Trading Markets Questions
Over-the-counter dealers are also called: A. registered representatives B. specialists (DMMs) C. market makers D. two-dollar brokers
market makers
The First Market is a(n): A. auction market B. negotiated market C. unregulated market D. primary market
auction market
The regular hours of operation of the NASDAQ system are:
9:30-4
CQS is open between: I 9:00 AM ET II 9:30 AM ET III 4:00 PM ET IV 6:30 PM ET
I. 9:00 AM ET IV. 6:30 PM ET
Which of the following is part of the Second Market? A. NYSE B. NASDAQ C. AMEX (NYSE-MKT) D. OTCBB
OTCBB
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? A. Retain all the certificates and send the customer a stock power with instructions that it must be signed B. Retain and deliver all the certificates, since they are acceptable once they have been guaranteed by the broker-dealer C. Return only the unsigned certificate to the customer by registered mail with instructions that it must be signed D. Return all certificates to the customer by registered mail with instructions that they must be signed
Retain all the certificates and send the customer a stock power with instructions that it must be signed
The trading of listed securities over-the-counter occurs in the...
Third market
The Consolidated Tape reports trades of NYSE listed issues that occur: A. on the NYSE Floor B. on Regional Exchanges C. in the Third Market D. all of the above
all of the above
A NASDAQ security is bid at $42 and offered at $42.25. An over-the-counter trader effects a trade at $42.25 and charges a commission of $.13 to the customer. The price that will show on the tape is: A. $42.00 B. $42.13 C. $42.25 D. $42.38
$42.25
The ex date for a stock split is set at: A. 2 business days prior to the Record Date B. 1 business day following the Record Date C. 2 business days prior to the Payable Date D. 1 business day following the Payable Date
1 business day following the Payable Date
To be a good delivery, certificates must be in round multiples of...
100 shares
A market maker enters a quote of $31.50 Bid; $32.00 Ask; with a size of "3 x 5" into the NASDAQ System. If a market order to sell is entered into the system for 500 shares, and this dealer's quote is matched, the market maker will be obligated to buy: A. 300 shares at $31.50 B. 500 shares at $31.50 C. 300 shares at $32.00 D. 500 shares at $32.00
300 shares at $31.50
Under Regulation ATS, any ECN that accounts for what percentage of the trading volume in a listed stock must show its quotes either through an exchange or a display facility? A. 1% B. 2% C. 4% D. 5%
5%
Futures contracts trade on the: A. NYSE B. AMEX (NYSE-MKT) C. CBOE D. CBOT
CBOT
Quotes found in the ADF are primarily bids and offers from: A. NASDAQ market markers B. Third market makers C. ECNs D. Designated market makers
ECNs
Orders on the Specialist/DMM's book are filled on a: A. Last In, First Out basis B. First In, First Out basis C. First In, Last Out basis D. Random Selection basis
First In, First Out basis
Quotes for which of the following are shown on the Consolidated Quotations Service (CQS)? I American Stock Exchange (NYSE-MKT) listed issues II New York Stock Exchange listed issues III NASDAQ Global Market issues IV NASDAQ Capital Market issues
I. American Stock Exchange listed issues II. NYSE listed issues
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. ECNs only trade listed stocks IV. ECN trades occur away from exchange trading
Which of the following trades are reported through ACT's Trade Reporting Facilities (TRFs)? I NASDAQ Market Center trade of a NASDAQ listed stock II Super Display Book trade of an NYSE listed issue III Trade of an NYSE listed issue in the Third Market IV Trade of a listed option contract on the CBOE
I. NASDAQ Market Center trade of NASDAQ listed stock III. Trade of an NYSE listed issue in the Third Market
Which of the following individuals CANNOT buy options for his own account? I Order Book Official II Specialist (DMM) III Market Maker IV Floor Broker
I. Order Book Official IV. Floor Broker
Which statements are TRUE? I TRF reports trades of NASDAQ issues listed in the NASDAQ System II TRF reports trades of NASDAQ issues listed in the ADF III TRACS reports trades of NASDAQ issues listed in the NASDAQ System IV TRACS reports trades of NASDAQ issues listed in the ADF
I. TRF reports trades of NASDAQ issues listed in the NASDAQ system IV. TRACS reports trades of NASDAQ issues listed in the ADF
An over-the-counter brokerage firm receives a customer order to buy 100 shares of ABCD stock and another customer order to sell 100 shares of ABCD stock at the same time. If the firm "crosses" the orders, it: I acts as an agent in the transactions II acts as a principal in the transactions III charges a commission on each transaction IV earns a mark-up on each transaction
I. acts as an agent in the transactions III. charges a commission on each transaction
Which of the following are prohibited trading practices under FINRA rules? I Backing away II Interpositioning III Marking to market IV Using a correspondent
