Unit 8 Quiz

Which of the following is a third-market trade? A) 12,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold over the counter. 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 PQ, a stock listed on the Philadelphia Stock Exchange are sold on the Chicago Stock Exchange floor. D) 10,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold on the Chicago Stock Exchange floor.

A) 12,000 shares of XYZ, a stock listed on the New York Stock Exchange, are sold over the counter.

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 may either halt or continue trading as it sees fit. B) It continues to trade ABC with the NYSE specialist's (Designated Market Maker) permission. C) It applies to the SEC for a decision within 30 minutes of the opening. D) It halts all trading in ABC until the NYSE reopens it.

A) It may either halt or continue trading as it sees fit.

Transactions involving which of the following would NOT be reported to the Consolidated Tape System (CTS) by an exchange or FINRA? A) Listed options. B) Listed securities traded through an electronic communication network (ECN). C) NYSE-listed rights and warrants. D) NYSE-listed securities traded on the Chicago and Philadelphia exchanges.

A) Listed options.

A firm 1-sided quote is permitted for: A) Over-the-counter Bulletin Board stocks. B) Nasdaq Capital Market stocks. C) Nasdaq Global Select stocks. D) Nasdaq Global Market stocks.

A) Over-the-counter Bulletin Board stocks.

In a proceeds transaction for a customer where the proceeds from the liquidation of one stock are used to purchase another stock, the 5% markup policy is computed on the basis of: A) a combination of both the buy side and the sell side. B) the markup on the buy side only. C) the markdown on the sell side only. D) each side of the transaction separately.

A) a combination of both the buy side and the sell side.

If a customer gives his broker/dealer an order to sell his stock if it falls to or below 69 and will not accept a price below 69, the order is: A) a stop limit order. B) a buy limit order. C) a sell limit order. D) a stop order.

A) a stop limit order.

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) day order. B) FOK order. C) GTC order. D) limit order.

A) day order.

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 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 C) prevent them from having their own orders entered on exchanges for execution D) allow them to enter orders that are sent directly to the trading floors of stock exchanges

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

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

A) not-held.

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 limit order. B) sell limit order. C) sell stop order. D) market order to sell.

A) sell stop limit order.

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) Additional cost to the firm of changing the order twice in a day. B) An existing order has precedence over a new order when it comes to execution. C) Day orders are less risky than GTC orders. D) Weakening the customer's risk tolerance by encouraging him to change orders frequently.

B) An existing order has precedence over a new order when it comes to execution.

A significant increase in which of the following types of orders may cause a bull market to accelerate? A) Sell stops. B) Buy stops. C) Short sales. D) Buy limits.

B) Buy stops.

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

B) Sell stop.

The symbol OPD appearing on the Consolidated Tape System indicates: A) an execution of a block trade. B) a delayed opening print. C) short sale. D) a cross.

B) a delayed opening print.

All of the following statements regarding the 5% markup policy are true EXCEPT: A) a transaction in common stock customarily has a higher percentage markup than a bond transaction of the same size. B) a riskless transaction is not generally covered by the 5% markup policy. C) the type of security is a factor to consider. D) the markup policy does not apply to securities sold at a specific price and with a prospectus.

B) a riskless transaction is not generally covered by the 5% markup policy.

A specialist (designated market maker) is permitted to do all of the following EXCEPT: A) represent a bid and offer simultaneously. B) accept a not-held order. C) accept a stop order. D) accept a limit order.

B) accept a not-held order.

If a customer wishes to change a day order to a GTC order in the middle of the day, the registered representative should: A) enter the new GTC order immediately and do nothing about the day order. B) allow the day order to expire at the end of the day and put in the GTC order before the next day's opening. C) enter the new order as GTC and immediately cancel the day order. D) enter a change notice immediately.

B) allow the day order to expire at the end of the day and put in the GTC order before the next day's opening.

Under NYSE rules, a not-held order: A) requires discretionary authority from the customer. B) is good for the day only. C) is a limit order. D) is good until canceled.

B) is good for the day only.

The 5% markup policy applies to all of the following EXCEPT: A) agency transactions in non-exempt unlisted securities B) municipal bond transactions. C) principal transactions in the OTC market. D) agency transactions on an exchange.

B) municipal bond transactions.

