Series 56 Practice Questions – Flashcards
Unlock all answers in this set
Unlock answersquestion
The U4 needs to be updated for all of the following events except
answer
Marriage
question
How long after a U4 or U5 becomes inaccurate must it be updated?
answer
30 Days
question
Supervisors must keep the trade blotter for how long?
answer
6 years
question
When must the CE regulatory element be passed?
answer
On the 2 year anniversary and 3 years after
question
What is the maximum gift amount that an exchange employee can receive?
answer
$50
question
3 types of punishment SROs can hand out
answer
1. Censure 2. Monetary fine 3. Expulsion
question
SROs cannot hand out this specific form of punishment
answer
Jail time
question
If a market maker continues to participate until 4:25, he may leave
answer
Anytime after 6:30
question
What type of stock can be repurchased by the issuing corporation?
answer
Callable preferred stock
question
Minority shareholders benefit from
answer
Cumulative voting rights
question
A stock certificate...
answer
Provides physical evidence of ownership
question
How much margin is required to purchase a penny stock?
answer
100%
question
3 responsibilities of the transfer agent
answer
1. Account for lost shares 2. Act as a proxy for the firm 3. Handle issues relating to damaged certificates
question
One specific responsibility that is NOT handled by the transfer agent
answer
Reimburse stockholders for share transfer payments
question
What happens to your ownership percentage if you do not subscribe to a firm's rights offerings?
answer
It decreases
question
3 risks associated with OTCBB stocks
answer
1. Illiquid trading 2. Increased volatility 3. Threat of bankruptcy
question
1 risk not associated with OTCBB stocks
answer
Tighter spreads
question
If I own XYZ calls and it goes ex-dividend today, how must I settle to receive the dividend?
answer
I must settle on a cash basis
question
Which of the following will not change an option contract? A. Stock dividend B. Cash dividend C. Even stock split D. Odd stock split
answer
B. Cash dividend
question
What will cause an automatic adjustment to an options contract?
answer
A cash dividend of over $12.50
question
The index option settlement price is based on
answer
Today's closing price
question
Which currency does not have a contract size of 10,000
answer
Japanese yen
question
How long does a trader have to report an erroneous trade?
answer
30 minutes
question
During what time frame can a trading pause be enacted?
answer
9:45 to 3:45
question
If a trader buys his own offer and there is no beneficial transfer of ownership, it is...
answer
A wash trade
question
What is considered trade shredding?
answer
Breaking up an order to make more commission
question
Which currency is quoted in hundredth of cents?
answer
Japanese yen
question
Trader X posts an offer at $2 displaying 100 shares with 500 shares in reserve. Then trader Y posts an offer at $2 displaying 1000 shares. Trader Z pays the offer for 600 shares. What happens?
answer
Trader X gets filled for 100 shares and trader Y gets filled for 500 shares
question
On the expiration date, what time do options expire?
answer
11:59 PM
question
What is the max profit for the following option position? Long 1 XYZ 45 call for $8 Short 1 XYZ 50 call for $3
answer
$0
question
When must a customer sign the Options Account Agreement?
answer
Within 15 days of account approval
question
Who is responsible for supervision of accounts for branch offices?
answer
The principal
question
The Securities Act of 1933 addresses A. The primary market B. The secondary market C. The SEC D. FINRA
answer
A. The primary market
question
Which of the following is not on a trade blotter report? A. Entered orders B. Executed orders C. Canceled orders D. Changes in market levels
answer
D. Changes in market levels
question
3 Things that are on a trade blotter report
answer
1. Entered orders 2. Executed orders 3. Canceled orders
question
Which of the following agencies cannot investigate a prop trading firm? A. NYSE B. OPRA C. FINRA D. SEC
answer
B. OPRA
question
What is an auction market?
answer
A market formed by competitive bids and offers
question
What is treasury stock?
answer
The amount of shares that were issued and then repurchased by a company
question
Which of the following is not a method used by firms to compensate equity holders? A. Interest payments B. Stock dividend payment C. Cash dividend payment D. Corporate stock repurchase.
