Chapter 8- Trading Securities

**All of the following statements regarding the short sale of a listed security are true EXCEPT: A) short sales may take place at the closing. B) the buyer must be advised that he is purchasing borrowed shares. C) a short sale can be effected at any time in the trade sequence. D) short sales may take place at the opening.

**Be careful, EXCEPT ? B) the buyer must be advised that he is purchasing borrowed shares. On an exchange floor, short sales can be effected at any time in the trade sequence. In addition, short sales may be effected at either the opening or closing. The buyer is never informed that shares being purchased represent borrowed shares.

**A customer places an order to sell short 100 DEF 52.25 STOP. After placing the order, DEF trades as follows: 53, 52.60, 52.20, 52.10, 52.25. Which trade triggers the order? A) 52.2. B) 52.1. C) 52.25. D) 52.6.

A) 52.2.

**A customer enters a day order to sell 300 XYZ stock at 34.60. XYZ continues to trade in a 33 to 33.60 range. An hour before the close, he considers changing the order to a GTC order. You respond that he might consider allowing the order to remain on the books as a day order, and if it remains unexecuted at the close, to re-enter it the next day as a GTC order. You would have based this recommendation on concern for which of the following? A) An existing order has precedence over a new order when it comes to execution. B) Additional cost to the firm of changing the order twice in a day. C) Weakening the customer's risk tolerance by encouraging him to change orders frequently. D) Day orders are less risky than GTC orders.

A) An existing order has precedence over a new order when it comes to execution. Time priority (first come, first served) of an order is lost if there are any changes in the terms of an order.

Your client feels that GGZ, currently trading around 39, would be a good buy at 38. Therefore, he places an order to buy 200 GGZ at 38 GTC. On the ex-date, when the stock splits 2-for-1, the order is still on the order book. How is the order adjusted on the ex-date? A) Buy 400 GGZ at 19 GTC. B) Buy 100 GGZ at 76 GTC. C) Buy 200 GGZ at 19 GTC. D) Buy 400 GGZ at 38 GTC.

A) Buy 400 GGZ at 19 GTC. In a stock split, the number of shares is increased and the price is reduced proportionately on the ex-date (200 shares x 2 = 400 shares; the new price is 38 x .5, or 19).

**Which of the following terms are associated with over-the-counter trading? Market maker. Specialist. Auction market. Negotiated market. A) I and IV. B) I and III. C) II and III. D) II and IV.

A) I and IV. The over-the-counter market is a negotiated market. Within it, market makers are broker/dealer firms that provide a source for stock that customers wish to buy and a repository for stock that customers wish to sell.

Traders can sell short: when a stock ticks up. when a stock ticks down. unrestrictedly in both exchange and OTC markets. A) I, II and III. B) I and II. C) I and III. D) II and III.

A) I, II and III. In both exchange and OTC markets, traders can sell short at any time in the trade sequence.

*Which of the following securities may be traded over the counter? Listed registered. Unlisted nonexempt. Registered unlisted. Unregistered exempt. A) I, II, III and IV. B) I and II. C) I and III. D) II and III.

A) I, II, III and IV. Registered securities not listed on an exchange constitute the bulk of the volume trading in the OTC market. Municipal bonds and government securities are exempt from SEC registration requirements, so the major market for these securities is the OTC market. The third market is the over-the-counter trading market for exchange-listed securities.

*****A customer sells short 1,000 XYZ at 60. Three months later, XYZ is at 44. Which of the following strategies might the customer employ to protect his unrealized gain? Sell 1,000 XYZ 45 stop. Buy 1,000 XYZ 45 stop. Buy 10 XYZ Mar 45 calls. Buy 1,000 XYZ 45 stop limit. A) II and III. B) I and III. C) I and IV. D) II and IV.

A) II and III. Buy 1,000 XYZ 45 stop. Buy 10 XYZ Mar 45 calls. In this short position, the customer currently has an unrealized gain of 16. He stands to see his unrealized gain begin to erode if the stock price rises, so he could enter a buy stop order above 44 to allow him to buy and cover his position if a price rise occurs. Purchasing calls would also be effective, since the right to exercise would allow the investor to buy stock at 45 and protect a gain of 15 points less the premium paid.

Which of the following orders would NOT be reduced on the order book on the ex-dividend date for a cash dividend? Buy limit order. Open sell stop order. Buy stop order. Sell limit order. A) III and IV. B) I and II. C) I and IV. D) II and III.

A) III and IV.

Which of the following orders are NOT placed on the order display book? Buy stop limit. Buy stop. Market. Not held. A) III and IV. B) I and II. C) I and IV. D) II and III.

A) III and IV. Market orders are executed immediately and are not placed on the order book. Not held orders are not presented to the order book.

