Progress Exam 3B

Broker-Dealer X sends its customer order flow to Market Center A. Which of the following has an obligation under the Limit Order Display rule?
A Both firms
B Broker Dealer X
C Market Center A
D Neither firm

C Market Center A
If orders are routed to a third party for execution (Market Center A), the accepting entity is subject to the requirements codified under the Limit Order Display rule. (82435)

Which of the following securities would least likely be found on Nasdaq?
A A REIT
B An ADR
C A MLP
D A Reg. D issued security

D A Reg. D issued security
All of the items mentioned in the question could appear on the Nasdaq system with the exception of a private placement (Reg. D security). Private placements sold under Regulation D are not registered with the SEC and, therefore,

A registered Nasdaq market maker must be open for business on Eastern Time from:
A 9:30 a.m. to 4:00 p.m.
B 9:30 a.m. to 8:00 p.m.
C 4:00 a.m. to 8:00 p.m.
D 8:00 a.m. to 8:00 p.m.

A 9:30 a.m. to 4:00 p.m.
The Nasdaq system operates from 4:00 a.m. to 8:00 p.m. each business day. A Nasdaq market maker must be open for business from 9:30 to 4:00. The market maker may voluntarily open for business prior to 9:30, or stay open for busine

Under SEC Rule 605, how often are trading venues required to file Market Center Reports regarding price improvement?
A Daily
B Weekly
C Monthly
D Quarterly

C Monthly
Under SEC Rule 605 trading centers are required to file monthly Market Center Reports that disclose the percentage of trades that received price improvement (trades done at levels better than the NBBO). (82438)

The abbreviation DNR stands for:
A Do Not Report
B Do Not Reduce
C Designated Net Reporting
D Directed Net Routing

B Do Not Reduce
DNR is the abbreviation for Do Not Reduce. This designation applies to orders that are entered below the current market price of a security (i.e., buy limit and sell stop orders) that are not to be reduced when a stock trades ex-dividend.

The most likely way a dealer calculates the mark-up on a debt security is by using:
A The Trace Daily Average Report
B A pre-determined spread over the comparable Treasury security
C Prevailing market price
D The VWAP

C Prevailing market price
The best definition of prevailing market price of a debt security is the dealer's contemporaneous cost for the same security. If this price cannot be determined, a hierarchy based on the following factors must be used by the brok

Orders that are reported into the Order Audit Trail System (OATS) must include all the following information, EXCEPT the:
A Amount of the markup charged by the executing member
B Whether a sale was long or short
C Time of entry
D Designation of the order

A Amount of the markup charged by the executing member
The Order Audit Trail System (OATS) is a system that enables a regulator to effectively review market activity regarding customer orders within a member firm, conduct surveillance, and enforce rules.

Which of the following tickets could be marked as a long sale?
A A customer has 1,000 shares of stock XXX and wants to sell 2,000 shares of the security
B A customer is long an XXX convertible bond and enters an order to sell the underlying shares
C The c

D The customer bought stock on Monday and sells the position on Wednesday prior to settlement of the purchase
SEC and Nasdaq rules on short sales incorporate the SEC definition of a short sale which is any sale of a security that the seller does not own,

Under the Limit Up/Limit Down Rule, what is the length of the trading pause?
A 30 seconds
B 60 seconds
C 90 seconds
D 5 minutes

D 5 minutes
The length of the trading pause under the Limit Up/Limit Down Rule is five minutes. During this window orders may be entered but no executions may occur. (82442)

How long may a Nasdaq market maker withdraws its quotes for a specific stock due to a systems outage?
A 1 day
B 5 days
C 20 days
D 60 days

B 5 days
Market makers may be granted an excused withdrawal of up to 5 business days for technical problems such as system outages. (82440)

Trade Reporting and Compliance Engine (TRACE) reports must be submitted within what time frame?
A 10 seconds
B 60 seconds
C 15 minutes
D By end of day

C 15 minutes
Trade Reporting and Compliance Engine reports must be submitted within 15 minutes of the transaction. (82446)

A customer enters an order to sell 5,000 shares MOC (market-on-close). Due to extreme market conditions, the market closes at 3:30 p.m. without the order being filled. The RR should:
A Cancel the order and notify the customer
B Reenter the order when the

A Cancel the order and notify the customer
If a market-wide trading halt closes the market for the remainder of the trading day, pending and new customer orders (absent customer instructions to the contrary) should be treated as good-til-cancelled (GTC) o

The maximum order size for an order entered into the Nasdaq Market Center Execution System is:
A 100 shares
B 1,000 shares for retail customers, but no limit for institutional investors
C 9,999 shares for retail accounts and 99,999 for institutional inves

D 999,999 shares
The maximum order size for a Nasdaq Market Center Execution System order is 999,999 shares. If an order is larger, it is split into multiple orders and entered into the system. (82437)

