1
Q
Regulation SHO
A
- Every ordered ticket to sell must be marked long or short
- if a sale is short, securities must be located
2
Q
All or None
A
- entire order must be filled or not executed
- maybe offered additional tries after 1st
3
Q
Fill or Kill
A
- either the entire order is filled on the first try or the order is canceled
4
Q
Immediate or Cancel
A
- either part of the order is filled on the first try or the remaining balance is canceled
5
Q
Either Or
A
EX: Buy at or Sell at, if one side is filled, the other side is canceled
6
Q
Discretionary
A
Not specifying the size or security
7
Q
Limit Order
A
- to be filled at that price or better (to buy - lower)
- to sell higher
8
Q
Alterations to Executed Order
A
- must be approved in writing by branch manager or compliance officer of firm
- must be documented in writing with essential facts as to why
9
Q
Cancel and Re-bill
A
- when changing an executed order
10
Q
Regulation NMS
A
- market centers to electronically link and provide automated execution at the best price of all markets within 1 second for orders that are executable.
- market centers cannot discriminate against customers who access their quotes.
- requires that markets have procedures in place to prevent trade-throughs - which is “trading through” another market’s better-priced quote (the same thing as executing an order at an inferior price in that market).
- sets disclosure rules for markets - which must provide monthly reports on the speed and quality of trade executions.
- sets disclosure rules for broker-dealers - which must provide customers with reports on how their orders were routed and whether the broker-dealer accepted payments for order flow for sending the order to a specific market.
11
Q
Trade Through Rule (Rule 611)
A
- requires that any “fast market” (NYSE, NYSE American (AMEX) and NASDAQ) must either execute a trade within 1 second at the best price posted for a given security at that moment; or must route that order to the market that is posting the better price (this could be a Third Market Maker or an ECN).
12
Q
SEC Rule 606
A
-The fact that the firm received payment for order flow must be disclosed on the customer trade confirmation.
13
Q
RULE 602
A
- Exchanges must collect and display bids and offers
- promptly communicate changes in bids and offers
14
Q
Rule 604
A
- display customer limit orders publicly so they can be accessed by all investors
15
Q
Rule 605
A
Market Center order execution report
- effective spreads
- Speed of Execution
- fill rates
- price improvement. disimprovement
16
Q
Disclosure of payment for order flow
A
- the fact that the firm received an order for payment must be disclosed on order flow
17
Q
Disclosure on request of routing of customers order
A
- must disclose the identity of the market to which the customer’s orders were routed for execution in the preceding 6 months along with the time of execution
18
Q
Quarterly report
A
-Percentage of customer orders that were “non-directed;”
Identity of the 10 largest markets or market makers, to whom non-directed orders were routed and any other venue that received 5% or more of the firm’s orders;
Arrangement, if any, for payment for order flow or profit-sharing. Because of this rule, member firms cannot have “hidden” arrangements with market makers to favor them in return for “payment for order flow” - everything is out in the open and is fully disclosed.
19
Q
Rule 612
A
Regulation NMS does not allow sub-penny orders to be entered for NMS (NYSE, NYSE American (AMEX) or NASDAQ) stocks.
trade executions are permitted in sub-penny increments, since this makes the market more competitive.
20
Q
Minimum quote for greater than $1.00 NMS stocks
A
.01
21
Q
Minimum quote for less than $1.00 NMS stocks
A
.0001
22
Q
Broker
A
Agent/ Commission
23
Q
Dealer
A
Principal/market maker/ mark up or down
24
Q
NYSE listing standards
A
- New company listing first issues of shares
- an existing company that is moving its existing shares
25
Existing companies moving shares standards
- 2,200 stockholders;
- 1,100,000 shares outstanding;
- $100,000,000 aggregate market value of outstanding shares;
- 100,000 shares average monthly trading volume.
26
IPOs listing standards
- 400 holders of round lots
- 1.1 million shares outstanding
- min mark cap $60 mil
27
DMM - Designated Market Maker
makes a market in a given listed stock; and also acts as a broker's broker handling the book of retail orders that are "away" from the current market.