answer
A. Interest payments
question
Trader A who is long XYZ shares enters a 20,000 share bid. The stock price rises and the trader exits his position on the offer. Then trader A cancels the bid. This is an example of?
answer
Spoofing
question
Trader B calls his broker and asks him to buy 300 shares of XYZ near the close of trading everyday for a week. Trader B already has a substantial position in XYZ, and the additional shares have little impact on his position. This is an example of...
answer
Marking the close
question
When does the opening trade rotation begin?
answer
When the underlying stock opens for trading
question
When must you mark a short sale?
answer
When the order is placed
question
A customer must inform which party that he is exercising an option?
answer
His clearing firm
question
What should a participant do if there is a failure to deliver for 13 days?
answer
Close out the position
question
A facilitation cross occurs when there are orders from which two parties?
answer
Customer and broker
question
What is the minimum amount of capital a JBO must hold?
answer
$1 million
question
What is the minimum number of contracts for a facilitation cross?
answer
50
question
A market maker has a 40,000 share offer at $10. A customer puts in a 200 share offer at the same price. What does the market maker do?
answer
A market maker may keep his display because it is a de minimus change to the offer
question
When is the last time a customer can exercise an option?
answer
5:30 ET the day before expiration
question
When is the last time OCC clearing members can submit exercise notices?
answer
8:00 ET the day before expiration
question
What is the difference between OATS and COATS?
answer
COATS applies to options and OATS applies to equities
question
What must a market maker do to short a restricted security?
answer
Mark the order "Market Maker Exempt"
question
Futures and stock transactions settle in how many days respectively?
answer
Futures settle t+1 and stocks settle t+3
question
Which of of the following is a narrow based index? A. S&P 500 Index B. Russell 1000 Index C. Dow Jones Transportation Index D. Nasdaq 100 Index
answer
C. Dow Jones Transportation Index
question
Stock options and index options settle in which of the following ways, respectively
answer
Stock and cash
question
Of the following, who is not required to display a two sided quote? A. Floor broker B. Lead market maker C. Remote market maker D. Specialist
answer
A. Floor broker
question
Who sets options exercise limits?
answer
Each individual exchange
question
A market maker firm must submit an exercise note to
answer
Its clearing firm
question
During Fast Markets, which of the following is true? A. Specialists are no longer allowed to execute trades B. Floor brokers are no longer allowed to execute trades C. Quoted bids and offers are inaccurate D. Normal market hours are shortened
answer
C. Quoted bids and offers are inaccurate
question
A trading pause occurs when an S&P 500 stock moves
answer
More than 10% in 5 minutes
question
The following be received by supervisor of any outside brokerage accounts
answer
Monthly statements and trade confirmations
question
Which of the following regulations involves the dissemination of nonpublic material?
answer
Reg FD
question
What's the par value of a preferred stock?
answer
100
question
An option contract is adjusted for a dividend at this time
answer
Ex-dividend date
question
Except for the Japanese Yen, what is the standard contract size for a Forex option?
answer
10,000
question
What is the auto-exercise threshold for in-the-money options?
answer
$0.01
question
A trader buys 1 June XYZ 45 call and 1 June XYZ 45 put. This is an example of a
answer
Straddle
question
What is the method for determining order priority?
answer
Price then time
question
For American style options, assignments to sellers can happen
answer
At any time
question
A trader at firm A receives a call from his friend at firm B about a sell stop order in security XYZ that is 10 cents away. Trader A immediately buys puts on XYZ to guarantee himself a profit if the stop gets triggered. This is an example of a...
answer
Front-running violation
question
What does T+N refer to?
answer
The number of days after the transaction that the settlement occurs
question
A broker-dealer assigns options exercises to sellers by these three methods
answer
1. Completely at random 2. First in, first out 3. Fair and equitable
question
Which agency provides the threshold stock list?
