Trading Markets
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 A I and III B I and IV C II and III D II and IV
Explanation The best answer is B. The "TRF" is the Trade Reporting Facility that is operated by the ACT system. Initially, the system was used for NASDAQ only. When NASDAQ became a registered stock exchange in late 2006, separate "TRFs" were created using ACT, which allowed NASDAQ to sell its Network C Tape (each exchange sells its tape - it's a big source of revenue for the exchange). The TRFs run by ACT include: NASDAQ TRF (reporting trades of NASDAQ stocks to the Network C Tape); NYSE TRF (reporting Third Market trades of NYSE listed issues to the NYSE Network A Tape. The NYSE feeds the trades that take place on its trading floor to this tape on its own); ORF (the Over-The-Counter Reporting Facility) which reports trades OTCBB and Pink Sheet issues; TRACS (Trade Reporting and Compliance Service) which reports trades of NYSE, NYSE American (AMEX) and NASDAQ stocks that take place on ECNs that are not linked into an exchange. TRACS feeds the trade into the appropriate Network A, B or C Tape.
Which of the following individuals trades on the New York Stock Exchange Floor? I Specialist (DMM) II Floor Broker III Two Dollar Broker IV Registered Representative A I and II only B III and IV only C I, II, III D I, II, III, IV
Explanation The best answer is C. The Specialist (now renamed the DMM - Designated Market Maker) is the assigned market maker in a security on the NYSE floor. The Floor Broker handles orders as agent for retail member firms. The Two Dollar Broker executes orders for retail member firms, usually when its Floor Brokers are too busy. Registered representatives cannot trade on the NYSE floor.
Over-the counter traders perform all of the following functions EXCEPT: A establish spreads B take positions C give quotes D perform clerical duties
Explanation The best answer is D. OTC traders position trade (that is, trade for the firm's inventory account), establish spreads (the difference between the bid and ask quote that is the profit for the dealer), and give quotes to customers. Clerical duties are handled by clerks.
Which of the following statements are TRUE regarding market makers who trade on NASDAQ? I Changes in quotes are reported to the tape within 10 seconds II Trades are reported to the tape within 10 seconds III The initiating member reports IV The executing member reports A I and III B I and IV C II and III D II and IV
Explanation The best answer is D. Trades of NASDAQ stocks must be reported by the executing member within 10 seconds of execution to the Network C tape. This is FINRA's reporting rule for trades of NASDAQ stocks and all OTC equity trades, including OTC trades of NYSE-listed issues (Third Market trades), OTCBB trades and trades of Pink Sheet issues. Note that the NYSE operates under the same rule.
If a member firm routes a customer market order for an NYSE listed issue to the NYSE's automated trading system, the order will be sent to: A Super Display Book B Single Book C OTCBB D Pink OTC Markets
The best answer is A. The NYSE's automated trade execution system is Super Display Book, which replaced the older SuperDOT (Designated Order Turnaround) system in late 2009. The comparable NASDAQ system was Single Book, which has now been renamed the "NASDAQ Market Center Execution System," and is now simply called the "NASDAQ System." OTCBB is FINRA's "Over-The-Counter Bulletin Board," where dealers post quotes for non-NASDAQ issues. Review
An OTC equity trader has received a large influx of buy orders for ABC stock and, to fill them, has taken a short position in the firm's inventory account. The dealer would most likely: A increase the ask price in the OTCBB B decrease the bid price in the OTCBB C decrease the mark-up to customers that buy D place a "BW" in the OTCBB
The best answer is A. The dealer's Ask price is too low - that is why the buyers are pouring in! The dealer will raise the Ask price - this will discourage buyers. If the dealer were to decrease the Bid price, this would discourage sellers to the dealer - and this dealer needs to buy to cover the current short inventory position. Therefore, the dealer is likely to increase the bid price as well. Decreasing the mark-up charged to customers would encourage more buyers at the Ask, which the dealer does not want. Placing a "BW" in the OTCBB is a "Bids Wanted." This indicates that the dealer wants to sell more of the stock to any willing buyers, which is not the case - the dealer wants to buy the stock, not sell it! Rather, he or she would want to place an "OW" - Offers Wanted - in the OTCBB, telling potential sellers that the dealer is interested in buying.
