Trading Markets- SIE

For municipal transactions effected on a yield basis, how are these bonds generally priced? I Discount bonds are priced to maturity date II Discount bonds are priced to the near-term call date III Premium bonds are priced to maturity date IV Premium bonds are priced to the near-term call date

** I and IV. For transactions in callable issues effected on a yield basis, discount bonds are priced to maturity while premium bonds are priced to the near term call date. Thus, the customer is always given a dollar price that ensures he will, at a minimum, get the promised yield.

Trading on regional stock exchanges is modeled after trading procedures used by the:

NYSE ** All of the regional stock exchanges, such as the Philadelphia Stock Exchange (PHLX), model their trading after the NYSE Specialist/DMM and Floor Trader system. Note: The regional exchanges as independent entities are a dying breed. At the end of 2007, NASDAQ purchased the PHLX and the Boston stock exchanges. The NYSE has purchased the Pacific and American stock exchanges. These must still be known for the exam, since these are being run as separate subsidiaries of the major markets.

When a corporation declares a reverse stock split, all of the following will occur EXCEPT:

each shareholder's proportionate ownership in the corporation will be decreased ** When a corporation declares a reverse stock split, each shareholder's proportionate ownership in the corporation remains the same. For example, if a customer owns 5,000 shares at $1 and the corporation splits its stock 1 for 5, the customer will now own 1,000 shares at $5 (in both cases, it's a $5,000 investment). The other statements are true. If there is a reverse stock split, the market price per share will be increased and the number of outstanding shares will be reduced. Also, institutional purchasers are often restricted by their investment policy guidelines from buying "cheap" stocks. Corporations will declare a reverse stock split so that the stock price increases to an acceptable level to institutional investors.

A buy limit order is executed when the market is: I falling II rising III at or below the limit price IV at or above the limit price

falling and at or below the limit price ** A buy limit order is an order to buy at a price that is lower than the current market. The limit is the maximum price at which the customer will buy. (Remember the old adage: Buy Low; Sell High - that's how limit orders are placed in the market)

The proper procedure when receiving mutilated certificates from a customer is to:

hold the mutilated certificates and request a validation letter from the issuer or transfer agent before crediting the account ** The proper procedure when receiving mutilated certificates from a customer is to validate the certificates with the issuer or transfer agent. Once they are validated, they can be deposited to an account for the customer.

An order ticket to sell may be marked "long" in all of the following circumstances EXCEPT the customer:

holds fully paid warrants to buy the underlying stock in custody of the broker-dealer ** A customer is "long" if the customer owns an option, right or warrant on that stock and has exercised (so we know that the stock is actually coming in). Similarly, if a customer is short a put and it has been exercised, we know that the customer will be receiving the stock - so the customer is "long." A customer is "long" if the customer owns a convertible security (into that stock) and has given irrevocable instructions to convert. If a customer simply owns a right, call, or warrant; is short a put; or owns a convertible; this is not considered to be "long" the underlying stock until the action is taken to turn that instrument into that stock.

Which of the following is (are) taxable in the year of receipt? I Interest earned from investments II Cash dividends from investments III Stock dividends from investments

I and II. Cash dividends and interest are taxable each year (unless the interest is exempt). Stock dividends and stock splits are treated as a "return of capital." The cost basis of the shares is reduced proportionately and the number of shares is increased for the stock dividend or stock split.

An order for a New York Stock Exchange listed issue is routed by the member firm to an Electronic Communications Network (ECN) rather than to the exchange floor. This practice is permitted:

if the price offered by the ECN is better ** SEC rules require that execution must occur at the "best market." If a stock is traded in multiple markets, then the order must be routed by the member firm to the market that is posting the best quote.

Which of the following features affect the pricing of a municipal bond quoted on a yield basis? I In Whole Call II Calamity Call III Put option

in whole call only ** When a municipal dealer gives a basis quote, he or she is promising the purchaser a certain yield on the bond. MSRB rules require that when the actual dollar price is determined, that the dollar price be computed to the lowest dollar amount of yield to call or yield to maturity. The only calls that are considered are optional calls, meaning the issuer has the option of calling in the entire issue at preset dates and prices, as set forth in the bond contract. Mandatory calls are not considered - an example of a mandatory call is a "sinking fund" call. In such a call, the issuer is obligated to deposit monies annually to a sinking fund, and then use the funds to call in bonds on a random pick method at specified dates. It is the luck of the draw as to whether a given bond is called or not. Since there is no reasonable certainty of a specific bond being called, this type of call is not considered when pricing municipal bonds. Extraordinary calls (such as catastrophe calls, or calls of bonds backed by mortgages due to mortgage prepayments) are not considered, again because of the lack of any certainty as to their actually happening. Put options have no effect on bond pricing, because exercise is at the option of the bondholder; not the issuer.

A customer places an order to buy bonds. The order reads "Buy 5M ABC 9s M '35 @ 90 GTC." The customer has entered a:

limit order to buy at 90 ** Since a price is specified with no other qualifications, this is a limit order to buy $5,000 face amount ("5M") of 9% bonds maturing in 2035. The customer wants to pay 90% of par for the bonds or less. Open buy limit orders are executed if the market drops.

A person who makes a secondary market in securities is called a(n):

market maker ** The secondary market is the trading of issues outstanding in the market. The individuals making the secondary market are the market makers (dealers). Market makers deal with the public through registered representatives (retail brokers). Underwriters are the market makers in the primary market (new issues), not the secondary market.

Typically, a dual listed stock is one that trades in:

multiple First Markets ** A dual listed stock is one that is listed on more than one exchange, and any exchange is a First Market. A typical dual listed stock is listed on both the NYSE and a smaller regional exchange. There is no such thing as a dual listing between an exchange and the Third or Fourth Markets. Both the Third and Fourth Markets do not have "listings." Finally, note that most companies are only listed on 1 major market because each exchange charges listing fees, and corporations see no reason to pay multiple listing fees.

Regular way trades of all of the following securities settle "next business day" EXCEPT:

municipal debt ** Trades of government debt and listed options settle "regular way" next business day. Trades of corporate securities and municipal bonds settle "regular way" 2 business days after trade date.

The Second Market is a(n): A. auction market B. negotiated market C. unregulated market D. primary market

negotiated market. ** The Second Market is trading of unlisted securities "over-the-counter." This is a negotiated market. For example, a stock quoted in the OTCBB is actually traded by picking up the phone, calling the market maker posting the quote, and negotiating a price.