28
Floor Broker
- represents the retail member firms, manually handling orders on the floor that cannot be executed through the NYSE's electronic trading system.
- can only act as an agent
29
$2 Broker
-assists Floor Brokers in executing difficult trades or trades during times of order overflows (and the $2 Broker used to charge $2 per trade to do this, hence the name).
30
Competitive Trader
- an exchange member that is only allowed to trade for their own account
31
ACRA ECN
- Supercomputer in New Jersey, where member firms can co-locate their serves and feed order into their system and get lightning fast speed and get virtualy instant execution and roders
32
Super Display Book
- faster and cheaper to use than manual trading by Floor Brokers.
- accepts Market and Limit orders, up to maximum sizes permitted
- cannot accept Market-Not Held orders
33
Specialist/DMM performs 2 functions
- will buy and sell for his own inventory account when there are no other market participants
- broker's broker," the Specialist/DMM will take orders from retail firms that cannot be immediately executed; if the market moves to that price, the Specialist/DMM will execute the order for the retail member, acting as a broker for another brokerage firm.
34
DMM earns the spread by
- capacity as a market maker
- earns a commission form each trade in his book
-- acts as odd lot dealer
35
Network A Consolidated Tape
- reports trade of all NYSE listed issues no more than 10 minutes
36
Network A
reports trades of all NYSE listed issues, no matter where the trade took place
37
Cabinet Stock
- stock that trades in round lots of 10 shares instead of 100 shares.
- ery thinly traded stocks or very expensive stocks.
s/s
38
SLD
- Out of sequence
| - sold, but out of sequence
39
OPD
- delayed stock opening
| - imbalance of buy and sell orders
40
Block
10,000 shares
41
Sell stop orders are placed
lower than the current market and triggered when prices fall
42
Prohibited Practices of trading on NYSE
- Bet on the course of the market
- Buy or sell dividends
- Buy or sell privileges to receive or deliver securities
- Buy or sell securities at the close
- Buy or sell securities at a stop price away from the market
- Pre-arranged trade
43
Customer Orders
- receives priority
- cannot buy for the firm's own account at the next lowest price below the current trading range until all customer orders at that price have been filled.
- cannot sell for the firm's own account at the next highest price above the current trading range until all customer orders at that price have been filled.
44
Records of Orders transmitted to the floor must be kept for
3 years and preceding 2 years kept accessible
- terms of the order, time of order transmitted, time of order executed
45
Trade reported with an error
- customer must pay actual price of trade
| - reported, not executed, trade is not binding
46
Record customer transactions in accounts not later than
- settlement date, same as SEC requirement
47
Member firms are prohibited from
- Excessive trading
- manipulative operations
- circulating rumors that seem to influence market price
- effecting trades at succesively higher or lower rates-
- changing price of the transaction before the settlement date
- loaning money with stocks
48
OTC Block Trading Desk
- too large of block size for SuperDisplay Book
- takes the position into the firm's inventory
- acts as Third Market Maker
- adds liquidity and price stability to the market
49
A customer is considered to be long if
- owns stock and will deliver on sale of settlement
- owns convertible security, has given orders to convert, and will deliver on settlement
- customer owns rights, warrants
50
Regulation SHO applies to
- all traded common stocks, NASDAQ, NYSE, Pink Sheets, OTCBB
51
The locate Requirement of Regulation SHO
- Must locate securities to be borrowed and make sure they can be delivered by settlement
52
Short against the box
- customer has sold 1,000 shares of ABCD short against 1,000 shares being held by the firm
- used to lock in a gain on an appreciated stock position
53
"Up-bid" requirement
- stock falls more than 10% in a trading day, it can ONLY sell short above the BEST bid of that day
54
Easy to borrow list
- securities are readily available
- unlikely to create a fail to deliver on settlement
- must meet the test for 5 Business days
55
Threshold securities
- A daily list of hard to borrow securities
| - must meet the test for 5 business day
56
Circuit breaker rules
- intended to stop a catastrophic market drop
| - 2 levels, market-wide, and single
57
Level 1
- If S&P 500 drops by 7% from the prior day's close, listed equity prices will be shut down for 15 minutes
58
Level 2
- after re-opening if the market drops by 13%, markets will close again for 15 minutes