Under the circuit breaker rule, a trading halt in NMS stocks will be INITIATED if the Standard and Poor's Index drops by: A 7% prior to 3:25 PM (EST) B 13% prior to 3:25 PM (EST) C 20% prior to 3:25 PM (EST) D 25% prior to 3:25 PM (EST)
The best answer is A. Under the circuit breaker rule, if the Standard and Poor's 500 Index moves down by 7% or more from the prior day's closing price, the listed equity markets will be shut down for 15 minutes. After reopening, if the index falls by a total of 13% or more from the prior day's closing price, the markets will close again for 15 minutes. This is intended to allow investors to calmly evaluate market conditions, so that a "domino effect" of panic selling does not occur. Finally, after reopening, if the index falls by a total of 20%, the markets will close until the next day. Also note that any 7% or 13% drop that occurs after 3:25 PM will not close the markets - they will stay open until the 4:00 PM close. This is the case because funds base their NAVs on closing prices, and it was felt that having a lack of pricing to investors would be overly disruptive. On the other hand, any 20% drop at any time will shut the markets until the next day, since such a dramatic price drop is usually caused by a major news event.
Regulation NMS requires: A market centers to accept automated executions that do not discriminate against any class of users of their systems B ECNs to register with FINRA as broker-dealers and to electronically display their quotes if they are responsible for 5% of the trades in that issue C broker-dealers to charge commissions to customers that are fair and reasonable D market makers to stop trading all equity securities in the United States if a circuit breaker is triggered
The best answer is A. Rule 610 of Regulation NMS requires all market centers to electronically link and provide automated execution within 1 second for orders that are executable. It also mandates that market centers cannot discriminate against customers who access their quotes. Regulation ATS requires ECNs to register with FINRA as broker-dealers and to electronically display their quotes if they are responsible for 5% of the trades in that issue. FINRA sets rules for fair and reasonable commissions. The "circuit breaker" that shuts U.S. securities markets first kicks in if the S&P 500 Index falls by 7%.
An NMS stock is current quoted at $16.10 Bid - $16.30 Ask. A customer wishes to place an order to buy 1,000 shares of the stock at $16.111. The registered representative should: A refuse to accept the order B route the order to an ATS C route the order to an exchange D accept the order and round the price to $16.11
The best answer is A. Rule 612 of Regulation NMS does not allow sub-penny orders to be entered for NMS stocks. The order must be refused under SEC rules (or the representative can tell the customer to enter it as $16.11, but this is not given as a choice).
Under SEC Rule 605 of Regulation NMS, market centers, in their monthly reports on order execution, must disclose all of the following information EXCEPT: A trading volumes B speed of executions C rates of price improvement D fill rates
The best answer is A. SEC Rule 605 of Regulation NMS requires that market centers prepare, and make available to the public, monthly standardized reports summarizing their order executions. Included in the report is data on:Effective spreads (narrow spreads are better!);How market orders of various sizes were executed relative to the public quote (executions at, or very close, to the public quote are better!);Speed of execution (fast execution is better!);Fill rates (a larger percentage of orders being filled is better!); andPrice improvement or disimprovement (getting a better price than expected is better!). Trading volumes are not included in the monthly reports because they are reported every day by the exchanges.
Which statement is TRUE regarding a customer's order to buy 400 XYZ @ $34.50 Day placed on the New York Stock Exchange? A The order is entered on the Specialist's book (DMM's book) B The floor broker must stay with the order until it is executed C The order must be executed in full D The order must be executed at the exact price specified
The best answer is A. This order to buy specifies a price, so it is a limit order. Limit orders to buy are placed lower than the current market and will be executed if the market falls. On the NYSE, the order is placed on the Specialist/DMM's book for execution if the market drops. The order is to be filled at a price of $34.50 or better, making Choice D wrong. If only part of the order can be filled at the specified price, this will be done, making Choice C wrong.
A NASDAQ trader has programmed his computer to surveil quoted prices in leveraged ETFs looking for issues that have relatively stable prices and low trading volume. The program generates bid and ask quotes creating a new NBBO (National Best Bid and Offer) that make it appear that the market is starting to move, attracting other participants to match those quotes. A nanosecond later, the program withdraws those quotes and the trader executes against the new quotes that were placed by others at improved prices. This is an example of: A trading away B spoofing C trapping D fading away
The best answer is B. The question describes "spoofing" - the placing of bogus phantom quotes to create a new NBBO that attracts other market participants to match or better those quotes; then the individual who placed the original quotes cancels them before a trade occurs, and trades with the other market participants at the improved price. This is a market manipulation. Trading away is the same thing as selling away - the prohibited practice of a representative executing a securities trade "away" from his or her firm. All securities trades executed by representatives must be known to the firm and supervised by the firm. Trapping and fading away are not terms associated with securities trading.