Which of the following orders are reduced on the ex-dividend date for a cash dividend? Buy 100 XYZ 60 DNR. Sell 100 XYZ 70. Sell 100 XYZ 60 STOP. Buy 100 XYZ 70 STOP. A) III only. B) I and II. C) II and IV. D) III and IV.

A) III only. Sell 100 XYZ 60 STOP.

Last week one of your customers placed a GTC order to sell 200 shares of ABC with an 18 stop when the stock was trading at 18.85. It is now the ex-date for a $.55 dividend and the order has not yet been executed. What has happened to your customer's stop order? A) It is reduced to 17.45. B) It remains at 18. C) It is increased to 18.55. D) It is canceled.

A) It is reduced to 17.45. Unless the customer has given DNR, (do not reduce) instructions, open buy limit orders and open sell stop orders are reduced on the ex-dividend date by the amount of the dividend. BLiSS - below CMV, reduced on ex-div date

A client asks his broker to enter a day order to buy 100 shares of COW at 36. Later in the day, he changes the order to a GTC order at the same price and for the same number of shares. What happens to the position of the order on the order book? A) It loses its original position. B) It stays in the same position. C) The entire order is canceled until the next trading day. D) It cannot be changed until the next trading day.

A) It loses its original position. When an order is changed, it loses its priority standing on the order display book.

*A client buys 100 shares of MCS at 20. If the stock rises to 30 and he wants to protect his gain, which of the following orders should be entered? A) Sell stop at 29. B) Sell limit at 30. C) Sell limit at 30.15. D) Sell stop at 30.15.

A) Sell stop at 29. A sell limit order is used to sell out a long position at a higher price (when the market moves up). A sell stop order is used to sell out a long position at a lower price (when the market moves down). To protect the gain, a sell stop order would be placed just below where the stock is currently trading.

Which of the following would accelerate a decline in a bear market? A) Sell stop. B) Buy stop. C) Buy limit. D) Sell limit.

A) Sell stop. Sell stops, placed below the current market, become market orders to sell when the stock trades at or through (below) the stop price. Market sell orders can accelerate declines in the price of the stock.

A day order is entered to buy 500 LMN at 24.35. By the close of the trading day the firm has been able to purchase 100 shares at 24.25 and 200 shares at 24.35. If the remainder of the order is unfilled, what is the outcome? A) The customer must accept the execution for 300 shares, and the remainder of the order is canceled after the close. B) The customer may reject the incomplete order unless the broker/dealer can guarantee filling the remainder by the end of the day. C) The customer may reject the incomplete order unless the remainder can be filled within 3 business days. D) The customer may demand that the firm deliver the remaining shares at 24.35.

A) The customer must accept the execution for 300 shares, and the remainder of the order is canceled after the close.

A customer has an order to buy 400 ABC at 60 Stop. ABC declares a 25% stock dividend. On the ex-date, the order on the order book will read: A) buy 500 shares at 48 stop. B) buy 400 shares at 60 stop. C) buy 425 shares at 50 stop. D) buy 500 shares at 30 stop.

A) buy 500 shares at 48 stop.

At 2PM ET a customer enters an order to buy GGZ at the close on the NYSE. GGZ traded between 70 and 71 all day. Then, after a last-minute rally, it closed up 4 points at 74. The customer should expect to pay the: A) closing price. B) opening price the next morning. C) average price calculated for the entire day. D) price as near to the close as possible, at the floor broker's discretion.

A) closing price.

To narrow the spread between the bid and the asked price of one of his stocks, a specialist enters a bid to buy for his own account, acting in this transaction as a: A) dealer (or principal). B) broker/dealer. C) broker (or agent). D) floor broker.

A) dealer (or principal). A specialist (designated market maker) buying for his own account is operating as a dealer, which means he is acting as a principal in the transaction. Agent- for cust.

All of the following statements regarding a market not-held order are true EXCEPT: A) it is given to a specialist (designated market maker). B) it gives the floor broker discretion over the price or time of execution. C) the order ticket must be marked not held. D) it may be filled a small portion at a time.

A) it is given to a specialist (designated market maker).

For individual public investors, dark pools of liquidity A) lessen the transparency of the overall market as volume, quote and price information, and market participant identity is unknown B) allow them to enter orders that are sent directly to the trading floors of stock exchanges C) allow them to give an order to their broker/dealer to buy or sell securities while only referencing an account known by a number and not their name D) prevent them from having their own orders entered on exchanges for execution

A) lessen the transparency of the overall market as volume, quote and price information, and market participant identity is unknown

**Sell orders sent to an exchange: A) must be marked long or short. B) must be marked only if they are long sales. C) must be marked only if they are short sales. D) do not need to be marked, only executed in accordance with the appropriate rules.

A) must be marked long or short. Every sell order must be marked as either a long sale or a short sale.

If a municipal firm purchases a block of municipal bonds in anticipation of a price increase, the firm is engaged in: A) position trading. B) arbitrage. C) hedging. D) short selling.