- allows investors to calmy evaluate market conditions, so a domino effect of panic does not occur
59
Level 3
- if the market re-opens again and drops by 20%, the market will close for the day
60
Single stock Limit Up/ Limit Down Rule
- designed to stop erratic trading in a single stock
| - LULD rule tracks each NMS stock's movement in 5-minute windows
61
LULD/ Tier 1 Stocks
- actively traded NMS stocks
| - capped at 5% up or down move from prior 5-minute movement history
62
LULD/ Tier 2 Stocks
- less actively traded NMS stocks
| - capped at 10% up or down move from prior 5-minute movement history
63
Fundamental price move
- trades are unable to occur in price band for 15 seconds, then trading stops for 5 minutes
64
CQS
- shows bid and ask quotes for NYSE listed issues, NOT NASDAQ
- bids from the DMM, Regional Exchange Specialist, third market makers
- open from 9:00 am to 6:30 pm
65
A Tape
NYSE Listed issues
66
B Tape
- NYSE/AMEX listed issues
| - regional exchange-listed issues
67
C Tape
NASDAQ listed issued
68
OTCBB
- over the counter bulletin board
- cannot meet NASDAQ listing standards but are current in their filings with SEC
- distributes quotes through NASDAQ work stations
-
69
PINK OTC
- Shows quotes for stocks that are not listed in the NASDAQ
| - penny stocks, bankrupt companies, companies not currently in filings with SEC
70
Gray Market
- quoting or trading of securities OTC that are not eligible for inclusion in the OTCBB or PINK OTC markets because usually, the companies are too small, bankrupt, or currently not reporting to the SEC
- illiquid but if a trade occurs but still be reported
71
NASDAQ global market
- upper tier of NASDAQ equities
- tougher listing standards
- 2,800 issues
- former name was NMS
72
NASDAQ Capital Market
- lower tier of NASDAQ equities
- easier listing standards
- 500 issues
- former name was Small Cap Market
73
The regulator for the NASDAQ is
FINRA
74
NASDAQ and Network C Tape
- executing member must report within 10 seconds
75
Securities not traded on NASDAQ
- stock options
- non-convertible bonds
- municpal bonds
- government and agency bonds
76
Global select listing standards IPO
- at least 450 holders or round lots
- 2,200 shareholders
- 1.25 mil shares outstanding
- min. market cap of 70 mil
77
Global select listing standards moving from one market to another
- at least 450 holders or round lots
- 2,200 shareholders
- 1.25 mil shares outstanding
- min market cap of 110 mil
78
Initial listings of Global select are more_______ than continued listing
stringent
79
Delisting occurs from the global standards when
- it does not meet the minimum requirement, not the inital requirement
80
Global Market listing standards
minimum of:
- stockholders equity
- revenue and total assets
- shares outstanding
- market cap
- share price
- # of shareholders
- # of market makers
81
Global and Capital Market Corporate Governance
- minimum representation of outside independent BOD
- Audit committee
- annual shareholder meeting and soliciting proxies
- providing annual and quarterly financial reports
- giving shareholders voting rights
- code of conduct that addresses conflicts of interests
82
NASDAQ Level 1
- intended for use by registered representatives
- shows the best available market for each stock
- inside market or NBBO (National Best Bid and Offer, highest bid, lowest ask)
83
NASDAQ Level 2
- intended for use by trading desks
| - shows the bid and asks from all the market makers
84
NASDAQ system
- quotes are firm, with FINRA requiring a minimum quote size of 100 shares
85
Broker earns
- commission by being a middle man/ agent
| - matches a customer's order to the best available market
86
Dealer earns
-mark up by acting as a principal by selling or buying the security away from the firm's inventory
87
NASDAQ Market Center Single Book
merged SuperMontage, INET, and BRUT
88
NASDAQ Market Center AKA System
- dropped the Single Book and now calls its automated book the System
89
NASDAQ System
NASDAQ Market Center
- Displays Limits for all stocks
- accepts market and limit orders only (NOT STOP or STOP LIMIT orders)
- maxmium order size 999,999
90
MPID
Market Participant who entered the order
91
NSDQ MPID
an anonymous market participant who entered an order
92
Orders and quotes entered on the NASDAQ
- time-stamped upon receipt(determines to rank)
| - filled First in First Out
93
Decremetion
As each automatic execution occurs against the displayed quote, the size of the quote is reduced by the fill amount
94
OATs
Order Audit Trail System
- electronically captures order information for all U.S Equity Securities
- Each reporting member upon receipt, must record all details of order into OATs
- not used for ption orders
95
ACT System
Automated Confirmation of Transaction Services
- receives reports of completed trades and sends to the contra-party for comparison on a real-time basis.