The only call provision that must be considered when determining the purchase price of a municipal bond trade effected on a yield basis is a(n): A. extraordinary optional call B. extraordinary mandatory call C. optional call D. mandatory call

optional call **When a municipal dealer gives a basis quote, he or she is promising the purchaser a certain yield on the bond. MSRB rules require that when the actual dollar price is determined, that the dollar price be computed to the lowest dollar amount of yield to call or yield to maturity. The only calls that are considered are optional calls, meaning the issuer has the option of calling in the entire issue at preset dates and prices, as set forth in the bond contract. Mandatory calls are not considered - an example of a mandatory call is a "sinking fund" call. In such a call, the issuer is obligated to deposit monies annually to a sinking fund, and then use the funds to call in bonds on a random pick method at specified dates. It is the luck of the draw as to whether a given bond is called or not. Since there is no reasonable certainty of a specific bond being called, this type of call is not considered when pricing municipal bonds. Extraordinary calls (such as catastrophe calls, or calls of bonds backed by mortgages due to mortgage prepayments) are not considered, again because of the lack of any certainty as to their actually happening.

Which of the following call provisions must be considered when determining the purchase price of a municipal bond trade effected on a yield basis? I Optional Calls II Extraordinary Optional Calls III Mandatory Calls IV Extraordinary Mandatory Calls

optional calls

On ex dividend date, which orders are reduced for cash dividends?

orders placed below the current market ** On ex dividend date, all open orders placed lower than the current market are reduced (except for orders placed DNR - Do Not Reduce). The orders placed below the current market are OBLOSS - Open Buy Limits and Open Sell Stops. The intent is to make sure that these orders do not become executable due to the fact that the stock's opening price is reduced by the dividend amount.

Retail member firms that route orders to market makers in return for compensation earn:

payment for order flow ** If a retail member firm chooses a market maker to execute its orders in return for compensation from that market maker, then the retail firm is earning so-called "payment for order flow." The SEC permits this practice, subject to the retail member firm always executing its trades at the best available price.

Buy stop orders are: I placed above the current market II placed below the current market III triggered as the market rises IV triggered as the market falls

placed above the current market and triggered as the market rises ** Buy stop orders are placed above the market and are triggered as the market rises. If there is a large pool of buy stop orders at a certain price, when the market hits that level, they are triggered and become market orders to buy - fueling the rise in the market.

Sell limit orders are: I placed below the current market value II placed above the current market value III executed if the market falls IV executed if the market rises

placed above the current market value and executed if the market rises

Which callable municipal bonds quoted on a yield basis would be priced to the near term "in whole" call date?

premium bonds ** Municipal bonds trading in the secondary market at a premium must be priced to give the customer the promised yield based upon yield to call - this is the worst case basis. Using the call date assumes that the premium will be lost over the shortest time period - if the bond is not called, then the customer's yield improves. If a par bond is called early, the customer's yield stays the same (or improves, if there is a call premium paid). If a discount bond (or zero-coupon bond) is called early, then the customer's yield improves. For both of these, the "worst case" is for the bonds to be held to maturity - earning the discount over the slowest period of time.

Initial Public Offerings (IPOs) are sold for the first time in the

primary market. ** Initial Public Offerings (IPOs) are sold for the first time in the primary market. The First Market is trading of exchange listed securities on that exchange floor. The Third Market is trading of exchange listed securities in the over-the-counter market. The Fourth Market is trading of securities directly between institutions via ECNs - Electronic Communications Networks - such as Instinet.

A customer holds 1,000 shares of ABC stock valued at 80 in a margin account. The debit balance in the account is $35,000. ABC declares and pays a 20% stock dividend. The tax consequence of the distribution to the investor will be:

reduction of cost basis per share ** Under IRS rules, stock dividends are not taxable at the time of receipt. This is true, because, in essence, the shareholder received nothing from the company, except for the possibility of increased future share price appreciation. The stock dividend results in the cost basis per share being reduced, with the number of shares held increased proportionately. In aggregate, the customer's cost basis remains the same.

A customer has a gain on a long stock position that he wishes to protect. The appropriate order is: A. buy stop order B. sell stop order C. sell limit order D. market order

sell stop order ** The customer will "lose" the gain on a long stock position if the market begins to fall. To sell out the position in a falling market, the order must be a sell stop order (placed below the market). To sell out a long position in a rising market the order would be a sell limit order.

In order to protect a gain on a long stock position, a customer should place a:

sell stop order ** a gain on a long stock position will be lost if the market falls. The sell order that is placed below the current market is a sell stop order (sell limits are placed above the current market). If the market begins to fall, the stop is triggered and the stock is sold out at the market price.

the second market is the:

trading of OTCBB stocks ** The Second Market is over-the-counter trading of securities that are not listed on a stock exchange. For equities, the Second Market is the OTCBB (Over-The-Counter Bulletin Board) and the Pink OTC Markets. The First Market is trading of listed stocks on an exchange. Choices B and D are definitions of the primary (new issue) market - not the secondary (trading) markets.

The proper procedure when receiving mutilated certificates from a customer is to validate the certificates with the issuer or transfer agent. Once they are validated, they can be deposited to an account for the customer.

uncertificated book-entry registration in customer name ** DTC (Depository Trust Corporation) safekeeps almost all physical securities certificates for member firms. It is based in New York and has an underground, airtight bunker that goes 8 stories into the ground for this purpose. Computer systems keep track of the "transfer" of these certificates from one owner to another - they are no longer physically moved, unless the customer actually wants delivery of the physical certificate (for which DTC now imposes a substantial charge). Once DTC could track change of ownership by computer, the next step was to create a "book entry" registration system for stocks, where there are no more physical certificates (saves time and money). This is called "DRS" - the Direct Registration System. Because the owner's name is electronically recorded on the books of the transfer agent, payments of dividends and interest are made directly from the transfer agent to the customer/owner.

The second market is trading of:

unlisted securities "over-the-counter" **The Second Market is trading of unlisted securities in the over-the-counter market. For equities, the Second Market is the OTCBB (Over-The-Counter Bulletin Board) and the Pink OTC Markets. Choice A describes the First Market; Choice C describes the Third Market; and Choice D describes the Fourth Market.

If a municipal bond, callable at par, is quoted on a yield basis that is higher than the nominal yield, the price of the bond to a customer would be calculated based on:

yield to maturity ** Regarding a bond purchased at a discount: the yield to call will be the highest effective yield. Under MSRB rules, bonds are priced on a worst case basis, meaning in this case where the discount is earned over the longest period of time. This occurs if the bonds are held to maturity. If the bonds are called, the yield actually improves on the bonds, since the customer earns the discount faster.