answer
The exchange
question
The following is example of a violation of what rule? A broker executes a proprietary order at a price price than would satisfy a customer limit order without executing a customer's order
answer
The manning rule
question
The Securities Act of 1934 includes...
answer
Trading of any security within the US
question
There is a dutch tender between $99 and $105. Trader A puts in an order to sell 100,000 shares at $99.75. The company says they will buy 95% pro-rata at $100.25. What are the terms of the sale?
answer
Trader A sells 95,000 shares at $100.25
question
Exchange A has a system error and cannot route orders to exchange B. What happens?
answer
Exchange B declares self-help against Exchange A
question
What time does ACT close?
answer
8:00
question
In terms of information, the following is true about bulletin board securities in relation to listed securities
answer
Less information must be disseminated to investors regarding company information
question
On what basis are foreign currency options settled?
answer
Cash
question
According to the Anti-Money Laundering portion of the Patriot Act, who must a broker-dealer check with prior to accepting capital contributions from a customer?
answer
FINRA
question
What is NOT true of the code of arbitration in regards to the rules of parties withdrawing.
answer
Both parties can withdraw at any point
question
You are long 1 XYZ 25 call and short 1 XYZ 30 call with a net debit of $3. What is the maximum profit?
answer
$2
question
How long do you have to report OTC trades?
answer
30 seconds
question
A firm is below their minimum margin requirements (or doesn't have enough capital) but with permission, executes a trade for a customer under the name of another firm. This is referred to as...
answer
Give-up
question
3 things that are true of warrants
answer
1. They can receive stock dividends 2. They can be perpetual 3. If a warrant is exercised, the company will issue new shares
question
Which of the following trading facilities is an ATS? A. NYSE B. AMEX C. Dark pool D. ECNS
answer
D. ECNs
question
John owns 1 March XYZ call @ $25. XYZ gets a hostile takeover bid for $28. What happens to the contracts?
answer
Option contract adjustments for mergers and acquisitions are handled on a case by case basis
question
A buy limit order designated to a specific market center, while a better offer is available on another exchange is called...
answer
An Inter-Market Sweep Order
question
Who is in charge of choosing lead market makers, specialists and so forth?
answer
The exchange
question
What term does this best describe? The executing broker places a trade on behalf of another broker as if he/she actually executed the trade
answer
Give-up
question
How is the position limit for a broad index calculated?
answer
The number of outstanding shares and the volume for the last 6 months
question
When must a customer receive the risk disclosure document?
answer
At or prior to account approval
question
The maximum spread allowed by market makers of options between the prices of $5 and $10 is
answer
$0.50
question
If a trade occurs between 8:00pm and 8:00am when is it reported?
answer
15 minutes before the open
question
When a trader is short Aug 35 calls and long Aug 55 calls, what type of option strategy is being used?
answer
Bear call spread
question
You are long 5 XYZ Aug 20 calls, and XYZ is at $25. You close the position. What happens to your account?
answer
Increased by $2,500
question
What is the maximum gift amount that a trader can receive?
answer
$100
question
In order to close out a short position, a trader must
answer
Buy to close
question
If a trader does not complete the continuing education requirement
answer
He must retake the qualifying exam
question
Market makers have how long to settle a fail-to-deliver?
answer
T+6
question
A trader buys 500 shares at or near the close each day in order to end the day on an uptick. What is the name of this violation?
answer
A marking-the-close violation
question
An option market maker's displayed quote...
answer
Should be considered a firm quote for all investors
question
A supervisor is required to review all of the following daily except A. A random sampling of chats B. A random sampling of emails C. Daily trade blotters D. All outside research reports used by employees
answer
D. All outside research reports used by employees
question
Tickets that are marked on an "as/of" (T+N) basis signify
answer
Trades that happened earlier and have not yet been reported
question
A trader is short Aug 35 calls and long Aug 55 calls. What type of option strategy is being used?