Which of the following features or risks are NOT associated with extended-hours trading?
A Less liquidity
B More volatility
C Wider spreads
D Firms only accept market orders

D Firms only accept market orders
According to FINRA, the following risks must be disclosed to customers, prior to engaging in extended-hours trading: reduced liquidity, increased volatility, changing prices, unlinked markets, wider spreads, and exaggerat

A customer's market order to buy is executed at $41.25, but through an error in communication is reported to the customer at $41.15. Which of the following statements is TRUE?
A The customer must pay 41.25
B The customer may only be charged 41.15
C The fi

A The customer must pay 41.25
Despite an error in reporting the trade, the customer is bound by the actual execution level provided the customer's instructions were not violated. (82443)

The inside market on VVV is 17.20 - 17.50 and Market Maker X's quote is at the inside. Market Maker X accepts a customer buy limit order for 500 of VVV at 17.30 and simultaneously receives a market order to sell from another customer. Market Maker X may:

B Cross the stock @ 17.30
SEC best execution interpretations require the market maker to improve the execution price of the market order to sell up to the price of the limit order. The market maker can either cross the market and limit orders, or execute

All of the following statements are TRUE for a Nasdaq Market maker, EXCEPT:
A The firm must maintain a two-sided attributable quote
B To prevent manipulation, all MPIDs used by the firm must have the same quote
C The firm may maintain more than one attrib

B To prevent manipulation, all MPIDs used by the firm must have the same quote
An attributable quote/order shows the market participant identifier while a nonattributable quote/order does not. Nonattributable orders are anonymous and appear in the Nasdaq

Which of the following statements is TRUE if an issue is delisted from Nasdaq for failing to file timely 10-Qs?
A The issue may trade on the OTCBB
B The issuer may trade on the OTC Pink Markets
C The issuer must meet the minimum maintenance levels to be r

B The issuer may trade on the OTC Pink Markets
If an issue is delisted from Nasdaq, the issuer must reapply and satisfy initial listing requirements in order to be relisted on Nasdaq. An issue that is delisted from Nasdaq for lack of financial reports may

In which of the following cases is a broker dealer permitted to NOT disclose its compensation?
A The dealer is trading on a net basis
B The client is a QIB
C The execution is a block trade
D The client is accredited

A The dealer is trading on a net basis
Firms must generally disclose both capacity and compensation on a transaction regardless of the client type or size of the trade. One exception exists when a firm is trading for a client on a net basis. (82441)

Each of the following descriptions is a characteristic of an Electronic Communication Network (ECN), EXCEPT:
A The ECN may be classified as an exchange
B The ECN is exempt from potential Manning obligations
C The ECN may be classified as a broker dealer
D

D The ECN may only accept orders outside of normal market hours
An Electronic Communication Network (ECN) is defined as an electronic system that widely disseminates orders entered by market makers and other market participants and permits such orders to

What is the penalty if a market participant fails to make timely quotes to the Consolidated Quotation System?
A one-business-day suspension in all securities
B A 20-business-day suspension from market making in the security
C A one-business-day suspension

C A one-business-day suspension from market making in that security
An unexcused, voluntary withdrawal by a market maker from the Consolidated Quotation System (CQS) results in a one-business-day suspension from market-making activities in that security.

Broker-Dealer A sells stock in a Nasdaq security to Broker-Dealer B. If Broker-Dealer B reports the trade, what is Broker-Dealer A's reporting obligation?
A Lock in the trade within 10 seconds
B Affirm the trade within 20 minutes
C Accept the trade by end

B Affirm the trade within 20 minutes
Under both the ORF and TRF reporting rules, both member firms are required to report transactions in equity securities. The member firm that has the reporting obligation is required to report the trade within 10 second

Nasdaq Level 1 provides subscribers with:
A The inside market on a security for which there is a minimum of two market makers
B The top three bids and offers in a given security
C Quotations of all registered market makers in the security
D The ability fo

A The inside market on a security for which there is a minimum of two market makers
The Nasdaq system provides member firms with bids and offers for over-the-counter securities. The Nasdaq system has three levels. Level 1 provides subscribers with the hig

The Nasdaq Market Center Execution System may also be referred to as the:
A An ECN
B An OATS participant
C Single Book
D An internal crossing platform

C Single Book
The Nasdaq Market Center Execution System is sometimes referred to as the Single Book. This system was formed through the integration of Nasdaq's three separate execution platforms into a single platform that allows for trading all Nasdaq, N

Which of the following statements describes a market maker's basic requirement regarding customer limit orders for Nasdaq stocks under the SEC's Display Rule?
A A market maker must display all retail customer limit orders but may hold institutional orders

D A market maker must immediately display any customer limit order that would tighten the market maker's quote
Under the SEC Display Rule, if a customer's limit order is accepted by a market maker and the price on the order would improve that market maker