A corporation declares a cash dividend on Tuesday, December 2nd, payable to holders of record on Tuesday, December 16th. The local newspaper publishes the announcement on Thursday, December 4th, while Standard and Poor's reports the dividend on Tuesday, December 9th. The ex date for regular way trades will be set at:

Monday, December 15th. ** The regular way ex date for cash dividends is set at 1 business day prior to record date. Since the record date is Tuesday, December 16th, the ex date is 1 business day prior and is Monday, December 15th.

In January, 20XX a customer buys 100 shares of ABC stock at $50 per share and pays a $2 commission per share. The customer receives $1 in cash dividends during the year. The customer's cost basis in the stock is:

$52 per share ** When the stock is purchased, any commission paid is not deductible - it is part of the cost basis of the shares. Thus, the cost basis for tax purposes is $50 + $2 commission = $52 per share. The $1 dividend received is included in taxable income for this year, and is not part of the stock's cost basis.

A customer purchases 200 shares of ABC stock. ABC declares a 3:2 stock split. After the stock split, how many additional shares will the customer now own?

100 additional shares ** For every 2 shares the customer had, she will now have 3 shares. After the 3:2 split, a customer who owned 200 shares will now have 300 shares or 100 additional shares.

A customer owns 1,000 shares of ABC preferred stock trading at $120 per share. Following a 2:1 common stock split, the customer will have:

1000 shares at $120 per share ** Be careful! Only common stock is affected by a stock split or stock dividend. The intent of a stock split or stock dividend is to reduce the price of the common stock to make it more marketable. It has NO effect on the preferred stockholder. Preferred stockholders receive a fixed dividend rate based on par value. Just like a bondholder, the price moves inversely to market interest rates. When there is a stock split or stock dividend, the price of preferred stock and bonds of that company are unaffected.

A customer owns 1,000 shares of ABC preferred stock trading at $120 per share. Following a 2:1 common stock split, the customer will have: I 1,000 shares II 2,000 shares III at $60 per share IV at $120 per share

1000 shares at $120 per share Be careful! Only common stock is affected by a stock split or stock dividend. The intent of a stock split or stock dividend is to reduce the price of the common stock to make it more marketable. It has NO effect on the preferred stockholder. Preferred stockholders receive a fixed dividend rate based on par value. Just like a bondholder, the price moves inversely to market interest rates. When there is a stock split or stock dividend, the price of preferred stock and bonds of that company are unaffected.

A customer has purchased 1,000 shares of ABC stock at $58 per share, paying a commission of $2 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is

1200 shares at a cost basis of $50 per share ** There is no tax due when a stock dividend is paid; instead the investor gets more shares; with each share worth proportionately less. The payment of a stock dividend increases the number of shares held by the investor and the cost basis must be reduced accordingly, since each share is theoretically worth less after the stock dividend is paid. The customer will have 1,000 shares x 1.20 = 1,200 shares after the stock dividend is paid. Each share originally had a cost basis of $60 ($58 price plus $2 commission). After the stock dividend is paid, the cost basis is adjusted to $60/1.20 = $50 per share.

A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is:

1200 shares held at a cost basis of $37.50 per share ** The payment of a stock dividend increases the number of shares held by the investor and the cost basis must be reduced accordingly, since each share is theoretically worth less after the stock dividend is paid. The customer will have 1,000 shares x 1.20 = 1,200 shares after the dividend. Each share originally had a cost basis of $45 ($44 price plus $1 commission). After the dividend is paid, the cost basis is adjusted to $45/1.20 = $37.50.

A 7% general obligation bond is issued with 20 years to maturity. A customer buys the bond on a 7.50% basis. The bond contract allows the issuer to call the bonds in 5 years at 102 1/2, with the call premium declining by 1/2 point a year thereafter. The bond is puttable in 5 years at par. The price of the bond to a customer would be calculated based on the:

20 year maturity ** This is a very difficult question. Since the bond has a stated rate of interest of 7%, but is priced to yield 7.50%, the bond is being sold at a discount. The amount of the discount to which this equates is about $140 (you do not need to know how to do this, but you do need to understand the concept that follows). The dollar price of the bond would be $860 to yield 7.50% to maturity. Under MSRB rules, bonds are priced on a worst case basis, meaning in this case where the discount ($140 in this case) is earned over the longest period of time. This occurs if the bonds are held to maturity. If the bonds are called earlier, the yield actually improves on the bonds, since the customer earns the discount faster.

ABC Corporation has declared a 5:4 stock split to shareholders of record on November 10th. The price of the stock will be reduced on ex date by:

20% ** This is a very tricky question. Since the stockholder has 1.25 times the number of shares after the split, the market price will be reduced on ex date by a factor of 1.25. Assume the market price of the stock is $50 before the split. After the split, the new market price is $50 / 1.25 = $40. The new price is $10 less than the original $50. $10 / $50 = 20% reduction from the original price.

A customer owns 500 shares of ABC preferred stock trading at $90 per share. Following a 3:1 common stock split, the customer will have: I 500 shares II 1,500 shares III at $30 per share IV at $90 per share

500 shares at $90 per share ** Be careful! Only common stock is affected by a stock split or stock dividend. The intent of a stock split or stock dividend is to reduce the price of the common stock to make it more marketable. It has NO effect on the preferred stockholder. Preferred stockholders receive a fixed dividend rate based on par value. Just like a bondholder, the price moves inversely to market interest rates. When there is a stock split or stock dividend, the price of preferred stock and bonds of that company are unaffected.

ABC Corporation has declared a 4:1 stock split to shareholders of record on November 10th. The price of the stock will be reduced on ex date by:

75% ** Since the stockholder has 4 times the number of shares after the split, the market price will be reduced on ex date by a factor of 4. Assume the market price of the stock is $60 before the split. After the split the new market price if $60 / 4 = $15. The new price is $45 less than the original $60 OR $45 / $60 = 75% reduction from the original price.

A customer enters an order to sell 100 shares of ABC at 75 stop limit when the market price of ABC is 78. The order will be executed at:

76. sell stop orders are placed lower than the current market and are elected (or triggered) at or below the stop price - here, the stop price is at 75. The market first goes to 75 and this is where the order is elected. Then the order becomes a limit order to sell at 75 or better (or higher). The order is executed at 76, as this is the first trade "at or above" the limit.