A) position trading. The dealer is buying for its inventory (position trading).

If your client has sold 100 shares of GGZ short and places a buy stop order at 80, the order is activated when the price of GGZ: A) rises to 80 or above. B) falls to 80 or below. C) falls below 80. D) rises above 80.

A) rises to 80 or above. A buy stop order is always entered at a price above the current offering price. A buy stop order at 80 means that if the market price rises to 80 or above, the order becomes a market order to buy and is filled immediately.

**order ticket is marked as follows: Buy 20M GGZ 9% Debentures at 95 AON GTC. All of the following statements regarding this order are true EXCEPT: A) the order will expire at the end of the day. B) this is a buy limit order. C) if executed, the customer will pay $19,000 or less for the bonds. D) the trade will be filled in its entirety or not at all.

A) the order will expire at the end of the day.

***FINRA's Trade Reporting Facility (TRF) electronically facilitates the reporting of trade data such as price and volume for A) trades in Nasdaq-listed securities and exchange-listed securities when they occur off of the exchange trading floor B) trades in NYSE-listed securities occurring on the NYSE C) brokers executing orders as agents in an auction market on any exchange trading floors D) brokers acting as agents in all order execution scenarios

A) trades in Nasdaq-listed securities and exchange-listed securities when they occur off of the exchange trading floor FINRA's Trade Reporting Facility (TRF) is an automated electronic system that facilitates the reporting of data for transactions that occur in Nasdaq-listed stocks or in exchange-listed stocks when they occur off of the exchange trading floor. It is used for transactions that are negotiated between brokers, therefore acting as a dealer, rather than as an agent.

A customer has placed an open order to buy 1,600 shares of GHI at $60. GHI declares a 25% stock dividend. On the ex-date, this order is considered a buy limit order for: A) 2,000 shares at $60. B) 2,000 shares at $48. C) 1,600 shares at $45. D) 1,600 shares at $50.

B) 2,000 shares at $48.

*****A customer enters an order to sell 100 TCB at 49 stop limit. Prior to the order, TCB was trading at 49.25. Subsequent trades are reported on the Tape as follows: TCB 48.75, 48.85, 49, 49.25 Which trade triggered the order? A) 49.25. B) 48.75. C) 48.85. D) 49.

B) 48.75. This is an order where the stop price and limit price (Stop, Limit) are the same. A sell stop limit order is triggered (elected) by the first trade that is at, or below the stop price. It is subsequently executed at a price at, or better than the limit price.

A customer sells short 100 shares of XYZ Corporation at $78 per share. The support and resistance levels for XYZ are at $70 and $80, respectively. If he wishes to protect his position, which of the following is the best place to put in a buy stop order? A) 78.1. B) 80.1. C) 69.85. D) 70.1.

B) 80.1. Buy Stop orders are ABOVE CMV, want it to break through the resistance level, above 80

**A customer enters an order to buy 1,000 ABC at 50, good for the week only. How will this order appear on the order book? A) Buy 1000 ABC 50 GTM. B) Buy 1000 ABC 50 GTC. C) Buy 1000 ABC 50 GTW. D) Buy 1000 ABC 50 Day.

B) Buy 1000 ABC 50 GTC. Limit orders and stop orders are entered on the order book as either GTC or day orders. Orders that are good for only a particular time frame (good for the week) will appear as GTC. It is the responsibility of the broker/dealer that entered the order to cancel it at the end of the week, if unexecuted.

**A customer sold 100 shares of QRS short when the stock was trading at 19. If QRS is now trading at 14, and he wants to protect his gain, which of the following orders should he place? A) Buy limit at 14. B) Buy stop at 14.25. C) Sell stop at 13.75. D) Sell limit at 14.

B) Buy stop at 14.25. A buy limit order is used to buy at a lower price (when the market moves down). A buy stop order is used to buy in a short position at a higher price (when the market moves up). To protect the gain, a buy stop order would be placed just above where the stock is currently trading.

The Nasdaq market includes securities in the: Global select market. Global market. Bulletin Board listings. Electronic OTC Pink listings. A) III and IV. B) I and II. C) I and IV. D) II and III.

B) I and II. The Nasdaq Market includes securities in 3 market tiers; global select, global, and capital markets. Bulletin Board securities (OTCBB) are issues that are not listed on Nasdaq or any U.S. exchange. OTC Pink issues are unlisted and, like Bulletin Board stocks, are referred to as non-Nasdaq.

Which of the following individuals normally trade on the floor of an exchange? Two-dollar broker. Registered market maker. Allied member. Stock lending representative. A) III and IV. B) I and II. C) I and III. D) II and IV.

B) I and II. Two-dollar broker. Registered market maker.

A sell limit order is executed when a stock is: rising. falling. at or below the limit price. at or above the limit price. A) II and IV. B) I and IV. C) I and III. D) II and III.