A technical analyst has been charting the price movements of ABC stock. The stock has been fluctuating in price between $63 and $67 per share for the past 3 months. If the analyst expects a breakout through the support level, which order should be placed? A Sell (Short) ABC @ $62 GTC B Sell (Short) ABC @ $62 Stop GTC C Sell (Short) ABC @ $68 GTC D Sell (Short) ABC @ $68 Stop GTC
The best answer is B. If a stock moves through a support level, it is breaking out to the downside. In this example, the support level is at $63. If the stock moves through this price, it is expected that it will move sharply downward. To sell below the current market, a sell stop order must be used. Therefore, the order to sell (short) ABC @ 62 Stop GTC is appropriate. This would be a short sale (the sale of borrowed shares), so that these shares could be purchased at a lower price after the market drops and used to cover the short position at a profit. A sell limit order cannot be used, since these are orders to sell higher than the current market.
Regulation SHO requires that if a stock falls by 10% or more: I it can only be sold short on an up bid II it can only be sold short on a down bid III short sales of that security are subject to the "bid test" rule for the remainder of that trading day IV short sales of that security are subject to the "bid test" rule for the remainder of that trading day and the entire next trading day A I and III B I and IV C II and III D II and IV
The best answer is B. If an NMS (National Market System stock - NYSE, NYSE American (AMEX), or NASDAQ listed) falls by 10% or more, it can only be sold short on an "up bid" for the remainder of that trading day and the entire next trading day. Thus, it can only be sold short into a rising market. This stops the relentless short selling of stocks with the intent of driving market prices down - a market manipulation.
Which statement is TRUE about principal transactions? A In a principal transaction, a commission is charged B In a principal transaction, a mark-up or mark-down is charged C In an principal transaction, both a commission and a mark-up or mark-down are charged D In a principal transaction, neither a commission, nor a mark-up nor mark-down are charged
The best answer is B. In a principal transaction, a mark-up or mark-down is charged; no commission is charged. It is prohibited to charge both a commission; and a mark-up or mark-down; in the same transaction.
Rule 606 of Regulation NMS requires: A each market center to prepare monthly electronic reports about its quality of executions and effective spreads B each broker-dealer to prepare quarterly reports on its routing of non-directed orders, including the 10 largest venues where orders were routed C market makers in OTC stocks to display any customer limit orders that are better-priced than the dealer's own quote D any order execution facility to execute the order at the NBBO, even if that execution facility is posting an inferior quote
The best answer is B. Rule 606 of Regulation NMS requires member firms to prepare a quarterly report on the routing of their non-directed customer orders. The report, which is publicly available, details the percentage of customer orders that were "non-directed;" the identity of the 10 largest markets or market makers to whom non-directed orders were routed; and details the member firm's relationship with that market maker (for example, many larger retail member firms own their own market maker subsidiaries to whom they route orders); and any arrangement for payment for order flow or profit-sharing.In contrast, Rule 605 of Regulation NMS requires market centers to make monthly electronic reports about the quality of execution in each stock traded, including how market orders of various sizes are executed relative to public quotes. The reports must also include information about effective spreads. In addition, market centers must provide reports on the extent to which they were able to "improve" execution prices for limit orders as compared to the public quote at that time. Do not confuse Rule 606 with Rule 605.
Which of the following describes position trading? A Selling a security for a customer and using the proceeds to purchase a different security for that customer B Selling a security from inventory to a customer with a mark-up C Buying and selling short the same security simultaneously in different markets to lock in a price differential D After receiving a buy order, a dealer purchases the stock into inventory and resells it to a customer
The best answer is B. Selling a security out of inventory direct to a customer with a mark-up; or buying a security into inventory direct from a customer with a mark-down; is position trading. The term position trading comes from the dealer taking "positions" for his inventory. Choice A describes a "proceeds transaction;" Choice C describes an "arbitrage transaction;" and Choice D describes a "riskless principal" transaction. Review
When comparing Specialists (DMMs) on the NYSE to market makers on NASDAQ, which statements are TRUE? I The Specialist/DMM is obligated to make a continuous competitive market in the stock II The Specialist/DMM is not obligated to make a continuous competitive market in the stock III The market maker is obligated to make a continuous competitive market in the stock IV The market maker is not obligated to make a continuous competitive market in the stock A I and III B I and IV C II and III D II and IV
The best answer is B. Specialists (now renamed DMMs - Designated Market Makers) are obligated, under NYSE rules, to make a continuous competitive market in the assigned stock during the entire trading session. NASDAQ Market Makers, on the other hand, once they have traded the amount that they show in the market at a competitive firm price, are not obligated to renew that quote at the current market. They can renew at a price that is "away" from the current market, thus assuring that they will not have to trade! (Of course, it is in their best interests to actively trade that stock and maintain competitive quotes - that is how NASDAQ market makers maintain a good reputation that attracts future business.)