- reports the trade to the tape and it reports the trade to the clearing corporation for settlement.
- must report trades within 10 seconds
96
ACT Trade Reporting Facilities (TRFs)
NASDAQ TRF - reporting trades of NASDAQ issues;
NYSE TRF - reporting trades of NYSE listed issues that take place in the Third Market;
ORF - OTC reporting facility, reporting trades of OTCBB and Pink OTC Markets issues;
TRACS - reporting trades of securities occuring on ECNs or Alternative Trading Systems.
97
ECN
- trading of large blocks of institutions
- attempt to match with other market participants, and earn a matching fee
- trade reports exclude fees
-
98
ADF
Alternative Display Facility
- displays quotes of unlinked ECNS
- NO MORE UNLINKED ECNs
99
TRACS
- Any trades that result from accessing the quotes displayed in the ADF are reported HERE
- feeds the trade to the appropriate tape
100
DARK
- evolution of ECN
- operated by larger-broker dealers/ some are independent dealers
- allow institutions to buy or sell large blocks without reporting them to the NASDAQ System
- dark because the size of trade and identity is not displayed
- can avoid when a large move like this is displayed, moving the market
- complies with Regulation ATS
101
Firm quote
- all NASDAQ issues
| - Dealer will honor quote
102
Bid wanted
dealer wants to sell a position and is looking for a bidder
103
Uniform quote
A quote is shown in the OTCBB or the Pink Sheets that is subject to negotiation
104
Offer Wanted
dealer wants to buy a position and is looking for a seller
105
Nominal Quote
- approximation of a market price, no obligation of the dealer to trade at that quote
106
Subject Quote
Subject to confirmation
107
Principal transactions
- firm acts as a dealer
- long/ shorts positions
- position trading
- arbitrage
- riskless/simultaneous trading
108
Position trading broker-dealer
- buying securities from a customer into its inventory, or selling customers from its inventory
- stock prices rise, long stock
- stock prices fall. short stock
109
Agency transactions
- crossing ( to customers orders, earning a commision on each, the firm can cross these trades, instead of attempting execution with other traders.
The crossing price must be the prevailing market price at that time.)
- a customer sells a security, and uses the proceeds of the sale to buy another security.
- Dual agency
the firm is effecting 2 trades for the customer; and in this case a "combined" mark-up or commission is earned.
110
Which of the following persons trades securities over-the-counter?
A Two dollar broker
B Market maker
C Specialist (DMM)
D Registered Representative
The best answer is B.
Over-the-counter dealers are called market makers. Two dollar brokers and Specialists (now renamed DMMs - Designated Market Makers) trade on stock exchanges. Registered representatives cannot trade securities - they can enter orders on behalf of customers to be executed by traders in the market.
111
If a member firm routes a customer market order for a Global Market listed issue to NASDAQ's automated trading system, the order will be sent to:
A Super Display Book
B the NASDAQ Market Center Execution System (Single Book)
C OTCBB
D Order Support System
The best answer is B.