B) I and IV. A sell limit order is placed above the prevailing market price. Therefore, it may be executed if the market is rising. If executed, limit orders will be filled at the limit price or better, which in the case of a sell limit is the limit price or higher.

In which of the following situations may a broker/dealer enter an order for a customer to sell a stock long? I. The broker/dealer has reason to believe that the customer owns the stock and will deliver it promptly. II. The security is carried in the customer's account at the broker/dealer. III. The customer owns a bond convertible into the stock and has issued conversion instructions. IV. The customer owns a call option on the stock and has exercised the call. A) II and IV. B) I, II, III and IV. C) I and II. D) I and III.

B) I, II, III and IV.

Which of the following orders is reduced on the order book on the ex-dividend date for a cash dividend? A) Buy stop limit order. B) Limit order to buy. C) Buy stop order. D) Sell limit order.

B) Limit order to buy. below cmv

A technical analyst has been charting ABC stock and notes that the support/resistance levels are $20 and $30 respectively. If the analyst expects ABC to fall through support, which of the following orders should he enter? A) Buy 100 ABC 30.25 stop. B) Sell 100 ABC 19.50 stop. C) Buy 100 ABC 20.50 stop. D) Sell 100 ABC 29.75 stop.

B) Sell 100 ABC 19.50 stop. Sell Stop is Below cmv, should be entered below support level

Which of the following orders on the order book will NOT be filled if the stock rises? A) Buy stop limit. B) Sell stop. C) Buy stop. D) Sell limit.

B) Sell stop. BLiSS (Buy Limits, Sell Stops) Entered BELOW CMV SLoBS over BLiSS

The KPL Corporation is considering having its stock listed on the New York Stock Exchange. Who will make the final decision as to whether it will be listed? A) The SEC. B) The New York Stock Exchange. C) The Board of Directors of KPL. D) FINRA.

B) The New York Stock Exchange.

Each of the following trades occurs in the secondary market EXCEPT: A) an insurance company buying corporate bonds directly from another insurance company. B) a corporate bond syndicate selling new issues to the public. C) a specialist (designated market maker)on the NYSE buying stock as principal. D) an agent buying unlisted securities for a client.

B) a corporate bond syndicate selling new issues to the public. NEW ISSUES ALWAYS TAKE PLACE IN THE PRIMARY MARKET.

**A New York Stock Exchange specialist (designated market maker) is employed by: A) the OCC. B) a member of the exchange. C) the NYSE. D) the SEC.

B) a member of the exchange. Designated market makers are employed by firms which must be exchange members.

A customer has sold short 100 GM at 70. GM is selling for 81. The customer had previously placed a GTC buy stop order at 83. GM announces a stock split and an increase in the dividend. The stock starts to move up and the customer decides to cover the short sale at a loss and instructs his broker to buy 100 shares of GM at the market. The registered representative will: A) sell 100 GM at 83. B) buy 100 GM at the market and cancel the order to buy 100 GM at 83 stop GTC. C) buy 100 GM at the market. D) sell 100 GM at the market.

B) buy 100 GM at the market and cancel the order to buy 100 GM at 83 stop GTC.

**ABC corporation trading at $80 per share has just bid $50 per share for XYZ corporation, currently trading at $40 per share in a hostile takeover attempt. The most common risk or takeover arbitrage strategy would be to A) there can never be an arbitrage opportunity in a hostile takeover scenario B) buy shares of the target company (XYZ) and short shares of the aggressor (ABC) C) buy shares of the aggressor company (ABC) D) sell shares of the target company (XYZ)

B) buy shares of the target company (XYZ) and short shares of the aggressor (ABC) The most common form of risk or takeover arbitrage is to purchase the shares of the target company and short the shares of the aggressor, believing that the potential acquisition will raise the target company's share price and decrease the share price of the aggressor.

A customer places an order to buy 300 DWQ at 140 stop, but not over 140.25. This is a: A) market not held order. B) buy stop limit order. C) buy stop order. D) buy limit order.

B) buy stop limit order. The customer has entered a stop limit order. If the stock rises to the stop price of $140, the order is elected then becomes a buy limit order at 140.25, meaning an order to buy at 140.25 or lower.

**On the order book, all of the following orders are reduced on the ex-date for a cash dividend EXCEPT: A) sell stop limit. B) buy stop. C) buy limit. D) sell stop.

B) buy stop. Only orders placed below the market price are reduced for cash dividends on the order book. Buy limits and sell stops are entered below the market price. Buy stops are entered above the market price.

An order designated FOK means that the order must be executed: A) at the opening of trading. B) immediately and in its entirety . C) in its entirety but not immediately. D) immediately but not necessarily entirely.

B) immediately and in its entirety .

On the trading floor, the highest bid and offer receive first consideration. When several bids at the same price occur, the trade will be awarded based on: A) parity, precedence, then priority. B) priority, precedence, then parity. C) priority then precedence. D) priority then parity.

