled

96
Q

What is a limit order?

A

an order to buy or sell a security at a state price

97
Q

What constitutes an established customer so that they are exempt from penny stock disclosures?

A

1) has held an account for at least 1 year 2) has at least 3 penny stock trades of different issuers on different days

98
Q

The consolidated tape reports what type of securities?

A

listed securities

99
Q

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

A

90 calendar

100
Q

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

A

10 business days

101
Q

What is the function of the NMS and what does it stand for?

A

National Market System promotes efficient and fair price information

102
Q

What are the requirements to be listed on the NYSE?

A

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

103
Q

If circuit breaker rule 80B is in effect, what happens to pending orders, limit orders, and new orders?

A

They are moved to the next day

104
Q

What rule restricts short sells to display on the next day so long owners can get out before short sellers?

A

The alternate uptick rule that is triggered if stock drops 10% or more from the previous close.

105
Q

Who sets the opening price for a stock?

A

The DMM

106
Q

A DMM can compete the with public. True or False

A

True

107
Q

What is the first market?

A

Listed securities. floor based exchanges with membership

108
Q

What is the second market?

A

Unlisted securities - OTC exchanges - negotiated market which is electronic

109
Q

What is the third market?

A

Exchange listed securities that trade OTC. There are not enough memberships in NYSE so this is the alternative

110
Q

What are ECNs?

A

for big institutions. member firms accept oders from their institutional customer; open 24 hours per day

111
Q

What are the three tiers of NASDAQ order system?

A

1) global select market 2) global market 3) capital market

112
Q

For Non-NASDAQ Market Pink and OTCBB how many dealers must you obtain a quote from?

A

At least three other market makers

113
Q

When do you not have to call three other market makers for quotes on the Non-NASDAQ OTC Market Pink and OTCBB?

A

when there are two or more priced quotes

114
Q

What is considered non-NASDAQ - OTC?

A

Pinks and OTCBB

115
Q

What is the Bid Price?

A

What the MM is willing to pay to buy

116
Q

What is the Ask Price?

A

What the MM is willing to sell at

117
Q

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)

A

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)

118
Q

What is unique about Level III of NASDAQ?

A

It is interactive and available only to MM to allow them to make changes in their quotes

119
Q

NASDAQ accesses across multiple markets for better prices. True or False

A

True

120
Q

What is ISO Intermarket Sweep Orders?

A

they do no route. will settle at NASDAQ’s best prices

121
Q

If you are a market maker can you be an agent?

A

Not on that stock.

122
Q

What is the following an example of:
MM1 9.50 - 10.00
MM2 9.05 - 9.50

A

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.

123
Q

What is the following an example of:
MM 1 9;50 - 10.00
MM 210.10 - 10.30

A

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

124
Q

What is the inside quote?

A

The most favorable

125
Q

Where are bonds reported?

A

Through TRACE. It provides the date, time, quantity (# of bonds) and price (yield to call or yield to materity.

126
Q

Where are stocks and convertible bonds reported?

A

OATS

127
Q

What is ACT?

A

a comparison tract: to compare and submit transactions to NSCC exclusive of markup and commission and for corporate equities not on an exchange

128
Q

what is the MM’s obligation to report trades? Within what time frame?

A

30 second

129
Q

What are MM’s obligations for reporting on short positions?

A

twice monthly

130
Q

What are MMs obligations related to volume reports? how often?

A

daily

131
Q

MM may not accept payment from an issuer to make a market. True or False

A

True

132
Q

Who reports trades when buyer and seller are equal dominance?

A

seller

133
Q

Who reports trades is unequal dominance?

A

The most dominant report

134
Q

Who never reports a trade?

A

customer

135
Q

what is backing away?

A

not honoring a firm quote

136
Q

What is front running?

A

Running your trades before a customer trade

137
Q

What is trading ahead of research reports?

A

exactly what it says it is

138
Q

What is interposition and when is it allowed?

A

Includes a middle man and is allowed when it results in a better price for the customer

139
Q

What are trade throughs?

A

bypassing a market at a lower price to buy from someone else

140
Q

What is reported to the consolidated tape?

A

if it is listed on the exhange, regardless of where it’s traded, it is report to the consolidated tape.

141
Q

What is a nondirected order?