The symbol "s/s" comes across the following tape. This means that a(n): A odd lot of 10 shares was traded B round lot of 10 shares was traded C round lot of 100 shares was traded D round lot of 100 shares was sold short
The best answer is B. The symbol s/s stands for round lot units of 10. These are the infrequently traded "cabinet stocks" - typically of companies whose shares are very highly priced compared to stocks that trade in 100 share units.
A customer wishes to place an order to short 50,000 shares of ABC stock. The average daily trading volume (ADTV) in ABC stock is 40,000 shares. The representative: A should place the order B cannot accept the order because the order size exceeds the ADTV C should inform the client that the firm may not be able to borrow the stock D should inform the client that the order can only be executed on an up-bid
The best answer is C. Because the customer wants to short 50,000 shares of the stock and the average daily trading volume is only 40,000 shares per day, this means that there is not much trading activity in the stock relative to the amount of stock this customer wants to short. Regulation SHO requires than when a stock is sold short, the broker-dealer must locate the shares to be borrowed; must determine that the shares can be delivered by settlement; and must document this. In this case, finding the shares to be borrowed will be more difficult, and if the firm is unable to locate the shares to be borrowed, the customer will not be able to short the stock.
A customer has entered a day order to buy 500 shares of ABC stock at $21 on the NYSE. Later in the same day, the customer tells the broker to change the order to GTC. The registered representative should: A immediately cancel the old order and enter the new order B immediately enter the new order, leaving the old order undisturbed C wait till the end of the day, and if the existing order was not executed, enter the new order D enter a change order directing the Specialist/DMM to change the order duration
The best answer is C. The proper procedure is to leave the existing day order intact. If it is executed that day, the customer buys the stock at the price he wishes. Otherwise the order is canceled. Because the NYSE no longer accepts any orders for longer than that day, the firm can take the order as a GTC order into its internal system and route it as a new order to the NYSE each day. It is not appropriate to cancel the old order because it had priority on the book. Orders on the book are handled on a FIFO basis - first in- first out. If it is canceled, the new order goes to "last place" on the book.
A technical analyst has identified a resistance level for ABC stock at $50 and a support level at $40. The stock is currently trading at $45 and the analyst expects a breakout on the upside. What order is appropriate to profit from this movement? A Buy 100 ABC @ Market B Buy 100 ABC @ $49 Stop C Buy 100 ABC @ $51 Stop D Buy 100 ABC @ $51
The best answer is C. A stock breaks a "resistance" level as the market rises. If the stock breaks this level ($50), the investor feels that the price will rocket upwards. To profit, he wants to buy if the market breaks $50 on the upside, so the order is to buy @ 51 Stop. The order must be a buy stop because it is placed above the current market. If the market rises to $51, the order is triggered and becomes a market order to buy. The order can then be executed on the next trade. Once the long stock position is established, the customer believes the price will skyrocket, so that it can be sold at a higher price for a profit.
Dark Pools: I display their quotes with size II do not display their quotes with size III are obligated to report completed trades to the tape IV are not obligated to report completed trades to the tape A I and III B I and IV C II and III D II and IV
The best answer is C. An evolution of the ECN is the "dark pool." Dark pools are operated by the larger broker-dealers (e.g., Goldman Sachs) and there are some that are independent companies (e.g., Liquidnet). They allow institutions to buy or sell very large blocks without displaying their orders in the ADF or in a display system such as the NASDAQ System. They are called dark pools because the size of the trade and the identity of the institution are not displayed. This avoids the problem that could occur where the display of a very large order in such a system, by itself, could move the market. If there is a match in a dark pool and a trade results, it still must be reported to the appropriate tape.
Which orders, if executed guarantee a specific price or better? I Buy Limits II Buy Stops III Sell Limits IV Sell Stops A I and II B III and IV C I and III D II and IV
The best answer is C. 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 filled at that price or better.