The automated order execution system for NASDAQ issues is now called the NASDAQ Market Center Execution System, or simply, the "System." The previous name, now obsolete, was Single Book. Super Display Book is the NYSE's automated trading system. The Order Support System (OSS) is the CBOE's automated trading system. The OTCBB (Over-The-Counter Bulletin Board) gives dealer offerings of stocks that are not listed on an exchange.
112
```
NASDAQ Level I shows:
I Lowest Bid
II Lowest Offer
III Highest Bid
IV Highest Offer
A
I and II
B
III and IV
C
I and IV
D
II and III
```
The best answer is D.
NASDAQ Level I shows the "inside market" - the highest bid and lowest ask. These are the best prices at which to trade. (One wants to buy at the lowest price asked by dealers; one wants to sell at the highest price bid by dealers.) Another name for the inside market is the "NBBO" - National Best Bid and Offer.
113
A market maker enters a quote of $10.50 Bid; $10.75 Ask; with a size of "1 x 1" into the NASDAQ System. If a market order to buy is entered into the system for 500 shares, and this dealer's quote is matched, the market maker will be obligated to sell::
A 100 shares at $10.50
B 100 shares at $10.75
C 500 shares at $10.50
D 500 shares at $10.75A market maker enters a quote of $10.50 Bid; $10.75 Ask; with a size of "1 x 1" into the NASDAQ System. If a market order to buy is entered into the system for 500 shares, and this dealer's quote is matched, the market maker will be obligated to sell:
The best answer is B. A market order to buy will be matched, in sequence, against the "Ask" quotes in the system, from lowest to highest. Such a market order "sweeps" the book from low to high price, until it is filled. Because this dealer's Ask of $10.75 is only for 100 shares, this is the amount that the system will match. It will then move to the next Ask quotes from other dealers, in sequence, until the order is filled for 500 shares
114
A market maker enters a quote of $20.50 Bid; $21.00 Ask; with a size of "5 x 5" into the NASDAQ System. If a market order to buy is entered into the system for 1,500 shares, and this dealer's quote is matched, the market maker will be obligated to sell:
A 500 shares at $20.50
B 500 shares at $21.00
C 1,500 shares at $20.50
D 1,500 shares at $21.50
Explanation
The best answer is B. A market order to buy will be matched, in sequence, against the "Ask" quotes in the system, from lowest to highest. Such a market order "sweeps" the book from low to high price, until it is filled. Because this dealer's Ask of $21.00 is only for 500 shares, this is the amount that the system will match. It will then move to the next Ask quotes from other dealers, in sequence, until the order is filled for 1,500 shares
115
Which of the following trades are reported through ACT's Trade Reporting Facilities (TRFs)?
I NASDAQ Market Center trade of a NASDAQ listed stock
II Super Display Book trade of an NYSE listed issue
III Trade of an NYSE listed issue in the Third Market
IV Trade of a listed option contract on the CBOE
A I and III
B I and IV
C II and III
D II and IV
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 is 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.
Any trade that takes place on the NYSE (which owns and runs Super Display Book) is reported to the Network A Tape by the NYSE. Options trades occurring on exchanges such as the CBOE are reported through "OPRA" - the Options Price Reporting Authority - which is not covered on Series 7.
```
116
Quotes placed by market participants in unlinked ECNs can be accessed through:
A ATS
B ADF
C ACES
D ACT
Explanation
The best answer is B. An unlinked ECN is one that is not placing its quotes into Single Book. The SEC mandated that the FINRA provide an Alternate Display Facility ("ADF") to publicly display these quotes. Thus, to find the best market for a NASDAQ stock, both NASDAQ and the ADF must be checked.
117
The Pink Sheets:
I give bid and ask quotes for OTC stocks
II give bid and ask quotes for NASDAQ stocks
III show completed trades as they occur
IV do not show completed trades as they occur
A I and III
B I and IV
C II and III
D II and IV
The best answer is B.
