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Series 7 > Unit 17: Processing Transactions > Flashcards

Unit 17: Processing Transactions Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Who approves order tickets? By when?

A

Principals promptly do after execution, no later than by end of trading day

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2
Q

What must be on the order ticket?

A

Account name or number must be on the order ticket

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3
Q

What are two things NOT on an order ticket?

A

Current market price or client’s name / address

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4
Q

What happens if there is a mistake?

A

Principal must approve the change, write what happened, and have it retained for 3 years

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5
Q

What is a execution report? Who checks it?

A

Report that happens after a trade is executed to check that everything was done as requested. RR checks this

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6
Q

Changing an account number requires who’s approval?

A

Manager or Principal

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7
Q

If a firm messes up the trade, is there burden on the customer?

A

No

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8
Q

Who can correct errors? Who cannot?

A

Supervisors can, but not a registered representative because it could indicate misconduct

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9
Q

Where do margin trades go through?

A

Margin department

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10
Q

What are the three levels of Nasdaq quotation service?

A

Level 1: Inside market, lowest asks, highest bids, last sale volume
Level 2: Available to subscribers, 100+ share orders, quote size by market maker
Level 3: All above, ability to input

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11
Q

What is the Order Audit Trail System (OATS)?

A

Reports / records all of the equities traded on NASDAQ

Provides accurate audit trail

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12
Q

What are dark pools of liquidity?

A

Large pool of liquidity that’s anonymized. Hosted on alternative trading systems

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13
Q

What is Trade Reporting and Compliance Engine? (TRACE). What does it not have?

A

Trade reporting system for corporate and government agency bonds

Trade details to the public immediately (within 15 minutes)

Reporting system, not an execution system

  1. Debt Foreign government securities
  2. Money market instruments
  3. Debt securities that are not depositary trust eligible
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14
Q

What are Trade Reporting Facilities (TRFs)?

A

All OTC in equities are reported to FINRA

Facilities through which members report transactions in stocks listed on NYSE, Nasdaq

DPP and REITs are included

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15
Q

What is the role of a DMM?

A
  1. Fair and orderly market
  2. Reduce market volatility
  3. Cover 5-10 stocks
  4. Minimize price disparities
  5. Use own book
  6. Cannot disrupt the market with their own trading
  7. Serve both as principals and agents
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16
Q

Electronic Municipal Market Access (EMMA)

A

Centralized reporting for key incformation about munis, presented for retail, include 529s and ARS

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17
Q

What is the Real-Time Transaction Reporting System (RTRS)

A

Reports muni information within 15 minutes

Official audit trail?

Does not include MFS

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18
Q

What is the third market?

A

Exchange listed securities that trade in the OTC market within 90 seconds of execution

19
Q

What does the Uniform Practice Code (UPC) focus on? What does it say regarding OTC and Munis?

A

Focuses on operational and settlement standards for delivery of securities

Both are subject to UPC

20
Q

What is making good delivery?

A

When everything is in shape for delivery (time, size, documentation)

21
Q

What is time for delivery?

A

It primarily focuses on settlement date - date in which ownership transfers between buyer and seller

22
Q

What is regular way settlement?

A

Refers to the timing of delivery - most securities must be delivered t + 2

Municipal and corporate bonds are T + 2
Government securities are T+1
Money market is same day

23
Q

What do interdealer trades settle in for government securities? What do all other securities settle in?

A

Federal funds

Clearinghouse funds

24
Q

What is cash settlement? What is timing?

A

Requires delivery of the securities from the seller and payment from the buyer on the day of execution

If trade is executed before 2:00 PM, it must be completed by 2:30 PM ET

If trade happens after 2:00 PM, settlement is due in 30 minutes

25
Q

What are seller’s option contracts?

A

If seller wants to lock in a sale price, but wont be able to deliver the securities in time for regular way settlement.

Settled T + 3 as long as buyer is provided a 1 day notice

26
Q

What are when-issued contracts? What do when-issued contracts not include?

A

When-issued contracts are when municipal bonds are sold without knowing the settlement date and therefore you cannot calculate the accrued interest

Settlement date
Price
Trade Date

27
Q

What does Regulation T specify? What could failure to pay lead to?

A

Payment is legally due two business days after settlement date. Failure to pay can lead to an account freeze unless they have received an extension from the designated examining authority (DEA)

28
Q

When is settlement for equity (including exercise of options)?

A

2 Business Days

29
Q

When is settlement for corporate and municipal bonds?

A

Two business days

30
Q

When is trading options and non equity options settlement?

A

Next business day

31
Q

When is T Bills, T-Notes, and T-Bonds settlement?

A

Next business day

32
Q

When is US Government Agency settlement?

A

2 Business Days

33
Q

When is seller’s option settlement?

A

No sooner than T + 3

34
Q

When is cash settlement?

A

Same business day

35
Q

When is Regulation T settlement?

A

2 Business Days after regular way

36
Q

When must customer confirmations be sent?

A

No later than the settlement date

37
Q

When must broker-to-broker confirmations be sent?

A

No later than the following trade date (T + 1)

38
Q

What is a don’t know (DK) notice?

A

When one party of an interdealer transaction does not recognize the trade or if they disagree with the trade

39
Q

What are Due Bills?

A

If a customer buys a stock before the ex-dividend date but the trade settles after the record date, the seller will receive the dividend instead

Broker dealers send due bills when the wrong party receives a dividend, interest, or rights from the issuer

40
Q

What is overdelivery? What is underdelivery?

A

Overdelivery is when customers sell more shares than they really sold
Underdelivery is when customers receive less shares than they sold

41
Q

What is Good Delivery Clearing Rule?

A

You must have delivery in round lots (100 shares) and the odd-lot can be whatever it needs to be

42
Q

What denominations do coupon or bearer bonds need to be in?

A

$1k or $5k

43
Q

What denomination do fully registered bonds need to be in?

A

$1k or multiples of $1k but never more than $100k

44
Q

When are equity trades reported? When are debt trades reported?

A

Within 10 seconds

Within 15 minutes

Series 7 (9 decks)

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