If a BD is a member of an UW synd & they want to begin making a mkt in the sec they are underwriting, what must happen so they can begin market making?
A broker-dealer that is participating as a syndicate member cannot become a market maker in the security that is the subject of the offering until the syndicate is terminated.
Reasons for an excused withdrawal as a NASDAQ Mkt Maker?
Excused withdrawal status may be granted for the following reasons: religious holidays, sudden illness, vacation, jury duty, equipment malfunction, the requirements of Rule 103 of Regulation M, and failure to maintain a clearing agreement.
Who typically uses a VWAP transaction
Volume Weighted Average Price transactions are used by pension plans and institutional traders. The theory states that if the price of a buy trade is lower than the VWAP for a trading day, then it was a good trade
What is the initial listing criteria for a company to list on the NASDAQ Global Market?
bid price. number of market makers. number of shareholders.
Reasons for a NASDAQ trading halt?
- order imbalance
- pending news of a press release on a material event by the issuer
- pending release by the issuer of a material news event
What is Stopping Stock?
Stopping stock means guaranteeing an execution price without completing the execution immediately. The floor broker will try to improve the price but if unsuccessful will execute the order with the designated market maker at the guaranteed price.
Securities eligible for NASDAQ trading?
- OTC common stock
- ADRs
- Close-end investment security
Criteria for continued listing requirements on the NASDAQ Capital Mkt?
- min mkt bal of publicly held shs of $1 mil
- min bid price of $1
- Total assets of $2 mil
- at least 2 active mkt makers
What is a Market Maker & examples of a Mkt Maker?
A Mkt maker is a firm that is ready to buy/sell a particular stock on a regular and continuous basis at publicly quoted prices. Acting in a dealer capacity & trading from their own inventory
Examples: NYSE specialist allowed to act as a dealer, a dealer that regularly buys/sells for his own acct, a block positioner
What is Trade or Tape Shredding?
the practice of splitting large trades into multiple 100-share trades as a means to maximize payments or rebates to the member.
No member shall split any order into multiple smaller orders for execution for the purpose of maximizing a monetary amount (e.g. commissions) to be received as a result of the execution of such orders.
What is needed for a company to voluntarily delist its shs from the NYSE?
- approval from the Board of directors
- the company must furnish the exchange w/ a copy of the Board resolution authorizing the delisting that has been certified by the secretary of the issuer
If a Mkt Mkr executes a trade w/ another BD what must be reported to ACT?
- execution price
- type of transaction (buy,sell,cross)
- the NASDAQ symbol
What are mkt mkrs prohibited from communicating w/ each other?
Market makers cannot demand, ask or coerce another market maker to change his or her quote, nor can they alert each other of upcoming trade reports.
What does the NASDAQ Mkt Center Execution System (aka Single Book) do?
- eliminates locked/crossed mkts
- time stamps individual orders
- order protection
When using the Risk Mgmt Functions of ACT, how long does a clearing broker have to accept or decline a single trade that equals or exceeds the single trade limit?
15 minutes
What is the exemption to Rule 5320 that would allow a Member Firm to trade along with a customer order?
Trading along is only permitted if the customer was provided with clear and comprehensive written disclosure at the account opening and annually thereafter
What would a mkt maker be doing if they are “backing away” from an order?
if a mkt maker fails to execute an order in a fast mkt, or fails to execute an order with a firm quote, or fails to execute an order when they accidentally did not update their quote
What is required to list a sec. on the NASDAQ Global Market Index?
- 400 shareholders
- $4 bid price
- 3 or 4 mkt makers
- 1.1 mil publicly held shares
What securities transactions are reported through ACT?
- OTC Bulletin Board Sec
- NASDAQ National Mkt Sec
- NASDAQ Small cap stock
What is ACT?
ACT - The Automated Confirmation Transaction system - facilitates the reporting and clearing of trades. ACT handles the reporting and dissemination of last sale information on the three tiers of the NASDAQ market, OTC Bulletin Board stock and Consolidated Quotation Service stock which includes listed stock traded OTC.
What services does ACT provide?
- disseminates last sales in designated securities
- confirms transactions between broker dealers and institutions
- confirms transactions between dealers and reports to NSCC
When would a BD that is not a Mkt Maker in a security have to disclose their markup?
If the BD is not a market maker, he would not buy for his position or inventory, but he would have to disclose the markup for a riskless transaction, in which he did not act as a market maker.
What are the reasons a suspension/termination of a sec listed on the NASDAQ could be initiated?
- issuer has been found guilty of fraud
- the accountant refuses to certify the issuers financial stmts
- issuer files for bankruptcy
Per FINRA rule 5320 when can a member firm trade along with a customer?
FINRA Rule 5320 allows member firms to trade along side an institutional customer if the institutional customer provides express permission for the member to do so on an order by order basis.