A customer places an order to sell bonds. The order reads "Sell 5M ABC 9s M '45 @ 90 GTC." At which of the following prices may the order be executed? I 89 II 90 III 91 IV 92

90, 91, 92 ** The customer places a limit order to sell 5M - or 5 $1,000 par bonds at 90% of par value or more, if possible. The order must be executed at 90% or more, so selling at 90, 91 and 92 are OK. Selling at 89 is not high enough to satisfy the customer's limit.

Which of the following first markets does NOT trade stocks?

CBOT ** The NYSE trades stocks. The AMEX and PHLX trade stocks and stock options. (The AMEX is a wholly owned subsidiary of the NYSE, and it has renamed its equities market "NYSE American," while its options market is still called the AMEX.) The CBOT - Chicago Board of Trade - is not a securities exchange. Rather, it is a futures market.

Futures contracts trade on the:

CBOT ** The NYSE trades stocks. The AMEX trades stocks and stock options. The AMEX is a wholly owned subsidiary of the NYSE, and it has renamed its equities market "NYSE American," while its options market is still called the AMEX. The CBOE trades stock options and index options. The CBOT - Chicago Board of Trade - is not a securities exchange. Rather, it is a futures market.

Quotes from all market centers in NYSE listed securities are found on (the):

CQS (CONSOLIDATED QUOTATIONS SERVICE ** CQS (Consolidated Quotations Service) aggregates and displays quotes for all market makers in exchange listed issues - both NYSE and NYSE American (AMEX) listed. These market makers are exchange Specialists (DMMs) and Third Market Makers (OTC firms that make markets in exchange listed issues). The UQDF (UTP Quote Data Feed) aggregates and displays quotes for all market makers in NASDAQ issues. UTP stands for "Unlisted Trading Privileges." Not only do NASDAQ Market makers quote and trade NASDAQ stocks, but exchange Specialists/DMMs are now permitted to compete and trade NASDAQ stocks under a "UTP" plan. The ADF is where ECN quotes are found (Fourth Market). The Pink Sheets (Pink OTC Markets) give quotes for stocks that do not meet exchange listing standards - most of these are "penny stocks."

ABC corporation announces a 5:4 stock split to holders of record on Wednesday, November 15th, payable on November 30th. NASDAQ has set the ex date at December 1st. What is the first day that the stock will trade without a due bill attached?

December 1st ** This is a hard question. The ex date for stock splits and stock dividends is unusual because it is set at the business day after the payable date. The record date to receive the extra shares is typically a month before the payable date. Someone who buys the shares settling after the record date will not get the extra shares. Yet on ex date the price is reduced, and that customer has the same number of shares, now worth less per share. The customer can claim the extra shares he deserves with a due bill. As of the morning of the ex date, any new purchaser buys at the reduced price and a due bill is not needed.

Which of the following is NOT part of the secondary market?

Fifth Market. ** The Secondary Market is categorized into 4 sub-markets: the First; Second; Third; and Fourth Markets. The First Market is trading of exchange listed securities on that exchange floor. The Second Market is trading of securities that are not exchange listed in the over the counter market. The Third Market is trading of exchange listed securities in the over the counter market. The Fourth Market is trading of securities directly between institutions in the over the counter market via ECNs (Electronic Communications networks) such as Instinet.

A corporation declares a cash dividend on Wednesday, December 1st. The record date is set at Tuesday, December 21st, with the dividend payable on Friday, December 31st. Based on this information, the ex date is set at Friday, December 17th. The "tax event" occurs on:

Friday, December 31st ** For tax purposes, payments by issuers to securities holders are considered to be received as of the date the issuer sends the check. In this case, the check is sent on Friday, December 31st (payable date), therefore the income is taxable as of this date.

A transaction is mistakenly placed in John Jones' cash account when it should have been recorded in John Jones' margin account. To correct this: I the registered representative must create a cancel/rebill record detailing the reasons for the designation change II no cancel/rebill record is required because both accounts are owned by the same individual III the branch manager or compliance official must approve of the change in writing IV the branch manager or compliance official is not required to approve of the change in writing since the accounts are owned by the same individual

I and III. FINRA requires that anytime there is a change of account name or designation relating to an executed order, a written record must be made of the change. This is called a "Cancel-Rebill" record. A branch manager or compliance officer must know the reasons for the change and must approve the change in writing.

Which of the following are characteristics of ECNs? I ECNs trade listed stocks II ECNs trade OTC stocks III ECNs trade "away" from exchanges IV ECN trades are not reported

I and III. (ECNs trade listed stocks and ECNs trade "away" from exchanges ** ECNs (Electronic Communications Networks) attempt to match large institutional orders. They only do this for listed stocks (NYSE, NYSE American (AMEX) and NASDAQ). They don't do OTC stocks (OTCBB or Pink Sheet issues) because the market is too thin. The trades take place in matching computers, so they take place "away" from an exchange floor. The trades are reported to the appropriate tape (Network A, B or C) like any other trade.

Which orders guarantee price but not execution? I Buy Limits II Buy Stops III Sell Limits IV Sell Stops

I and III. If a "Stop" order is elected, it becomes a market order to be filled at the first opportunity. Thus, the actual price at which the order is executed is not known. On the other hand, a "Limit" order specifies that the execution must comply with the limit price specified or better. Thus, limit orders are only filled at that price or better. If the market never reaches that price, they are never filled.

Under Regulation ATS, any ECN must: I register with the SEC as a broker-dealer II register with the SEC as an exchange III display its quotes and make them electronically accessible if the ECN is responsible for 2% or more of the trading volume in that stock IV display its quotes and make them electronically accessible if the ECN is responsible for 5% or more of the trading volume in that stock

I and IV (register with the SEC as a broker-dealer and display its quotes and make them electronically accessible if the ECN is responsible for 5% or more of the trading volume in that stock ** Under Regulation ATS, any ECN (Electronic Communications Network) or ATS (Alternative Trading System) must register with FINRA as a broker/dealer (therefore it comes under some market regulation). Once an ECN is big enough (5% of the trading volume in a given stock in the past 6 months), it must publicly display its orders so that they can be accessed and traded against electronically.

ABC Corporation declares a dividend on June 15th with a Record Date of Friday, August 1st. If the stock is bought on Thursday, July 31st, which of the following statements are TRUE? I If the stock is purchased for cash, the customer will receive the dividend II If the stock is purchased for cash, the customer will not receive the dividend III If the stock is purchased regular way, the customer will receive the dividend IV If the stock is purchased regular way, the customer will not receive the dividend

I and IV.