I. backing away II. inter-positioning
The Market Maker on the CBOE: I buys and sells for his own account II does not buy or sell for his own account III holds a book of public orders IV does not hold a book of public orders
I. buys and sells for his own account IV. does not hold a book of public orders
If a firm effects trades solely on an principal basis, the firm: I carries inventory II does not carry inventory III is a market maker IV is not a market maker
I. carries inventory III. is a market maker
Which of the following are disclosed on a customer confirmation? I Commission if an agency trade was executed II Mark-up if a principal transaction in a non-NASDAQ OTC security III Inventory position of the dealer IV Amount of accrued interest for a bond trade
I. commission if an agency trade was executed IV. amount of accrued interest for a bond trade
Under Regulation SHO, in order to sell short a stock for a customer, the member firm MUST: I determine that the securities to be sold short can be borrowed and delivered on settlement II determine that the issuer of the securities to be sold short is current in its SEC filings III buy-in the securities sold short in 13 consecutive settlement days if the trade was not effected on an up-tick or up-bid IV buy-in the securities sold short in 13 consecutive settlement days if there is a fail to deliver and the security was on the "threshold" list as of trade date
I. determine that the securities to be sold short can be borrowed and delivered on settlement IV. buy-in the securities sold short in 13 consecutive settlement days if there is a fail to deliver and the security was on the "threshold" list as of trade date
Regarding reporting of trades that take place in NYSE listed issues: I each trade must be reported within 10 seconds II each trade must be reported within 60 seconds III the executing member reports IV the initiating member reports
I. each trade must be reported within 10 seconds III. the executing member reports
The order to "Sell 100 ABC @ 90 Stop Limit" is: I elected at 90 or below II elected at 90 or above III executed after the order is elected at the next available price IV executed after the order is elected at a price that is at or above 90
I. elected at 90 or below IV. executed after the order is elected at a price that is at or above 90
A sell stop order is executed: I in falling markets II in rising markets III at the price specified IV at the market price
I. in falling markets IV. at the market price
Which of the following orders can be placed in the NASDAQ System (Single Book)? I Market order II Stop order III Limit order IV Not Held order
I. market order III. limit order
Electronic Communications Networks: I match customer orders on an agency basis II fill customer orders on a principal basis III charge a fee for the successful execution of each order IV earn a spread for the successful execution of each order
I. match customer orders on an agency basis III. charge a fee for the successful execution of each order
The "spread priority rule" affords precedence to: I One-on-one transactions II Sales of covered calls and puts III Simultaneous purchase and sale of option positions
I. one-on-one transactions III. simultaneous purchase and sale of option positions
Odd lot transactions on the NYSE are: I orders for less than 100 shares II orders for multiples of 100 shares III handled by the Specialist (DMM) IV handled by the $2 Broker
I. orders for less than 100 shares III. handled by the Specialist (DMM)
A market maker that compensates a retail member firm for sending its customer orders to that market maker is: I paying for order flow II interpositioning III engaging in a prohibited practice under SEC rules IV permitted to do so, subject to best execution requirements
I. paying for order flow IV. permitted to do so, subject to best execution requirements
Buy stop orders can be used to: I protect a profit on short positions II limit loss on short positions III acquire stock if a resistance level is broken IV acquire stock if a support level is broken
I. protect a profit on short positions II. limit loss on short positions III. acquire stock if a support level is broken
Which of the following statements are TRUE regarding Comparisons and "Don't Know" notices? I The comparison must be sent on trade date II The comparison must be sent no later than settlement date III If there is a mismatched trade, a DK must be sent on trade date IV If there is a mismatched trade, a DK must be sent no later than settlement
I. the comparison must be sent on the trade date III. if there is a mismatched trade, a DK must be sent on the trade date
Under FINRA rules, which of the following would be considered when determining a mark-up to a customer in an over-the-counter principal transaction? I The current market price of the security II The cost of the security to the dealer III The size of the purchase IV The relative frequency of trades in that security