The "Gray Market" is: A unlisted securities quoted in the OTCBB or Pink OTC Markets that are traded OTC B listed securities quoted in CQS that are traded in the Third Market C unlisted securities that are not quoted in the OTCBB or Pink OTC Markets that are traded OTC D listed securities that are not quoted in the OTCBB or Pink OTC Markets that are traded on exchanges
The best answer is C. The "Gray Market" is the quoting and trading of securities OTC that are not eligible for inclusion in the OTCBB or Pink OTC Markets, usually because the company is too small, bankrupt, or is not currently reporting to the SEC. This market is quite illiquid, but if a trade occurs, it must still be reported - so these companies have trading symbols assigned to them.
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 A I and III B I and IV C II and III D II and IV
The best answer is C. The Specialist (now renamed the DMM - Designated Market Maker) is obligated to make a "fair and orderly" market in the assigned stock. Thus, the Specialist/DMM is obligated to trade in a manner that tends to dampen market volatility - if the market is falling rapidly, the Specialist/DMM must buy that security for its own inventory account to slow down that rate of price decline. If the market is rising rapidly, the Specialist/DMM must sell that security from its own inventory account to slow down that rate of price increase. Thus, the Specialist/DMM tends to trade against the market trend.
Which of the following are entered into OATS? I Orders to buy NASDAQ issues II Orders to sell NASDAQ issues III Orders to buy OTC issues IV Orders to sell OTC issues A I and II only B III and IV only C II and IV only D I, II, III, IV
The best answer is D. OATS stands for "Order Audit Trail System." It electronically captures order information for equity securities (no more paper order tickets). OATS records of orders are now required for all U.S. equities markets - NYSE, NYSE American (AMEX), NASDAQ and also for OTCBB and Pink OTC Markets issues.The "idea" is to give FINRA an electronic order trail of each order from entry to execution to trade reporting and comparison. Since each order is entered independently, both buy and sell orders are entered.
The "Trade-Through" rule of Regulation NMS applies to all of the following EXCEPT: A NYSE issues B NYSE American (AMEX) issues C NASDAQ issues D OTCBB issues
The best answer is D. Rule 611 of Regulation NMS (National Market System) prohibits an exchange from "trading through" the better priced quote of another market (including Third Market Makers and ECNs). Thus, all exchanges must be linked so that the trade execution will always occur at the NBBO (National Best Bid and Offer prices). If another market is posting a better priced quote, the exchange that receives the order must fill the order at the better price, or must route the order to that market for a fill. Regulation NMS applies to NYSE, NYSE American (AMEX), and NASDAQ listed issues. These are all markets that can electronically update and access quotes for trade execution within 1 second of order receipt. The rule does not apply to OTCBB or Pink Sheet issues, where the markets are much less liquid and trades are still done manually.
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
The best answer is D. The Specialist (now called the DMM - Designated Market Maker) is a dealer on the exchange floor trading for his own account. He trades both round lots and "odd" lots (units of less than 100 shares for all stocks except "cabinet" stocks - very high priced stocks that trade is round lots of 10 instead of 100). The Specialist/DMM also acts as agent for other brokers, running a book of open orders to be filled if the market moves up or down. The Specialist/DMM does not participate in new issue syndicates; this is handled by retail firms who deal with the public. All new issues are initially sold over-the-counter, so the Specialist/DMM on an exchange could not participate in these offerings. Once an initial public offering is completed over-the-counter, the stock trades either on an exchange or over-the-counter.
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 A I and III only B II and IV only C I, III, IV D I, II, III, IV
The best answer is D. NASDAQ Level II shows all bid and ask quotes for NASDAQ stocks with the size of the quote. The minimum quote size is 100 shares (1 round lot). Quotes for odd lots (less than 100 shares) can be entered into the system, but are not displayed until there are other odd lot orders at the same price that aggregate to 100 shares or over. A mixed lot is an order that has both a round lot and an odd lot component (such as an order for 143 shares - which is composed of a 100 share round lot and a 43 share odd lot). Just like odd lots, any portion of the order that is less than 100 shares is not displayed until there are other odd lot orders at the same price that aggregate to 100 shares or more. The maximum quote that can be entered and displayed is for 999,999 shares.
Under Rule 606 of Regulation NMS, all of the following must be disclosed to customers by member firms upon request EXCEPT: A which market received the customer order B whether the order was directed or non-directed C the time of execution of the order D the best market for the security at the time of execution
The best answer is D. Rule 606 of Regulation NMS covers reports that broker-dealers must prepare on their order-routing procedures.It requires that, upon customer request, a member firm must disclose:The markets to which the customer's orders were routed to during the past 6 months;Whether the orders were directed (that is, the customer specified the market where the order was to be filled) or non-directed (the member firm chose the market where the order was to be filled); andThe time of execution of the orders. There is no requirement to disclose the best market available for that security at the time, since SEC rules require that execution must occur at the "best market."