Which statements are TRUE about ECNs? I ECNs only trade listed stocks II ECNs trade listed and OTC stocks III ECN trades are not reported to the tape IV ECN trades occur away from exchange trading floors

I and IV. (ECNs only trade listed stocks and ECN trades occur away from exchange trading floors) ** ECNs (Electronic Communications Networks) only trade listed stocks (NYSE, NYSE American (AMEX) and NASDAQ). They do this as an institutional matching service, getting a small fee for each match. These trades occur OTC in the "Fourth Market." ECNs do not trade OTC issues (OTCBB and Pink Sheets), because the market is illiquid. ECN trades are reported to the appropriate Network A, B, or C Tape by a system called TRACS.

When a corporation splits its stock, which of the following statements are TRUE? I An existing shareholder's proportionate ownership in the corporation will remain the same II An existing shareholder's proportionate ownership in the corporation will be increased III Individual investors are less likely to buy the stock IV Individual investors are more likely to buy the stock

I and IV. an existing shareholder's proportionate ownership in the corporation will remain the same and individual investors are more likely to buy the stock **When a corporation splits its stock, each shareholder's proportionate ownership in the corporation remains the same. For example, if a customer owns 100 shares at $50 and the corporation splits its stock 2 for 1, the customer will now own 200 shares at $25 (in both cases, it's a $5,000 investment). It is more likely for a customer to buy a $25 stock than a $50 one, since cheaper stocks are more affordable.

In an inefficient market: I dealer spreads are wide II dealer spreads are narrow III trading volume is high IV trading volume is low

I and IV. dealer spreads are wide and trading volume is low. ** An inefficient market is the opposite of an efficient one. An "inefficient" market is where there is a low trading volume - meaning there is high liquidity risk. With such light trading volume, dealer spreads will widen.

Customers who trade NYSE listed securities during extended trading hours are: I subject to a higher degree of price volatility than during regular trading hours II subject to a lower degree of price volatility than during regular trading hours III always able to obtain an execution at the market because the Specialist/DMM maintains a continuous auction market IV not always able to obtain an execution at the market because there is no Specialist/DMM maintaining a continuous auction market

I and IV. subject to a higher degree of price volatility than during regular trading hours and not always able to obtain an execution at the market because there is no specialist/ DMM maintaining a continuous auction market ** The "after hours" trading sessions have much lower investor participation, so trading volumes are very small. Because of the lack of order flow, the market is less liquid; and as a result, few dealers participate in the market. Thus, one may not be able to get an execution; and each trade that is executed can result in a much greater than normal market price movement.

Which of the following statements are TRUE about an order to: Buy 100 ABC @ 45 Stop 50 Limit? I The order is elected at $45 or higher II The order is elected at $45 or lower III The order is executed at $50 or higher IV The order is executed at $50 or lower

I and IV. the order is elected at $45 or higher and the order is executed at $50 or lower

Which of the following must be disclosed, or made available, on agency trade confirmations? I Name, address, and telephone number of broker II Name, address and telephone number of contra-broker III Amount of commission charged IV Time of trade

I, II, III, and IV ** In an agency trade confirmation, the name, address and phone number of the broker must be on the confirmation. The amount of the commission must be on the confirmation. Also, the name of the contra broker and time of the trade must be made available to the customer upon written request (the fact that this information is available is in the fine print on the back of the confirmation).

Which of the following can result in the establishment of a short position? I Arbitrage transaction II Sale of a security "against the box" III Position trades of borrowed shares

I, II, and III Short positions are established in arbitrage transactions (the simultaneous purchase and short sale of a security in two different markets to lock in a temporary price difference). A short position is taken when a security is sold "against the box" - meaning that the long position is being held and an equivalent number of shares are being borrowed and sold to lock in a profit. Finally, position trades (position trading is trading for the firm account, using the firm's "positions") of borrowed shares are short sales.

Which of the following securities are traded in the secondary market? I Preferred Stocks II American Depositary Receipts III Mutual Funds IV Municipal Bonds

I, II, and III (preferred stocks, american depository receipts and municipal bonds) ** Equities - common stock, preferred stock, and American Depositary Receipts trade on exchanges and are traded "over-the-counter." Municipal and U.S. Government bonds are traded "over-the-counter." There is no trading of mutual fund shares - these are redeemable securities that are redeemable with the sponsor.

Which of the following customers is considered to be long 100 shares of ABC stock? I A customer who has bought 100 ABC shares in a regular way trade that has not yet settled II A customer who owns 1 ABC call contract III A customer who owns two ABC convertible bonds, convertible into 50 shares each, who has given irrevocable instructions to convert IV A customer who owns 100 ABC warrants and has exercised those warrants

I, III, and IV. A customer is considered to be long stock once the stock has been purchased. The transaction does not have to settle for the customer to be considered to be long. A customer is considered to be long if he owns options or warrants and has exercised. Choice II is not considered a long stock position since the call has not been exercised, while Choice IV is a long position because the warrants have been exercised. A customer is considered to be long stock if the customer owns a convertible security and gives irrevocable instructions to convert (Choice III).

Which of the following securities are actively traded in the secondary market? I Open end funds II Closed end funds III Real estate investment trusts IV Direct participation programs

II and III (closed end funds and real estate investment trusts) ** Closed end funds and REITs are listed on exchanges and are traded like all other stocks. Open end funds (mutual funds) are redeemable with the sponsor - they do not trade. Direct participation programs (limited partnerships) also do not trade - the investor is in the program for the life of the partnership and is only permitted to sell if the general partner in the venture approves.

Which of the following dates may be needed to compute the total dollar price of a municipal bond traded on a yield basis in the secondary market? I Dated date II Maturity date III Call date IV Put date

II and III only. When pricing a municipal bond traded in the secondary market on a yield basis, the MSRB requires that the dollar price be computed on a "worst case" basis. For premium bonds, having the bond called early (losing the premium faster) is worst; so premium bonds must be priced to the nearest "in whole" call date. For discount bonds, having the bond last until the maturity date is worst, earning the discount slower. Thus, these dates are employed when pricing municipal bonds quoted on a yield basis. Put options have no effect on bond pricing, because exercise is at the option of the bondholder; not the issuer. The dated date has no meaning for pricing a bond trading in the secondary market. It is simply the legal date of issuance of the bond, and is the date from which interest started accruing on the issue.