The Pink Sheets give bid and ask quotes for over-the-counter stocks that do not meet exchange listing standards. They do not show trades as they occur. All trade reporting for OTC equity securities occurs through the ORF - the Over-The-Counter Reporting Facility.
118
Which statement is TRUE about the Gray Market?
A It is the trading venue for unsponsored ADRs
B It is illiquid and nontransparent
C It is not subject to regulation by FINRA
D It is another name for a Dark Pool
The best answer is B.
The Gray Market is a term for the quoting and trading OTC of securities not found in the OTCBB or Pink OTC markets. These are typically smaller and bankrupt companies. The market is illiquid and nontransparent - most often these companies are not reporting to the SEC. The market is still regulated by FINRA and trades must be reported to FINRA.
A Dark Pool is a private trading venue for listed securities operated by a major broker-dealer that is used by institutional investors that don’t want their quotes shown on NASDAQ or the NYSE (hence the term “dark”). While quotes are not shown publicly, when trades occur, they are still publicly reported. Dark Pools now account for about 25% of equity trading volume in the U.S. The advantage for institutions is that they can hide the level of their trading interest. For example, an institution that wants to unload a huge block of stock would not want to place that sell order on the NYSE or NASDAQ because it is visible to the world and other investors would rush to sell once they see that order, depressing the price.
119
```
Last sale information is available for:
I Exchange listed securities
II Over-the-counter securities
III Municipal securities
IV Over-the-counter Pink Sheet securities
A I only
B I and II only
C II and IV only
D I, II, III, IV
```
The best answer is D.
Real time transaction reporting occurs for all exchange trades and for OTC equity trades (OTCBB, and Pink Sheet) trades. Corporate and agency bond trades are reported via TRACE, while municipal bond trades are reported via RTRS.
120
Confirmations sent no later than....
The completion of the transaction
- regular way 1-day settlement
- cash sent on the same day
121
Customer confirmations must disclose
- Name, address and phone number of broker-dealer;
- Trade date; Settlement Date;
- Transaction Price;
- Commission charged in all agency trades;
- Mark-up or mark-down charged in NASDAQ principal transactions; and riskless principal transactions
- The time of the trade; and other name of the other party to the trade; must be made available to the customer in agency transactions;
- Accrued interest for bond transactions.
- Type of account cash, margin
122
Option customer confirmations must disclose
- Trade date; Settlement Date;
- Number of contracts bought or sold;
- Transaction Price;
- Commission charge (all options trades are effected on exchanges and hence are agency trades);
- The time of the trade; and the name of the other party to the trade; must be made available to the customer.
123
MSRB requires customer confirmations to
- Name of issuer
- interest rate
- maturity
- if callable
- type of bond
124
Yield and dollar price of the transaction
- the dollar price that is computed must be lower than price to maturity or pice to call
125
Worst case basis discount bonds
- held to maturity, and priced to give the customer the promised yield at maturity
126
worst-case basis premium bonds
- bond is called early and priced to the customer at the promised yield based upon holding bonds to the nearest "in whole" call date
- also known as yield to worst
- only in whole calls are considered when pricing premium bonds
127
Pre-refunded bonds
sufficient U.S. Government securities have been purchased by the issuer and placed in escrow to pay all interest on the municipal bond issue until the near term call date, and to retire the issue at the near term call date (including paying any call premium) when the escrowed government securities mature
-maturity date becomes call date
128
FINRA 5% Policy
- 5% is a guideline on maximum commission and markups charged
- applies to all trades in First, Second, Third and Fourth Market
- does not apply to IPOs, Mutual Funds, Variable Annuities, Municipal Securities
- basis for determining security percentage is always the inside market.
129
Determining a fair and reasonable mark-up or commission
```
Size of the trade;
Dollar Amount of the trade;
Type of security traded;
Availability of the security;
Level of service provided by the firm.