I. the current market price of the security III. the size of the purchase IV. the relative frequency of trades in that security
Which of the following information is disclosed on an options confirmation? I Trade date II Trade volume III Open interest IV Option expiration
I. trade date IV. option expiration
Buy limit orders: I used to buy securities at prices that are lower than the current market price II used to buy 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
I. used to buy securities at prices that are lower than the current market price III. guarantee a specific execution price or better
The NYSE Specialist (DMM), when trading for his own account, trades: I the market trend II against the market trend III to dampen market volatility IV to enhance market volatility
II. against the market trend III. to dampen market volatility
Registered representatives: I can trade securities on stock exchange floors II cannot trade securities on stock exchange floors III can trade securities over-the-counter IV cannot trade securities over-the-counter
II. cannot trade securities on stock exchange floors IV. cannot trade securities over-the-counter
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. closed end funds III. REITs
If a firm effects trades solely on an agency basis, the firm: I carries inventory II does not carry inventory III is a market maker IV is not a market maker
II. does not carry inventory IV. is not a market maker
In a riskless principal transaction, the dealer: I has risk II has no risk III earns a mark-up IV does not earn a mark-up
II. has no risk III. earns a mark-up
A buy stop order is executed: I in falling markets II in rising markets III at the price specified IV at the market price
II. in rising markets IV. at the market price
Execution of a trade routed to an ECN is: I guaranteed since the ECN is a market maker in the security II not guaranteed since the ECN executes trades solely by matching customer orders III subject to the "best execution" rule IV not subject to the "best execution" rule
II. not guaranteed since the ECN executes trades solely by matching customer orders III. subject to the "best execution" rule
Which of the following statements are TRUE about All or None orders? I The order can be executed in part or in full II The order must be executed in its entirety III If the order cannot be filled, later execution attempts are permitted IV If the order cannot be filled, later execution attempts are not permitted
II. order must be executed in its entirety III. if the order cannot be filled, later execution attempts are permitted
The Specialist (DMM) can stop stock for: I proprietary orders II public orders III brief time periods IV that trading day
II. public orders III. brief time periods
In a riskless or simultaneous transaction, which of the following statements are TRUE? I The firm is acting as agent in the transaction II The firm is acting as principal in the transaction III The transaction must comply with the 5% Policy IV The transaction does not have to comply with the 5% Policy
II. the firm is acting as a principal in the transaction III. the transaction must comply with the 5% policy
Which statements are TRUE about the CBOE Order Support System? I The order is directed to the brokerage firm's communication post on the exchange floor II The order is directed to the trading post III Execution notices are sent directly from the trading post to the brokerage firm
II. the order is directed to the trading post III. execution notices are sent directly from the trading post to the brokerage firm
Sell limit orders: I used to sell securities at prices that are lower than the current market price II 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
II. used to sell securities at prices that are higher than the current market III. guarantee a specific execution price or better
Trades of NASDAQ listed securities that take place in all markets are consolidated and reported through the: A. Network A Tape B. Network B Tape C. Network C Tape D. Network D Tape
Network C tape
Which statement is FALSE about OATS? A. Orders for NASDAQ-listed issues are entered into OATS B. Orders for OTCBB issues are entered into OATS C. Orders for Pink Sheet issues are entered into OATS D. Orders for CBOE-listed options are entered into OATS
Orders for CBOE-listed options are entered into OATS
All of the following trades are reported through ACT's Trade Reporting Facilities (TRFs) EXCEPT: A. NASDAQ System (Single Book) trade of a NASDAQ listed stock B. Super Display Book trade of an NYSE listed issue C. Trade of an NYSE listed issue in the Third Market D. Trade of an OTCBB issue in the Second Market
Super Display Book trade of an NYSE listed issue
Specialists (DMMs) on the New York Stock Exchange can perform all of the following functions EXCEPT: A. act as a market maker B. act as a broker's broker C. handle odd lot transactions D. act as an underwriter