At the time of a "when, as and if issued" trade the: I amount of accrued interest due to the underwriters is known II amount of accrued interest due to the underwriters is not known III settlement date is known IV settlement date is not known

II and IV. amount of accrued interest due to the underwriters is not known and settlement date is not known ** "When, as, and if issued" trades are used for new issues where the certificates are not as yet physically printed and delivered. At the time of the "when issued" trade, the final settlement date is not known. Therefore, the amount of accrued interest due to the underwriters is not known. Of course, the trade date is known and the trade price is known at the time of the "when issued" confirmation.

An order ticket is marked: Sell (Short) 100 ABC @ $50. This means that the customer: I owns the shares II does not own the shares III will deliver owned shares on settlement IV will borrow shares to deliver on settlement

II and IV. does not own the shares and will borrow shares to deliver on settlement ** A short sale is a sale of borrowed shares. The customer does not own the shares that he or she is selling; and borrows the shares from another person to make delivery on settlement.

Which of the following MUST be disclosed on municipal bond trade confirmations? I For general obligation bonds, the source of income backing the issue II For revenue bonds, the source of revenue backing the issue III For industrial revenue bonds, the name of the corporation guaranteeing the issue IV "In Whole" call dates

II, III, and IV. ** There is no requirement to disclose the source of income backing a general obligation issue because it must be taxing power. The MSRB does require that the type of revenue backing a revenue bond issue be disclosed, as well as the name of the corporate guarantor for industrial revenue bonds. "In Whole" call dates must also be disclosed on customer confirmations, since they can affect the pricing of the issue under MSRB rules (the MSRB requires that if a bond quoted on a yield basis is trading at a premium, and if it is callable "in whole" at preset dates and prices, then the dollar price must be computed to the call date rather than to the maturity date, since it will most likely be called).

The first market includes trading in:

NYSE issues ** The First Market is trading of listed stocks on an organized stock exchange - like the NYSE, AMEX (now renamed the "NYSE American") or NASDAQ exchanges. Exchanges have listing standards for the companies that trade there and accessible order books, where orders can be posted and traded against. Any companies that do not meet exchange listing standards ("unlisted securities") are quoted in either the OTCBB (Over The Counter Bulletin Board) or the Pink OTC Markets. These constitute the Second Market. Both the OTCBB and Pink OTC Markets are classified by the SEC as "quotations vendors" - they are not exchanges. To trade an OTCBB or Pink OTC Markets stock, the trade must be negotiated, usually over the phone. New issues are sold for the first time in the Primary Market.

Trades of NYSE American(AMEX) listed securities that take place in all markets are consolidated and reported through the:

Network B tape ** The Network B Tape reports trades of NYSE American (AMEX)-listed issues, regardless of the market venue where the trade took place. The Network A Tape reports trades of NYSE-listed issues, regardless of the market venue where the trade took place. Reports of trades of NASDAQ issues are made through the Network C Tape, regardless of the market venue where the trade took place. There is no Network D Tape.

A customer decides to sell her shares of stock that she keeps in a vault at home, and sends her stock certificates to her brokerage firm. Unfortunately, she forgets to sign one of the certificates. The customer's broker should do which of the following?

Retain all the certificates and send the customer a stock power with instructions that it must be signed

A customer has asked his registered representative to sell 100 XYZ if the market falls to 50, but he does not want to sell for less than 45. The proper order is:

Sell 100 XYZ @ 50 stop 45 limit ** An order to sell that is placed BELOW the market must be a sell stop order (sell limit orders are placed above the market). The customer wants to sell if the market falls to 50, so the order is "Sell 100 XYZ at 50 Stop." If triggered, this order becomes a market order to sell (which will happen at the prevailing market price). But the customer has also specified that he doesn't want to sell for less than 45 per share, meaning there is a limit on the execution price. The proper order is "Sell 100 XYZ at 50 Stop 45 Limit."

An open order is on the member firm's internal order entry system to sell 800 XYZ at 50 Stop GTC. The company has declared a 25% stock dividend. On the morning of the ex date, the order on the book will be:

Sell 1000 XYZ at 50 stop GTC ** To adjust the order for the 25% stock dividend, the number of shares is multiplied by a factor of 1.25 (since there are 25% extra shares) while the order price is divided by a factor of 1.25. 800 shares x 1.25 = 1,000 shares on the adjusted order $50 price / 1.25 = $40 adjusted order price

Which is NOT considered to be a good delivery for an 800 share purchase of stock?

Ten 80 share certificates ** To be a good delivery from dealer to dealer, stock certificates must be delivered in multiplies of 100 on one certificate or in certificates of less than 100, where the certificates can be added exactly to 100 share units. Choice C does not meet this requirement. Individual 80 share certificates cannot be added into 100 share units. 25 share certificates are good (Four 25 share certificates = 100), as are eight 100 share certificates or one 800 share certificate.

Market makers in the Third Market trade:

The "Third Market" is OTC trading of exchange listed securities. These Third Market Makers (firms such as Weeden and Co. and Jefferies and Co.) now account for about 40% of trades in NYSE listed issues. Thus, these are competitors for stock exchange specialist firms (now called DMMs - Designated Market Makers). For example, a trade of IBM (NYSE listed) that takes place OTC, instead of on the NYSE floor, is a Third Market trade. Note that much of the Third Market's trading volume takes place when the NYSE floor is closed in the so-called "after hours" market.

The Fourth Market is trading of:

The Fourth Market is direct trading of securities between institutions on ECNs (Electronic Communications Networks) such as Instinet or Archipelago. The systems bypass brokerage firms, and therefore brokerage commissions. Instead, the ECN charges a small matching fee. Choice A describes the First Market; Choice B describes the Second Market, while Choice C describes the Third Market.

XYZ Corporation has declared a rights offering to stockholders of record on Wednesday, November 15th, payable on Tuesday, December 5th. Under the offer, shareholders need 5 rights to subscribe to 1 new share at a price of $24. Fractional shares can be rounded up to purchase 1 full share. The last day to buy XYZ shares before they go ex rights is:

Tuesday, December 5th ** The regular way ex date for cash dividends is 1 business day prior to the record date. However, the ex date for stock dividends, stock splits and rights offerings is different. For non-cash distributions, the ex date is set at the business day following the payable date. The payable date is Tuesday, December 5th, therefore the ex date is Wednesday, December 6th. To buy the shares before they go ex rights, the shares must be purchased before Wednesday, December 6th, meaning they must be purchased on Tuesday, December 5th.

The regular way ex date for cash dividends is set at 1 business day prior to record date. Since the record date is Tuesday, December 16th, the ex date is 1 business day prior and is Monday, December 15th.