B) priority, precedence, then parity.

A customer, concerned about a possible pull-back in XYZ stock, instructs his broker, to "Sell my XYZ stock if it falls to 40, but I don't want less than 39.75 for my shares." The broker should enter a: A) sell stop order. B) sell stop limit order. C) market order to sell. D) sell limit order.

B) sell stop limit order.

A securities firm that holds stock rather than sells the stock is: A) pegging. B) taking a position. C) commingling. D) churning.

B) taking a position. A firm that acts as principal by holding stock is taking a long position. The firm purchases the stock, hoping to sell at a later date at a higher price.

ALFA Electronics has been trading around 70. A customer tells his registered representative that if 1,000 shares of the stock can be purchased in one attempt, the customer will take it. If not, the customer is not interested. How should the representative enter this order? A) 1,000 ALFA AON at 70. B) 1,000 ALFA IOC at 70. C) 1,000 ALFA FOK at 70. D) 1,000 ALFA at 70.

C) 1,000 ALFA FOK at 70. A fill-or-kill (FOK) order designates that the customer wants the order to be filled in its entirety in one attempt or be canceled. With an all-or-none (AON) order, the broker/dealer can make numerous attempts to fill the order in its entirety. With an immediate-or-cancel (IOC) order, the broker/dealer can make only one attempt to fill the order, but a partial fill is acceptable.

***A customer is long 300 shares of COD and simultaneously short 200 shares of COD. To sell the 300 shares held long, the order ticket must be marked: A) short. B) 200 shares long and 100 shares short. C) 100 shares long and 200 shares short. D) long.

C) 100 shares long and 200 shares short. The customer is long 300 shares and short 200 shares of the same stock. Therefore, the customer's net long position is 100 shares. The order ticket must be marked 100 long, 200 short. In other words, the customer is long only to the extent of his net long position.

Which of the following is a third-market trade? A) 12,000 shares of PQ, a stock listed on the Philadelphia Stock Exchange are sold on the Chicago Stock Exchange floor. B) 10,000 shares of LMNO, a stock listed on Nasdaq, are traded between two financial institutions via an electronic communications network (ECN). C) 12,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold over the counter. D) 10,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold on the Chicago Stock Exchange floor.

C) 12,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold over the counter. 3rd Market = Listed Securities OTC!

**A customer places an order to sell short 100 DEF 52.50 STOP. After placing the order, DEF trades as follows: 53, 52.60, 52.20, 53 SLD, 52.10, 52.25. At which trade can the order be executed? A) 52.5. B) 53. C) 52.1. D) 52.25.

C) 52.1. *Tricky- cannot be executed at SLD (out of sequence order) must execute at next available

**A customer entered an order to sell short 100 shares of ABC. The stock closed on Friday at 48.00. The stock will trade ex-dividend $.50 on Monday. At what price can the order be executed at the opening? A) 47.5. B) 47.49. C) Any price. D) 47.51.

C) Any price. The stock's price is adjusted for the dividend at its opening the next morning. The adjustment in the stock does not limit where the short sale can be executed.

The over-the-counter market could be characterized as what type of market? A) First. B) Primary. C) Dealer. D) Auction.

C) Dealer.

Which of the following would be the usual use of a stop order? To protect the profit on a long position To prevent loss on a short position To buy at a specific price only To guarantee execution at or near the close. A) II and III. B) II and IV. C) I and II. D) I and III.

C) I and II.

A specialist (designated market maker) must refuse: not-held orders. good-for-a-month orders. stop limit orders. market orders. A) II and III. B) III and IV. C) I and II. D) I and IV.

C) I and II. not-held orders. good-for-a-month orders. **Specialists (designated market makers) cannot accept not-held orders or good-for-a-month orders. Not-held orders are the responsibility of floor brokers (commission brokers); these orders give the floor broker discretion as to time and price. Good-for-a-month orders are not standard orders. A time-qualified order must be day or GTC.

An investor enters a day order to buy 200 shares of GGZ at 63. Three hours later, with GGZ trading above that price, he calls his registered representative wanting to change the order to a good-till-canceled order. The registered representative should: I. immediately cancel the existing order. II. leave the existing order on the order book. III. immediately enter a new limit order to buy 200 shares of GGZ at 63 GTC. IV. enter a new limit order to buy 200 shares of GGZ at 63 GTC before the next day's opening if the day order was unexecuted. A) II and IV. B) I and III. C) I and IV. D) II and III.

C) I and IV. II. leave the existing order on the order book. IV. enter a new limit order to buy 200 shares of GGZ at 63 GTC before the next day's opening if the day order was unexecuted. The representative should not cancel the existing order because it would lose priority on the order book. However, the representative should not enter a GTC order that day because it could be filled twice. Instead, the representative should let the order stay for the day, when it would be canceled automatically if not executed. Then, the representative could enter a GTC order the next morning.