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
The best answer is D. Specialists (now called DMMs - Designated Market Makers) cannot deal with the public, so they cannot act as underwriters. They are wholesale members of the NYSE who deal only with other members. DMMs act as market makers and broker's brokers.
Which of the following is NOT a feature of the NASDAQ System (Single Book)? A Both agency and proprietary orders are accepted B Orders may be split to get the best execution C A reserve quote feature allows automatic quote updating D 30 seconds must elapse between each automatic trade execution
The best answer is D. The NASDAQ System displays all orders yet to be filled that are away from the current market and permits automated execution against those orders. It accepts both agency and proprietary orders. Orders can be aggregated or split for entry into the system. Once a trade is executed electronically, there is "0" time delay for the next potential trade. Once a market maker's quote has been exhausted, the system provides for a "reserve quote" feature that automatically renews the quote.
Which statements are TRUE about trading of stocks in the Second market? I The OTC market is a negotiated market II A greater number of companies trade OTC than are listed on a single exchange III The OTC market does not have listing standards IV FINRA regulates the OTC market A I and III B II and IV C I, II, III D I, II, III, IV
The best answer is D. The over-the-counter market is a negotiated market. A greater number of companies trade OTC (about 6,000 smaller companies) than on any single exchange. For example, the NASDAQ Stock Market has about 3,000 issues; while the NYSE lists about 2,800 issues. OTC equities are quoted in either the OTCBB or the Pink OTC Market. These "quotations vendors" have no listing standards. In contrast, each exchange has its own listing standards. FINRA regulates the OTC market.
Under NYSE rules, a company moving its listing from another market must meet which requirements? I 100,000 publicly held shares II 1,100,000 publicly held shares III $10,000,000 aggregate market value of publicly held shares IV $100,000,000 aggregate market value of publicly held shares A I and III B I and IV C II and III D II and IV
The best answer is D. Under NYSE rules, the numerical standards for a company wishing to move its listing from another market include 2,200 or more shareholders, with an average monthly trading volume of 100,000 shares for the past 6 months. There must be 1,100,000 publicly held shares with an aggregate market value of $100,000,000.
Under NYSE rules, every "responsible broker or dealer" who communicates bids and offers on the exchange floor (also known as "addressing the crowd") must comply with all of the following rules EXCEPT: A any bid or offer must be for at least the normal trading unit in that security B the highest bid and the lowest offer have precedence in all cases C bids and offers must be publicly announced D if two bids (or offers) are made at the same time and price, the smaller order has precedence
The best answer is D. Under NYSE trading rules, bids and offers must be for the minimum 100 share size trading unit; the highest bid and lowest offer have priority (the same as NASDAQ's "inside market" - now renamed the NBBO - National Best Bid and Offer); and all bids and offers must be publicly announced (no secret bids and offers, or side deals allowed). If 2 equivalent price bids (or offers) are made at the same time, the larger order has precedence and will be filled first.
ADF
abbreviation for the Alternative Display Facility, where any ECN that chooses not to link with an exchange to display its quotes and make them accessible, will display its quotes
Registered representative
also known as a broker or "RR," an individual who is employed by a broker-dealer to handle customer accounts and to advise the public about investing in securities. This person must be registered with and licensed (Series 7) by FINRA. (see Account executive)
Dark pool
an ECN (Electronic Communications Network) that does not make its quotes publicly available. Dark Pools are run by the larger broker-dealers and also by the exchanges. They allow institutions to "hide" their trading interest, so that their big trades will not "move the market" before the trade can be completed.
Threshold list
as defined by Regulation SHO, these are "hard-to-borrow" securities that, if sold short by a customer and the customer fails to deliver on settlement, then the securities must be bought-in no later than 10 business days from settlement date (called "13 settlement days" in Regulation SHO, since the rule counts from trade date instead of settlement date.)
NASDAQ Level I
the first level of the NASDAQ system, it displays the inside market for the security - which is the best (highest) bid and best (lowest) offer. This level is intended for use by registered representatives. NASDAQ Levels I and II are incorporated into the NASDAQ Market Center Execution System. (see Inside market; compare NASDAQ Level II)