Tuesday, June 14th. ** If a person owns common stock and wishes to receive the dividend, that person cannot sell prior to the ex date, because then the trade would settle on the record date or before, and the seller would NOT be on record to get the dividend. To receive the dividend, the stock must be sold no earlier than the ex date (or after). The ex date is 1 business day prior to record date - or June 14th. Thus, if the stock is sold on June 14th or later, the seller would receive the dividend.

A dual listed stock is one which trades in two different:

U.S. markets ** dual listed stock is one which trades in more than one marketplace - for example, a young West Coast company might have listed on the Pacific exchange when it was still small; and then listed on the NYSE when the company became large enough. Finally, note that most companies are only listed on 1 major market because each exchange charges listing fees, and corporations see no reason to pay multiple listing fees.

If a municipal bond is purchased regular way on Monday, January 3rd, when does the trade settle?

Wednesday, January 5th Regular way settlement for municipal securities takes place T + 2 or trade date plus 2 business days. So, the trade will settle on Wednesday, January 5th.

A registered representative receives a telephone call from a customer who tells the representative to: "Sell my 500 shares of ABC stock at the market." The representative has the record of the customer purchasing the shares 2 years ago, but the shares were transferred into the customer's name and shipped to the customer at his home address. The representative asks the customer where the shares are and the customer responds as follows: "The shares are in a fireproof safe in my bedroom." The representative should:

accept the sell order, but mark the order ticket long because it can be reasonably expected that the customer will deliver the shares by settlement. ** Under SEC rules, a sell order can be marked "long" if the representative determines the location of the shares and it can reasonably be expected that the shares will be delivered on settlement. The representative has determined that the customer has the shares at home, and since this is a long-time customer (the shares were purchased through that firm 2 years ago), it can be assumed that the customer will deliver them on settlement.

Which of the following statements are TRUE about stop orders? I Buy stop orders can accelerate price advances in bull markets II Sell stop orders can accelerate price declines in bear markets III Buy stop orders limit losses on short stock positions IV Sell stop orders limit losses on long stock positions

all of the above ** Buy stop orders are placed above the market and are triggered as the market rises. If there is a large pool of buy stop orders at a certain price, when the market hits that level, they are triggered and become market orders to buy - fueling the rise in the market. Sell stop orders are placed below the market and are triggered as the market falls. If there is a large pool of sell stop orders at a certain price, when the market hits that level, they are triggered and become market orders to sell - fueling the drop in the market. Buy stop orders can be used to buy in short stock positions as the market rises, cutting losses. Conversely, sell stop orders can be used to sell out long stock positions in falling markets, cutting losses.

All of the following information must be on an order ticket before it can be entered EXCEPT:

amount of accrued interest to be paid ** The amount of accrued interest is calculated after a bond trade is executed - it is not on the order ticket that is used to enter the order. The ticket must include the size of the trade, desired execution price, and customer identification.

The orders that are higher in price than the current market are: I Open Buy Limits II Open Buy Stops III Open Sell Limits IV Open Sell Stops

answer is open buy stops and open sell limits ** Sell limits and buy stops are the orders that are placed above the current market and are elected as the market rises. Remember OSLOBS - Open Sell Limits and Open Buy Stops as the orders placed above the current market.

Sell stop orders: I are used to sell securities at prices that are lower than the current market II are used to sell securities at prices that are higher than the current market III guarantee a specific execution price or better IV do not guarantee a specific execution price or better

are used to sell securities at prices that are lower than the current market and do not guarantee a specific execution price or better ** Sell stop orders are used to sell securities at prices that are lower than the current market - they are used to "stop" a loss on the position. If the market drops to the stop price, the order is "elected" and becomes a market order to sell. They sell order will be filled at the prevailing market price - so there is no guarantee of a specific execution price or better.

The First Market is a(n): A. auction market B. negotiated market C. unregulated market D. primary market

auction market. ** The first market is trading of listed stocks on the floor of an exchange. Exchanges started as pure "auction" markets, where an open outcry auction determined the price of a stock. With the advent of computerized trading, the NYSE is now a "hybrid" market that offers both a computerized matching market and an auction market that is done both electronically and manually. NASDAQ, as the first "virtual" exchange, does not use the auction model. It simply uses computerized matching. The over-the-counter market (e.g., OTCBB and Pink Sheets), by comparison, is a negotiated market.

A customer places an order to sell 100 ABC at 21 Stop Limit, when ABC stock is trading at $23. The company is restructuring and has announced a special dividend of $.72 to be paid to shareholders of record. On the ex date, the order will:

be reduced to $20.28 ** On ex dividend date, all open orders placed lower than the current market are reduced for cash dividends (except for orders placed DNR - Do Not Reduce). The intent is to make sure that the order does not become executable due to the fact that the stock's opening price is reduced by the dividend amount. The order was originally placed at $21. The adjusted order price is $21 -$ .72 reduction = $20.28 adjusted order price.

A bond trade takes place at 10:00 AM on Monday, July 10th for "cash." Settlement takes place:

before 2:30 pm on July 10th

Orders that are placed lower than the current market are: I buy limits II buy stops III sell limits IV sell stops

buy limit and sell stops** The orders that are placed lower than the current market are "OBLOSS" - Open Buy Limit orders and Open Sell Stop orders. Buy limit orders allow the purchase of a security at a price that is cheaper than the current market; sell stop orders allow the sale of a security at a price that is cheaper than the current market. Both of these orders are filled in falling markets. Conversely, the orders that are placed higher than the current market are "OSLOBS" - Open Sell Limits and Open Buy Stops. Sell limit orders allow the sale of a security at a price that is higher than the current market; buy stop orders allow the purchase of a security at a price that is higher than the current market. Both of these orders are filled in rising markets.

All of the following statements are true if a customer places an order for an NYSE listed issue EXCEPT the order:

can be matched internally by the member firm and is not required to be sent to a public trading venue ** FINRA member firms cannot match orders internally and cannot "privatize" their trades. All trades must be effected in a public venue - whether it be on the NYSE floor; in the Third Market; or through an ECN. Member firms are permitted to accept payment for order flow, but this must be disclosed to customers. Also remember that any trade price must be the "best" one available at that moment in the public markets.