A

executed in rotations

142
Q

what is a preferenced order?

A

one sent to a specific MM for execution at the inside price. (I will always give you the best deal.)

143
Q

What is a directed order?

A

One sent to a specific MM which must reponsd and either 1) accept 2) counter 3) reject or 4) partially fill

144
Q

What is a broadcase order?

A

One sent to all MMs and the MM can respond or ignore

145
Q

What is the default option for orders placed in the book that are not specified?

A

price first, then time

146
Q

What are pegged orders?

A

Those that track to the inside market

147
Q

What is ACES?

A

a system that allows you to access a MM internal order book so I can automate the process

148
Q

Reports cannot be aggregated on which system?

A

OATS

149
Q

TRACE is the reporting system for what?

A

bonds and non-convertible debt

150
Q

What is a .z trade

A

one report late

151
Q

What is a .t trade

A

one executed outside normal business hours and reported the same day

152
Q

What is a as/of trade?

A

one executed outside normal business hours and reported next day

153
Q

What is TRACS for?

A

companies that cnanot use ACT

154
Q

TRACS is used to report what kind of trades?

A

ADF - Alternative Display Facility trades

155
Q

Does TRACs report commission?

A

no

156
Q

What is the OTCBB is an electronic quotation medium for who?

A

issues that dont meet the listing requirements of NASDAQ

157
Q

Where do quotes come from for the OTC Market (PInks)

A

on the web

158
Q

For TRACE reporting, when must trades be reported?

A

within 15 minutes of execution

159
Q

For Trace reporting, who reports the trade, the buyer or the seller?

A

both

160
Q

Do you have to reveal fees charged to customers?

A

yes

161
Q

Do you have to reveal original cost of a traded security?

A

no

162
Q

When is the only time you can trade ahead?

A

You can trade ahead of institutional customers

163
Q

When do GTC (good til cancelled) orders expire on the NYSE?

A

never

164
Q

When do GTC (good to cancelled) order expire on NASDAQ?

A

12 months

165
Q

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?

A

The firms must will 200 shares of the customer order at $21.34

166
Q

What is CQS and why was it developed?

A

Consolidated Quotation System developed in response to third market

167
Q

What kind of quotes are provided on CQS?

A

common stock; preferred stock; ADRs, rights, warrants for listed securities on the eschange or OTC

168
Q

CQS has the same rules for registration and withdrawal as what? with one exception?

A

NASDAQ - except can re-register in 1 day if volutarily terminated - NASDAQ is 20 days

169
Q

What does the consolidated tape include?

A

last sale informtion on listed equity securities from exchanges, third and fourth market - only for equities and convertibles

170
Q

What is NMS and what does it do?

A

National Market Systems and it promotes efficient and fair price information

171
Q

When is subpenny pricing allowed?

A

when the stock trades fro less than $1.00 per share

172
Q

what are the two floor-based stock exchanges?

A

NYSE “& NYSE Market

173
Q

There are six trading markets. Name the first three.

A

1) floor based exchanges
2) OTC stock exchanges (Nasdaq, BATS, Direct Edge
3) OTC markets (OTCBB OTC Pink

174
Q

What are the trading markets on the OTC market called?

A

1) Nasdaq 2) BATS 3) Direct Edge

175
Q

What are the two tradking markets on the OTC market called?

A

OTC BB & OTC Pink

176
Q

what are the other three trading markets called? (not floor-based; not OTC exchanges and not OTC markets)

A

4) Negotiated market/algorithmic
5) Third Market (exchange listed securities that trade OTC)
6) Alternative Trading Systems - ATS

177
Q

What is the Alternative Trading Systems?

A

The Electronic Communication Network (ECN)

178
Q

What is the ECN? and what are the benefits?

A

Member firms accept orders from their institutional customer fro execution on an agency basis. Benefits: reduced costs and open 24 hours a day

179
Q

who has regulatory authority over the exchanges?

A

NYSE and FINRA

180
Q

Who has regulatory authority over OTC, third and fourth markets?

A

FINRA

181
Q

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

A

1) approved by the issuer’s BOD

2) Filing form 25 with SEC

182
Q

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?

A

The firm must publicly offer the security at a price higher than its current bid by 1 cent.

Series 24 - Session Four (1 decks)

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