Under SEC rules, a customer short sale on an exchange floor can be executed on which of the following? Plus tick. Zero-plus tick. Minus tick. Zero-minus tick. A) I and III. B) II and IV. C) I, II, III and IV. D) I and II.

C) I, II, III and IV. On an exchange floor, a customer short sale can be executed at any time in the trade sequence.

Which of the following statements regarding the third market is TRUE? A) The services of a brokerage firm are not used. B) It refers to the block trading of unlisted securities. C) It is composed of listed securities traded OTC. D) It is composed only of unlisted securities.

C) It is composed of listed securities traded OTC.

If ALFA Securities, a broker/dealer, is a position-trading firm, which of the following statements is TRUE? A) It is underwriting securities in the primary market. B) It is acting as a broker for customers. C) It is trading for its own account. D) It is violating NYSE rules.

C) It is trading for its own account. Position trading is simply trading as principal, or dealer, for a firm's own account. The opposite role is that of a broker, or an agent, purchasing or selling securities in the secondary market for customers.

After the market closed yesterday, ABC announced that it would file for bankruptcy under Chapter 11. The NYSE decides not to open trading in ABC. In response to the NYSE's announcement, which of the following statements regarding the OTC market is TRUE? A) It halts all trading in ABC until the NYSE reopens it. B) It applies to the SEC for a decision within 30 minutes of the opening. C) It may either halt or continue trading as it sees fit. D) It continues to trade ABC with the NYSE specialist's (Designated Market Maker) permission.

C) It may either halt or continue trading as it sees fit. The over-the-counter market is not bound by actions of the NYSE or other exchanges, and third-market trading may continue in the stock.

At 2:15 pm EST, a customer gives his registered representative a market order to buy 100 shares of ABC at the close. What should the registered representative do with the order? A) Send in the order after the close to ensure receiving the closing price. B) Execute the order at the closing price first thing next morning. C) Send the order to the floor immediately. D) Hold it at his desk until just before market close.

C) Send the order to the floor immediately.

***The market wide circuit breaker (MWCB) rule uses which of the following as the pricing reference point to measure a market decline? A) The S&P 100 index recalculated monthly B) The Wilshire index recalculated daily C) The S&P 500 index recalculated daily D) The DJIA recalculated quarterly

C) The S&P 500 index recalculated daily The market wide circuit breakers (MWCBs) use the S&P 500 recalculated daily as the pricing reference point to measure market declines for the purpose of triggering market circuit breakers to halt trading.

*A customer has his broker enter an order to buy GHI stock at the opening. Though transmitted promptly, the order does not reach GHI's trading post in time to be filled at the opening. How is the order handled? A) The order is executed in the day, at a price as close to the opening price as possible. B) The order automatically becomes an at-the-open order in the following trading session. C) The order is canceled. D) The order is handled as a market order.

C) The order is canceled. An at-the-open order is to be filled at the opening price or not at all. An at-the-open order arriving later must be canceled.

An investor believes that ICBS, a Nasdaq security, is overpriced at 40. He can sell ICBS short in the over-the-counter market under which of the following circumstances? A) Only if he has an outstanding long position. B) Under no circumstances. C) With no restrictions. D) Only at a price higher than the current inside bid.

C) With no restrictions. As on exchanges, short sales in the OTC market can occur at any time in the trade sequence.

Each of the following statements concerning fill-or-kill orders and all-or-none orders are TRUE except: A) an FOK order must be filled in its entirety. B) an FOK order must be canceled if the whole order cannot be executed immediately. C) an AON order must be canceled if the whole order cannot be executed immediately. . D) an AON order must be filled in its entirety.

C) an AON order must be canceled if the whole order cannot be executed immediately. .

A customer enters an order to buy 100 ABC at 47 stop GTC. After the order is elected, the order may be executed at A) below 47 only B) at 47 only C) any price D) above 47 only

C) any price

You receive a not-held order from a customer who wants you to buy 1,000 shares of ABC when the price is right. Under NYSE rules, this order is a: A) GTC order. B) FOK order. C) day order. D) limit order.

C) day order. **unless the customer instructs you otherwise, not-held orders must be executed on the day received.

**All of the following are minimum requirements for listing on the NYSE EXCEPT: A) number of shareholders. B) market value of publicly held shares. C) earnings per share. D) number of publicly held shares.

C) earnings per share. While the numerical values are not tested, it is important to know that there is no minimum earnings per share requirement. However, there is a minimum earnings requirement.

**After-hours trading in large blocks of stock by institutional investors can be accomplished through: A) the intermarket. B) Nasdaq. C) electronic communications networks (ECNs). D) any regional exchange.

C) electronic communications networks (ECNs).