answer
A bear call spread
question
Two responsibilities of a Specialist
answer
1. Market making by displaying their best bid and ask prices to the market during trading hours 2. Maintain a "fair and orderly market" in the stocks they trade
question
1 key trading restriction placed on Specialists by the exchange rules
answer
Prohibited to trade ahead of investors in a given security who have placed buy or sell orders for the same price
question
The acceptance of the delivery of shares prior to the delivery date is at the option of which member
answer
The receiving member
question
If an option trade remains unmatched after a trade day, when is the deadline to resolve the error?
answer
15 minutes before the market open
question
In what case may a registered representative share directly or indirectly in the profits or losses of a customer account?
answer
If there is a profit sharing agreement in writing
question
What system was developed by the Options Clearing Corporation to support portfolio margining of customer accounts?
answer
Customer Portfolio Margin System
question
In terms of the exchange rules, every employee of a member or permit holding firm should be...
answer
Acceptable to the exchange
question
The Option Price Reporting Authority (OPRA)
answer
Reports last sale and current quotes from all participating option exchanges
question
On what date do shares adjust in price based on a declared dividend?
answer
Ex-dividend date
question
What term refers to shares that have been sold to the public combined with shares that have been issued to insiders but does not include shares that have been repurchased by the company?
answer
Outstanding stock
question
An option order that is a spread in which the stated number of option contracts to buy is not equal to the number of option contracts to be sold
answer
Ratio order
question
What type of order has no priority on the book?
answer
A contingency order
question
Who is the party that is defined as the member that receives an order for handling or execution against its quote?
answer
Executing party
question
What term refers to compensation that a broker receives from a third party who wants to influence how the broker routes their customer orders?
answer
Payment for order flow
question
Trades executed between midnight and 8:00 am eastern should be reported to the tape by _____ on the trade date
answer
8:15 am ET
question
When the lowest offer for an option contract is 0.05...
answer
A market order will be considered a limit order to sell at 0.05
question
Which of the following individuals employed by a securities Exchange member or permit holder would need to be registered? A. Individuals who are clerical and administrative B. Individuals who are involved only in commodity transactions C. Individuals who are engaged in the training of proprietary traders D. Individuals who are not actively engaged in a firm's securities business
answer
Individuals who are engaged in the training of proprietary traders
question
Which of the following would not be considered part of the consolidated last sale information? A. Price B. Volume C. Account ID D. Market ID
answer
Account ID
question
At an Automated Trading Center any quotation that is not automated would be identified as --
answer
A manual order
question
With respect to an options class, the time period on a national securities exchange when continuous trading has not yet commenced is a --
answer
Trading rotation
question
If a broker or dealer receives an order to buy or sell a listed option in an amount greater than the quotation size established by a national securities exchanges or national securities association's rules they may choose to -
answer
Execute part of the order equal to the published quotation size and revise their quote
question
If an order is filled at the national best bid or offer the order is referred to as being --
answer
Executed at the quote
question
The purchase or sale of an NMS stock during regular trading hours that is lower than a protected bid or higher than a protected offer is known as -
answer
A trade through
question
A list of securities that a firm may compile that indicates what stocks the firm's employees should avoid trading is known as --
answer
Do-not-trade lists
question
What is the general term for computerized trading used primarily by institutional investors for large volume orders?
answer
Program Trading
question
On the last business day before expiration options that are in-the-money should be --
answer
Exercised automatically
question
What entity is responsible for the option exercise and assignment process?
answer
OCC
question
Why should a holder of a short position in a call option be aware of ex-dividend dates?
answer
The likelihood of an in the money call being exercised increases as the ex-dividend date approaches
question
Which of the following is true of a Lead Market Maker? A. May not receive economic incentives for role B. Expected to post a minimum bid and ask size C. Are selected by FINRA D. Are regulated by the CFTC
answer
Expected to post a minimum bid and ask size
question
The document titled Characteristics and Risks of Standardized Options that should be distributed to individuals opening an options account is also known as the -
answer
Options Disclosure Document
question
What is a risk that accompanies purchasing an Exchange Traded Note (ETN) that does not accompany ownership of an Exchange Traded Fund (ETF)?
