Supervision Of Trading & Market Making Flashcards
Under ACT/TRF rules, a clearing broker has the option to review certain trades executed by it correspondent market makers prior to becoming obligated to clear the trades.
If the correspondent market maker executes a trade that exceeds the single trade limit, the clearing broker has ________ to determine if it will accept the trade
15 minutes
Order ticket vs. Customer Confirmation
An order ticket includes the following
Time stamp
Solicited / unsolicited
Locate requirement (if applicable)
Control relationships, if applicable, appear on customer confirmations
Physical Delivery
All physical deliveries are made by the seller at the office of the purchaser.
Any expenses incurred in connection with the delivery are borne by the seller
Who distributes proxy statements
Issuers send proxy statements directly to shareholders or to broker dealers holding customer securities in street name.
DTCC does not distribute proxy statements on behalf of the issuers
For trades executed during normal hours and canceled at or before 4:00, the cancellation report must be made within _______ of the time the trade is cancelled
10 seconds
Trade indicator .F
Institutional buy side investors often use algorithmic trading schemes that may require an ISO.
These orders are not subject to auto routing
The firm sending the ISO fulfills its regulation NMS order protection obligations by simultaneously sending order to those market centers with better prices.
For interdealer trades that are settled outside of the scope of automated confirmation and transaction reporting, paper confirmations must be sent no later than _______
T+1
OATS Report
Must include the following
Time stamp Stock symbol Limit price Time limit order was in force Execution price From who the order was received Type of Account
The type of securities and the CUSIP number of the security are not required.
In an interdealer trade of a corporate bond, Trace rules require which party to report the trade
TRACE rules require both side to report the trade
If a market maker receives a customer order that improves its sales price or size, the order must be displayed within ___________ of the receipt unless an exemption is available
30 seconds
Exceptions that the SEC allows market makers to trade alongside customer limited
Retail orders of 10,000 shares or more or a value of $100,000 or more
A customer whose order is being traded along with must give permission to the member
Who is the final authority in matters concerning certificate negotiability
The transfer agent
Form 211 must be filed with FINRA at least _______ business days prior to entering quotations in either OTC pink or the OTCBB
3 business days
What does the NYSE require regarding open orders when an issuer does a reverse split
Cancellation
During what hours must a limit order be protected
Limit orders must be protected during the hours when quotes must be firm
9:30am to 6:00pm
ACES
Advanced Computerized Execution System
Allows order entry firms to access a market makers internal trading system for order placement and execution
The market makers that receive the order pays the fee for the use of the ACES
What securities are excluded from TRACE reporting
Debt securities with 1 year exactly or less of maturity
Foreign debt, municipal debt, money market securities
Registered Bond Denominations
1,000 minimum
100,000 maximum
A fail to deliver (dealer to dealer) can be bought in no sooner than ______ days after settlement
3
Market Operations Review Committee
Hearing appeals of a NASDAQ decision regarding a erroneous trade is the responsibility of this committee
Preferenced Order
Order directed to specific market maker or ECN
Directed Order
An order that a market participant uses to access a particular quote, not a specific market maker
Intermarket Sweep Order
Placed for customer requiring trade execution in a specific market - though there may be a better price found in another market center
What are the requirements when a member borrows stock from another member?
The borrowing firm must put up, in cash, an amount equal to the market value of the borrowed shares.
How many market makers are required to display a 2 sided quote in the OTCBB market
2 market makes
Mechanics of a short sale
When a customers stock is loaned for a short sale, the stock must be returned on demand to the lending firm
The borrowing firm gives the lending firm cash equal to the stocks market value. The loans are marked to market.
The lender retains all ownership rights EXCEPT voting rights
Customer margin stock may only be loaned if the customer signs a loan consent agreement
Dividends paid during the loan period are payable to the lender by the buyer.
.Z modifier
Indicates that a trade report is being made late
Under a T3 modifier, the period between the time a market maker can begin quoting a stock and trading a stock is referred to as ________
5 minute window
Customers must be notified __________ of their right to request information on how and where their non-directed ordered were routed for execution
Annually
Security termination vs. Security suspension
A security that was terminated must, prior to reinclusion, comply with initial requirements of inclusion
If the security was suspended, it must, prior to reinclusion, comply with the requirements of continued inclusion
Failure to deliver - customer
How long do firms have to buy in a fail to deliver after settlement
10 days
What happens to a firm if it enters a quote that will lock or cross the market?
If a firm attempts to lock or cross the market, the order will be routed to the next market maker in line for an execution at the locking quote.