An order to sell at 38.65 stop limit is entered before the opening. The subsequent trades are 38.85, 38.50, and 38.35. The order: A) was executed at 38.65. B) was executed at 38.85. C) has not yet been executed. D) was executed at 38.50.

C) has not yet been executed.

FINRA can initiate a trading halt for all of the following EXCEPT: A) NASDAQ. B) listed stocks trading OTC. C) listed stocks trading on an exchange. D) Bulletin Board stocks.

C) listed stocks trading on an exchange. Only the exchange or the SEC can initiate a trading halt for a listed security trading on an exchange floor.

Each of the following types of orders remains open on the NYSE until certain conditions are met EXCEPT: A) good-till-canceled orders. B) stop limit orders. C) market orders. D) stop orders.

C) market orders.

*The opening quote for issues listed on the NYSE is set by the: A) floor brokers based on the level of opening orders. B) third-market makers. C) specialist (designated market maker). D) exchange.

C) specialist (designated market maker). The specialist (designated market maker) is responsible for setting the opening quote for issues listed on the NYSE. The set quote is based on orders in hand.

**Stocks that are listed on the NYSE can also be listed on A) the CBOE (Chicago Board Options Exchange). B) Nasdaq. C) the Chicago Stock Exchange. D) the OTCBB (over-the-counter bulletin board).

C) the Chicago Stock Exchange. NYSE-listed securities **can be listed on and trade on other U.S. exchanges. Listed securities can also be traded in the OTC market and when they do, are known to be trading in the third market. Nasdaq is for UNLISTED securities, whereas the CBOE trades listed options, not stock.

Maintaining a fair and orderly market on the NYSE trading floor is the responsibility of: A) the traders. B) the floor brokers. C) the specialist (designated market maker). D) the order book official.

C) the specialist (designated market maker).

On the morning of the ex-date for a cash dividend which of the following orders on the order book will be reduced? A) Sell stop. B) Buy limit. C) Sell stop limit. D) All of these.

D) All of these. Those orders entered below the prevailing market (unless marked DNR) are reduced on the morning of the ex-date by the amount of the cash dividend. Those orders are buy limits and sell stops including sell stop limits.

A technical analyst has been charting XYZ stock and notes that it fluctuates between $36 and $41. If the analyst expects a breakout through resistance, which of the following orders should be placed? A) Buy XYZ 35 GTC. B) Buy XYZ 35 Stop GTC. C) Buy XYZ 42 GTC. D) Buy XYZ 42 Stop GTC.

D) Buy XYZ 42 Stop GTC. Buy stop, above CMV, price should be above resistanc level

If an open-end investment company bought preferred stock directly from a bank through an electronic communication network (ECN), this trade took place in which of the following markets? A) Primary. B) Secondary. C) Third. D) Fourth.

D) Fourth.

Which of the following orders may be left with a designated market maker on the New York Stock Exchange? A) Good-for-a-week. B) Good-for-a-month. C) Not-held. D) Good-till-canceled.

D) Good-till-canceled. The designated market maker on the NYSE will accept GTC (good-till-canceled orders) and hold them on the order display book until they are executed or are canceled.

Which of the following orders, if executed, guarantee a specific price or better? Buy limit. Buy stop. Sell stop. Sell limit. A) I and III. B) II and III. C) II and IV. D) I and IV.

D) I and IV. Buy limit, Sell limit- Limit order are "or better" orders While limit orders may or may not be filled, they guarantee that if a fill does occur, it will be executed at the stated price or better.

Which of the following describe a securities exchange? Prices are set by negotiation between interested parties. The highest bid and the lowest offer prevail. Only listed securities can be traded. Minimum prices are established at the beginning of the day. A) I and III. B) I and IV. C) II and IV. D) II and III.

D) II and III. The highest bid and the lowest offer prevail. Only listed securities can be traded.

Dark pools of liquidity enhance market transparency for public retail customers diminish market transparency for public retail customers accommodate small transactions for institutional traders accommodate large-volume transactions for institutional traders A) II and III B) I and III C) I and IV D) II and IV

D) II and IV Dark pools, sometimes referred to as dark pools of liquidity, is trading volume that occurs or liquidity that is not openly available to the public. The bulk of this volume represents large trades engaged in by institutional traders and trading desks away from the exchange markets and is not visible to the public. This diminishes market transparency for public retail customers.

Which of the following statements regarding transactions in the different securities markets are TRUE? I. Transactions in listed securities occur mainly in the OTC market. II. Transactions in unlisted securities occur in the OTC market. III. Transactions in listed securities that occur in the OTC market are said to take place in the fourth market. IV. Transactions in listed securities that occur directly between institutions without the use of broker/dealers as intermediaries are said to take place in the fourth market. A) I and III. B) I and IV. C) II and III. D) II and IV.

D) II and IV. II. Transactions in unlisted securities occur in the OTC market. IV. Transactions in listed securities that occur directly between institutions without the use of broker/dealers as intermediaries are said to take place in the fourth market.