```
130
factors that should be considered when pricing a municipal bond for BOTH agency and principal transactions
- best judgement of the fair market value of the security
- expense of filling the order
- fact that the firm is entitled to a profit
- availability of security
- total dollar amount
- value of services
131
The factors to be considered ONLY for principal transactions
- yield should be comparable to other similar securities in the market
- maturity, rating, call features
- nature of dealer's business
- existing of material information on the issuer
132
The factors to be considered that ONLY apply to agency trades are the:
- price of the transaction
| - value of any other compensation received in connection with the transaction
133
stocks, corporate bonds, and municipal bonds settle
2 Business Day Settlement
134
U.S. Government securities and Options settle
"regular way" on the next business day.
135
Government securities settle through the
FICC - Fixed Income Clearing Corporation in Fed Funds
136
options settle through the
OCC - Options Clearing Corporation in Clearinghouse funds
137
stocks, corporate bonds and municipal bonds settle through
the National Securities Clearing Corporation in Clearinghouse funds - funds payable through a member of the clearinghouse, which can be a broker-dealer or a bank.
138
Seller's option
- seller needs more time to deliver than the regular way
139
When, As and If Issued trades
- new securities who issuance is announced, but physical certificates are not yet available
- when trade performed, the settlement date is not known because that certificate has not been issued
- therefore accrued interest is not known
- when finally issued, a second statement is issued regarding the settlement date
140
Comparisons
Dealer to Dealer trade confirmations that must be sent on a real-time basis
-matched against trading record to see if all terms agree so that settlement can proceed
141
DK- Don't Know notice
- dealer receives a comparison from the firm that the firm does not recognize it can send it back as a "DK"
- must be sent not later than 20 minutes its received
142
Good Delivery and assignments
- The assignment must be in the exact name as registered on the certificate;
- Fiduciary account assignments are made by the fiduciary (e.g., trustee, custodian, executor of an estate, etc.);
- Corporate account assignments are made by the person so designated in the corporate resolution.
143
Mutilated Security
must be accompanied by a validation letter from the issuer or transfer agent, stating that the certificate will be honored.
144
DTC
- Depository Trust Corporation maintains custody of the majority of most physical securities,
- clears and settles trades through NCSS
145
DRS
- Direct Registration System run by DTC
| - does away with paper certificates and gives the investor a statement of ownership
146
Due Bill
- wrong amount of accrued interest is received
- wrong side of the party receives a dividend, stock certificates, warrants, rights
- firm sends a due bill to claim their part
147
x-dividend date for cash dividends
- 1 business day prior to the Record Date.
| - On the ex-date, the price of the stock is reduced for the dividend.
148
If a customer wishes to buy stock and receive the dividend, he or she must buy
- in a regular way trade at least 2 business days prior to the Record Date
149
If a customer wishes to sell stock that he or she owns and still receive the dividend
- selling no earlier than the ex-date.
150
If a customer buys stock in a cash settlement
- can buy up to, and including the Record Date, and receive the dividend.
151
ex-date for stock dividends, stock splits and rights is set at
- business day after the Payable Date.
| - The Payable Date is typically set 3 to 4 weeks after the Record Date.
152
Reclamation
-If a broker-dealer receives securities on the settlement, accepts the delivery, and later discovers that the wrong securities were delivered, the broker-dealer can send back the wrong certificates and demand delivery of the proper securities.
153
Rejection
broker-dealer receives securities on settlement and rejects the delivery because wrong securities were delivered, the broker-dealer can send back the wrong certificates and demand delivery of the proper securities
154
Main difference between Reclamation and Rejection
- Reclamation is ACCEPTING at first, Rejection is REJECTING at first
Series 7
flashcards
Decks in class (16)
# Cards
-
Equities Questions4
-
Debt Questions134
-
Debt-CM84
-
Investment Companies78
-
Investment Companies Questions13
-
Trading Markets154
-
Trading Market Questions74
-
Options173
-
Option Questions79
-
Customer Account146
-
Customer Account Questions10
-
Retirement Plans83
-
Corporate Underwritings82
-
Regulations173
-
Taxes38
-
BRIT Suitability51