act as an underwriter
Which of the following individuals trades on the New York Stock Exchange Floor? I Specialist (DMM) II Floor Broker III Two Dollar Broker IV Competitive Trader
all the above
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
all the above
Which of the following statements are TRUE regarding quotes provided on NASDAQ Level II? I Quotes are shown for round and mixed lots II Quotes are shown for up to 999,999 shares III Bid and ask quotes are shown IV The minimum quote size is 100 shares
all the above
A simultaneous trade is performed on the OTC market. Under FINRA rules, the transaction is: A. prohibited B. allowed and must conform to the 5% Policy C. allowed if a commission or mark-up is only charged on one side of the transaction D. allowed if the combined mark-up does not exceed 8 1/2%
allowed and must conform to the 5% Policy
A nominal quotation given by an over-the-counter dealer represents a(n): A. firm bid or offer B. likely bid or offer C. approximate market value, with no bid or offer D. bid or offer limited to round lots of 100 shares
approximate market value, with no bid or offer
A bond trade takes place at 10:00 AM on Monday, July 10th for "cash." Settlement takes place: A. before 2:30 PM on July 10th B. before 2:30 PM on July 11th C. during business hours on July 15th D. during business hours on July 17th
before 2:30 PM on July 10th
Which of the following describes an arbitrage transaction? A. Selling a security and using the proceeds to purchase a different security B. Buying a security into inventory direct from a customer with a mark-down C. Buying and selling short the same security in different markets to lock in a price differential D. After receiving a buy order, the dealer purchases the stock into inventory and resells it to a customer
buying and selling short the same security in different markets to lock in a price differential
What is the primary function of a market maker? A. Matching persons who wish to buy the security in which the market is made to sellers of that security B. Disseminating the best bid and ask quote for the security in which the market is made C. Buying and selling the security in which the market is made into, and out of, the firm's own account D. Providing a venue in which buyers and sellers of a security can meet to trade
buying and selling the security in which the market is made into, and out of, the firm's own account
All of the following statements are true if a customer places an order for an NYSE listed issue EXCEPT the order: A. must be directed by the member firm to the NYSE trading floor for execution if the customer so requests B. can be directed by the member firm to any trading venue if the customer does not direct the order to a specific market C. can be matched internally by the member firm and is not required to be sent to a public trading venue D. can be directed by the member firm to a trading venue that "pays for order flow" as long as this is disclosed to the customer
can be matched internally by the member firm and is not required to be sent to a public trading venue
All of the following statements are true about the second market for equity securities EXCEPT: A. companies that are traded must meet listing standards B. FINRA regulates the over-the-counter market C. a greater number of companies trade over-the-counter than trade on any single exchange D. the over-the-counter market is a negotiated market
companies that are traded must meet listing standards
All of the following statements are true regarding the Super Display Book system EXCEPT: A. orders are routed directly to the NYSE DMM for execution B. odd lot orders cannot be entered into the system; only round lots are permitted C. customers must request use of the system, otherwise the trades are directed to floor brokers D. executed trades are directly reported to the member firm that entered the order
customers must request use of the system, otherwise the trades are directed to floor brokers
All of the following dates are needed to compute the total purchase price of a municipal bond traded in the secondary market that is quoted on a yield basis EXCEPT: A. dated date B. maturity date C. settlement date D. in whole call date
dated date
A broker-dealer receives fully paid stock certificates from a customer that are to be deposited to the customer's margin account. Upon inspection, the cashier of the firm finds that some of the certificates are mutilated and the identification numbers cannot be discerned. The proper procedure is to: A. reject all the certificates and return them to the customer B. reject the mutilated certificates and return them with a "due bill" to the customer C. hold the mutilated certificates and request a validation letter from the issuer or transfer agent before crediting the account D. accept all the certificates and credit them to the customer's account
hold the mutilated certificates and request a validation letter from the issuer or transfer agent before crediting the account