Which of the following market tiers are included in Nasdaq? Nasdaq Regional exchange-listed securities. Nasdaq Global Market. Nasdaq MidCap Market. Nasdaq Capital Market. A) I and II. B) I and III. C) III and IV. D) II and IV.

D) II and IV. Nasdaq consists of three market tiers: Nasdaq Global Select Market, Global Market, and Capital Market.

KLP common stock has been trading at or near to $25 per share all day. Your client would like to buy 500 shares of KLP at 25, but he is willing to accept fewer shares at that price. Which of the following orders fulfills his intentions? A) Market order to buy 500 shares of KLP. B) Limit order to buy 500 shares of KLP at 25 AON (all-or-none). C) Limit order to buy 500 shares of KLP at 25 FOK (fill-or-kill). D) Limit order to buy 500 shares of KLP at 25 IOC (immediate-or-cancel).

D) Limit order to buy 500 shares of KLP at 25 IOC (immediate-or-cancel).

Priority and precedence rules of bids and offers manage trading activity on the: A) OTC market. B) NYSE and the OTC. C) third market. D) NYSE.

D) NYSE.

**Your broker/dealer has just negotiated a trade with another broker/dealer in a Nasdaq-listed stock. The automated system that will facilitate the reporting of the post-execution data electronically, such as price and volume, to FINRA is known as A) the Designated Market Maker (DMM) display book B) Super Display Book (SDBK) C) Consolidate Tape System (CTS) D) Trade Reporting Facility (TRF)

D) Trade Reporting Facility (TRF) Broker/dealers acting in a dealer capacity (negotiating transactions with other broker dealers) in Nasdaq-listed stocks or in exchange-listed stocks when they occur off of the exchange trading floor will have the post-execution data such as price and volume transmitted electronically to FINRA via the Trade Reporting Facility (TRF).

In a buy stop limit order, once the stop price is hit: A) the order is immediately executed. B) the order becomes a market order. C) a purchase can only occur at the limit or above. D) a purchase can occur only at the limit or below.

D) a purchase can occur only at the limit or below. Once it hits stop, becomes a buy limit order "buy at limit or lower" A buy stop limit order becomes a limit order when triggered. The execution occurs at a price that is at, or below, the stated limit price.

All of the following may transact business on the trading floor of the NYSE EXCEPT: A) two-dollar brokers. B) designated market maker C) floor brokers. D) allied members.

D) allied members.

Each of the following is true about stop orders EXCEPT they: A) can limit a loss in a declining stock. B) become market orders when there is a trade at, or the market passes through, a specific price. C) can accelerate the advance or decline of a stock's price if executed. D) are the same as limit orders.

D) are the same as limit orders.

If a customer with an unrealized gain on a short stock position wishes to protect his profit, he should enter a: A) sell limit order. B) buy limit order. C) sell stop order. D) buy stop order

D) buy stop order A buy stop order can be placed above the current market to protect the short stock position. If the stock trades at or above the stop price, the order is elected and becomes a market order to buy the stock, which will be used to cover the short position.

All of the following are reasons for entering a stop order EXCEPT to: A) protect unrealized gains on a long position. B) limit losses in a long position. C) protect profits in a short position. D) guarantee execution at a specified price.

D) guarantee execution at a specified price.

Stop orders may be used for each of the following EXCEPT: A) protect profits on long positions. B) protect profits on short positions. C) establish positions. D) lock in a specific price to close out a position.

D) lock in a specific price to close out a position.

All of the following orders could be placed on the specialist (designated market maker) order display book EXCEPT: A) limit orders. B) stop limit orders. C) stop orders. D) market orders.

D) market orders.

On the basis of a major decline occurring within a few minutes of the close, trading is halted on all markets for the remainder of the trading day. Under the market wide circuit breaker (MWCB) rules, market-on-close (MOC) orders pending at the time trading is halted A) should be held for execution on the following trading day B) should be held for execution on the following trading day unless canceled by the customer C) are converted to market orders and executed at the opening on the following trading day D) must be canceled

D) must be canceled

**All of the following kinds of orders may be turned over to the specialist (designated market maker) for execution EXCEPT: A) market. B) stop. C) limit. D) not-held.

D) not-held. A not-held order (NH) is a market order in which the investor has given the authority to choose the price and time to the floor broker to achieve the best possible execution.

The specialist (designated market maker) has all of the following responsibilities EXCEPT: A) handling odd-lot market orders. B) providing liquidity. C) acting as broker for orders placed on the book. D) preventing the stock price from falling.

D) preventing the stock price from falling.

All open orders must be confirmed to the order book: A) once a year on the anniversary of the order. B) every 6 months after the order has been entered. C) April 1 and October 1. D) the last business days of April and October.

D) the last business days of April and October.