A quote on Nasdaq is as follows: Bid Ask 10 10.50, 1300 x 1500 The market maker is obligated to execute all of the following customer transactions in their entirety EXCEPT: A) sell 1,300 shares at 10. B) sell 1,500 shares at 10. C) buy 1,400 shares at 10.50. D) buy 1,500 shares at 10.50.

B) sell 1,500 shares at 10. This market maker has quoted a size of market of 1,300 − 1,500, which means it stands ready to buy a maximum of 1,300 shares at $10 and sell a maximum of 1,500 shares at 10.50. A sale of 1,500 shares at 10 is outside the size of this quote.

A short sale of stock directed to an exchange must observe all of the following EXCEPT: A) the locate requirement for borrowed shares. B) the symbol "ss" on the consolidated tape. C) a margin requirement of 50%. D) a minimum maintenance requirement of 30%.

B) the symbol "ss" on the consolidated tape.

The Three Contact Rule does NOT apply to the purchase or sale of a non-Nasdaq security provided there is at least: A) 4 priced quotations available electronically . B) 3 priced quotations available electronically . C) 2 priced quotations available electronically . D) 1 priced quotation available electronically.

C) 2 priced quotations available electronically .

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) Sell stop at 13.75. B) Sell limit at 14. C) Buy stop at 14.25. D) Buy limit at 14.

C) Buy stop at 14.25.

All of the following statements regarding OTC markets are true EXCEPT A) an offer is the lowest price a dealer will accept when selling B) securities traded OTC include ADRs and municipal bonds C) the OTC market is an auction market D) a bid is the highest price a dealer will pay when buying

C) the OTC market is an auction market

A customer sells securities and uses the proceeds to buy more securities at the same cost. Under the 5% markup policy, the markup is calculated on: A) the buy side only. B) the sell side only. C) the total of both sides. D) each side separately.

C) the total of both sides.

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) 52.25. C) 53. D) 52.1.

D) 52.1. After the sell stop order is triggered (at 52.20), it becomes a market order to sell at the next price in the trade sequence. The trade at 53 is qualified by SLD, which indicates a delayed report of a previous trade and is not part of the tick sequence. Therefore, the order will be executed at 52.10.

Your client has entered a limit order to buy 600 shares of DMF at $50 per share. DMF declares a 10% stock dividend. How would this order be adjusted on the ex-date? A) 600 shares at $50. B) 660 shares at $46.50. C) 660 shares at $46.37. D) 600 shares at $45.45.

D) 600 shares at $45.45. In this example, adjust only the share price: $50 ÷ (1 + .10) = $45.45. The number of shares in the order is not adjusted unless the shares can be increased by a full round lot (100 shares).

Which of the following describes Nasdaq Level 3 service? A) Displays the representative bid and ask quotations on a security in which a minimum of 2 market makers exist. B) Shows the quotations from all registered market makers entering quotes into the system. C) Displays the representative bid and ask quotations on a security in which a minimum of 3 market makers exist. D) Allows market makers to enter quotations into the system for a security in which they are registered.

D) Allows market makers to enter quotations into the system for a security in which they are registered.

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. A buy stop order is placed above a resistance level. It is triggered if and when the stock trades at or above the stop price. This allows an investor to participate in a bullish breakout through resistance.

Which of the following describes a quote on Nasdaq Level I? A) Nominal. B) Lowest bid/highest offer. C) Available to traders only. D) Inside market.

D) Inside market.

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) Hold it at his desk until just before market close. D) Send the order to the floor immediately.

D) Send the order to the floor immediately.

All of the following are included in Nasdaq EXCEPT: A) closed-end investment companies. B) convertible bonds. C) ADRs. D) U.S. government securities.

D) U.S. government securities.

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

D) must be marked long or short.

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

D) preventing the stock price from falling.

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

I and II

Which of the following is applicable to the NASDAQ OMX PHLX? I. Regional exchange operated by Nasdaq II. Offers trading in equity securities and options contracts III. Is a completely electronic exchange with no physical trading floor IV. Regional exchange operated by FINRA for the execution of OTC stocks only

I and II

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

I, II, III, and IV

Traders can sell short: I. when a stock ticks up. II. when a stock ticks down. III. unrestrictedly in both exchange and OTC markets.

I, II, and III

The 5% markup policy applies to which of the following? I. Exempt transactions. II. Agency transactions. III. Principal secondary market trade. IV. New issues.

II and III

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

II and III