Under MSRB rules, yield to worst means that: A. all municipal bonds quoted on a yield basis must be priced to maturity B. municipal par bonds quoted on a yield basis must be priced to maturity C. municipal discount bonds quoted on a yield basis must be priced to maturity D. municipal premium bonds quoted on a yield basis must be priced to maturity

correct answer is C. municipal discount bonds quoted on a yield basis must be priced to maturity ** When municipal serial bonds are quoted on a yield basis, the dealer must compute the dollar price shown on the customer confirmation. This dollar price must assure, that at a minimum, the customer will receive the promised yield. This is known as pricing to the "worst case" scenario. For a premium bond, the "worst case" scenario is having the bond called early (which is the likely case). Bonds trade at a premium because market interest rates have dropped, so the issuer can refund the issue at lower current market rates by calling in the bonds. In this case, the bond is priced based on giving the customer the promised yield using the near-term in whole call date as the redemption date. If the bond were not called, the customer's actual yield would improve, because the annual loss of premium incorporated into the yield would be spread over a longer time frame. For a discount bond, the "worst case" scenario is having the bond held to maturity (which is the likely case). Bonds trade at a discount because market interest rates have risen, so the issuer would not call these bonds. In this case, the bond is priced based on giving the customer the promised yield using the maturity date. If the bond were called early, the customer's actual yield would improve, because the annual earning of the discount incorporated into the yield would be spread over a shorter time frame.

All of the following securities deliveries are "good" EXCEPT:

custodian securities with an assignment performed by the recipient of the gift ** Custodian account securities cannot be assigned by the minor. The minor has no legal authority. Any assignment must be made by the custodian.

A customer purchases 100 shares of PDQ stock at $2. The company declares a 1:2 reverse stock split. After the reverse stock split, the: I customer will have 20 shares II customer will have 50 shares III market price will be $4 per share IV market price will be $10 per share

customer will have 50 shares and market price will be $4 per share ** In a reverse stock split, the number of common shares outstanding is decreased and the market price per share is increased proportionately. This is a 1:2 reverse stock split. For every 2 shares the customer had before, he or she will have 1 share (or half the number of shares before the split). Since the number of shares is halved, the market price per share doubles from $2 to $4 per share.

All of the following dates are needed to compute the total purchase price of a municipal bond traded on a yield basis in the secondary market EXCEPT

dated date ** When a municipal dealer gives a basis quote, he is promising the purchaser a certain yield on the bond. MSRB rules require that when the actual dollar price is determined, that the dollar price be computed to the lowest dollar amount of yield to call or yield to maturity. The only calls that are considered are optional calls, meaning the issuer has the option of calling in the entire issue at preset dates and prices, as set forth in the bond contract. This is an "in whole" call. The last interest payment date and the settlement date are needed to compute the amount of accrued interest. The dated date has no meaning for pricing a bond trading in the secondary market. It is simply the legal date of issuance of the bond, and is the date from which interest started accruing on the issue.

Comparisons and "Don't Know" notices are sent from:

dealer to dealer ** DK or "Don't Know" notices are sent dealer to dealer to reconcile unmatched trades. The dealer knows that there is a problem when he or she receives a comparison from the contra broker that does not agree with the trading record. These notices are sent the same day as the trade. Comparisons are dealer-to-dealer trade confirmations.

Which of the following statements are TRUE regarding stop orders? I Stop orders are placed "away" from the current market II Stop orders allow a specific execution price to be "locked in" III Stop orders can limit loss on a long stock position IV Stop orders can protect a profit on a long stock position

stop orders are placed "away" from the current market, stop orders can limit loss on a long stock position, and stop orders can protect a profit on a long stock position ** Stop orders are placed "away" from the current market - sell stop orders are placed below the current market price while buy stop orders are placed above the current market price. Stop orders do NOT allow a specific execution price. Once the "stop" price is reached, the order is elected and becomes a market order to be filled at the next price - which could be higher, lower, or the same as the stop price. They can be used to limit a loss on a long stock position (place a sell stop order for execution if the market falls to a certain price). Stop orders can be used to protect a profit on a long stock position (place a sell stop order just below the current market price of the stock).

Stocks that are listed on the New York Stock Exchange can also typically be listed and traded on:

the Chicago (midwest) stock exchange ** Stocks that are listed on the NYSE are typically not listed on the AMEX or NASDAQ. Each one of these is a "national" stock exchange, trading companies where there is a "national interest" in trading those stocks. In the past, the AMEX (now renamed the NYSE American) and NASDAQ were so-called "breeding grounds" for growing companies. As a company grew, it might qualify for the tougher NYSE listing requirements, and could move to the "Big Board." A dual listed stock is one which trades in more than one marketplace - for example, a young New England company might have listed on the Boston exchange when it was still small; and then listed on the NYSE when the company became large enough. An ECN, such as Instinet, is not a marketplace that lists stocks. It is simply an electronic order matching service

When a corporation declares a reverse stock split, which of the following statements are TRUE? I The market price per share will be reduced II The market price per share will be increased III Institutional investors are more likely to buy the stock IV Institutional investors are less likely to buy the stock

the market price per share will be increased and institutional investors are more likely to buy the stock ** When a corporation declares a reverse stock split, the market price per share will be increased and the number of outstanding shares will be reduced. Institutional purchasers are often restricted by their investment policy guidelines from buying "cheap" stocks. Corporations will declare a reverse stock split so that the stock price increases to an acceptable level to institutional investors.

Which of the following statements are TRUE about an order to: Buy 100 ABC @ 45 Stop? I The order is elected at 45 or higher II The order is elected at 45 or lower III Once elected, the order can only be executed at 45 IV Once elected, the order becomes a market order and is filled based on its standing in the market order queue

the order is elected at 45 or higher and once elected, the order becomes a market order and is filled based on its standing in the market order queue ** Buy Stop orders are placed above the current market and are elected as the market moves up to the stop price or higher. As soon as the order is elected, it becomes a market order and is executed based on its standing in the market order queue.

A customer places an order to sell 100 XYZ at 38 Stop. Which of the following statements are TRUE? I The order will be elected at 38 or higher II The order will be elected at 38 or lower III As soon as the order is elected, the order becomes a limit order to sell at 38 or higher IV As soon as the order is elected, the order becomes a market order which is filled at the next available price

the order will be elected at 38 or lower and as soon as the order is elected, the order becomes a market order which is filled at the next available price

An index arbitrage trading desk places sequential buy orders at the market opening for securities included in the index to raise their price against the current index value. Which statement is TRUE?

this is an illegal practice known as Marking The Open * An index arbitrage trading desk places sequential buy orders at the market opening for securities included in the index to raise their price against the current index value. Which statement is TRUE?