A mutilated security is considered a good delivery if validated by: A. customer who bought the stock B. customer who sold the stock C. contra broker D. issuer
issuer
Which of the following orders CANNOT be handled by a Specialist (DMM)? A. Market B. Market - Not Held C. Limit D. Marketable Limit
market-not held
All of the following securities are traded in the secondary market EXCEPT: A. corporate stocks B. corporate bonds C. municipal bonds D. mutual funds
mutual funds
The OTCBB includes quotes for: A. NASDAQ stocks B. Non-NASDAQ Stocks C. NYSE listed stocks D. All of the above
non-NASDAQ stocks
All of the following statements are true about the NYSE Super Display Book system EXCEPT: A. market orders are accepted B. limit orders are accepted C. not held orders are accepted D. round lot orders are accepted
not held orders are accepted
All of the following securities are generally traded "over-the-counter" EXCEPT: A. Options B. Corporate debt issues C. Municipal debt issues D. Treasury debt issues
options
On the Chicago Board Options Exchange, the person responsible for holding and executing public orders that are "away from the market" is the: A. Order Book Official B. Floor Broker C. Market Maker D. Retail Member
order book official
A non-regulatory trading halt has been initiated on the NYSE due to an order imbalance. Which statement is TRUE? A. All other markets in the U.S. must stop trading XYZ stock B. Other markets in the U.S. may still trade XYZ stock C. Other markets in the U.S. can only trade XYZ stock if they get SEC approval D. All other markets in the U.S. must continue to trade XYZ stock
other markets in the U.S. may still trade XYZ stock
The Specialist (DMM) performs all the following functions EXCEPT: A. trades for his own account B. executes orders for other brokers C. executes odd lot orders D. participates in new issue syndicates
participates in new issue syndicates
The "crossing" of customer orders by a Floor Broker on the CBOE floor is: A. a prohibited practice B. permitted only if the floor broker could not execute each of the orders with other market participants C. permitted only if a Floor Official approves D. permitted without restriction
permitted only if the floor broker could not execute each of the orders with other market participants
Block trades for sales of NYSE listed issues that are too large for Super Display Book are: A. given directly to the Specialist/DMM for execution B. given to Floor Brokers, who may only execute them as "Fill or Kill" orders C. only executable during normal trading hours D. routed to Third Market Makers who effect the transaction on a principal basis
routed to Third Market Makers who effect the transaction on a principal basis
In order to protect a gain on a long stock position, a customer should place a: A. sell stop order B. sell limit order C. not held order D. fill or kill order
sell stop order
An efficient trading market is one with: A. uniform trading procedures B. centralized trading floor C. small bid/ask spreads D. publicly disseminated trade reporting
small bid/ask spreads
When an exchange stops trading in a stock, the options exchange: A. keeps trading in the option B. exercises all outstanding option contracts C. lets all outstanding option contracts expire D. stops trading in the option
stops trading the option
Stocks that are listed on the New York Stock Exchange can also typically be listed and traded on: A. the American Stock Exchange (NYSE-MKT) B. the Chicago (Midwest) Stock Exchange C. the Chicago Board Options Exchange D. Instinet
the Chicago (Midwest) Stock Exchange
An order is placed on the NYSE to buy 100 ABC shares at $50 Day. If the order is not executed on that day, who cancels the order? A. the customer B. the Specialist (DMM) C. the registered representative D. ABC corporation
the Specialist (DMM)
DEFF stock is currently trading at $24, down $4 from yesterday's close. A client places a market order to short 100 shares of DEFF. Which statement is TRUE? A. The order cannot be accepted because the stock has declined by more than 10% during the trading day B. The order can be accepted, but can only be filled on an up-bid C. The order can be accepted, but can only be filled if the stock is not on the threshold list D. The order can be accepted and filled without conditions
the order can be accepted, but can only be filled on an up-bid
The FINRA 5% Policy applies to: A. the primary market B. mutual fund offerings C. trades of corporate securities D. trades of municipal securities
trades of corporate securities
Third Market Makers must report their trades of exchange listed stocks to the Consolidated Tape: A. within 10 seconds of execution during all hours of the day B. within 10 seconds of execution during the hours that the NYSE is open C. at the close of the trading day D. at the opening of the trading day
within 10 seconds of execution during the hours that the NYSE is open