answer
The debt rating of the issuer
question
Under relation SHO a broker dealer may combine all long and short positions to determine a net firm position. This is known as --
answer
Aggregation
question
Which of the following is not a requirement for a broker to execute a short sale on behalf of a customer? A. Assurance that the stock has been borrowed B. The broker has borrowed the security of behalf of the customer C. Documented Compliance D. Assurance the broker will receive commissions based on the execution
answer
Assurance the broker will receive commissions based on the execution
question
Firms shall preserve for ___ year(s) a record of the following - Every order originating with a firm that is given to or received from another firm Every order issued by a firm to any other market Every order originating off the Exchange
answer
3
question
An Over The Counter stock is one that is traded through
answer
A dealer network
question
An open end management type investment company is commonly known as a
answer
Mutual fund
question
What is Painting The Tape?
answer
Illegal practice by traders who manipulate the market by buying and selling a security to create the illusion of high trading activity
question
Which of the following is not considered a neutral option strategy? A. At the money covered call writing B. Straddle Writing C. Combination Writing D. Straddle Buying
answer
Straddle buying
question
Which of the following expectation is specific to members or permit holders of an Exchange? A. They should be expected to be profitable traders B. They are expected to avoid any acts that may be detrimental to the interest of the Exchange C. They are expected to employ as many people on the exchange floor as possible D. They are expected to act as both brokers and independent traders
answer
They are expected to avoid any acts that may be detrimental to the interest of the Exchange
question
What type of voting rights may be issued to Preferred Shareholders?
answer
Contingent voting rights
question
5. Which of the following describes an option that has intrinsic value? A. In-the-Money B. Out-of-the Money C. At-the-Money D. Expired
answer
In-the-money
question
In what case may a member or permit holder guarantee profits to a customer?
answer
Never
question
A branch office may be able to transact options business without the employment of an Options Principal if - A. The office has just opened B. The office has less than 3 registered representatives and proper supervision from an offsite Options Principal has been documented. C. The office is in the same city as the company headquarters D. A branch office must always have an Options Principal on site.
answer
The office has less than 3 registered representatives and proper supervision from an offsite Options Principal has been documented
question
Which of the following is not a right of a common stockholder? A. Unlimited Liability B. Proportionate Ownership C. Right of Transfer D. Rights to a Dividend
answer
Unlimited Liability
question
What term refers to the number of shares that may be potentially sold to the public?
answer
Authorized stock
question
What is the minimum size for a Qualified Contingent Cross Order?
answer
1,000 contracts
question
Multiple customer orders in the order book at the same price will be ranked by --
answer
Time the orders were received
question
Which is NOT an expectation of a market maker? A. Broker Customer Orders B. Update Market Quotes C. Honor Quotes D. Price Option Contacts Fairly
answer
Broker customer orders
question
On what form would an employee termination be reported?
answer
Form U-5
question
When Exchange A is displaying a bid for 100 XYZ @ 48.00 and Exchange B is displaying an offer for 100 XYZ @ 48.00 this is known as a --
answer
Locked quotation
question
A facility operated by or on behalf of a national securities exchange or national securities association that executes orders in a security or presents orders to members for execution is known as --
answer
SRO Trading Facility
question
If a specialist is bidding for 10,000 XYZ at 51.00 and receives a customer limit order to buy 100 shares of XYZ at 51.00 he -
answer
May choose to make no change to his displayed quote
question
What type of orders may be excluded from monthly market center quoting reports?
answer
Limit orders 10% away from the market price
question
An offer that is being displayed by an automated trading center and is being disseminated pursuant to a national market system plan is --
answer
A protected offer
question
A pegged Zero Display Reserve Order which tracks the inside quote of the opposite side of the market is
answer
Market Peg
question
A pegged Zero Display Reserve Order that tracks the midpoint is defined as a --
answer
Midpoint Peg
question
A pegged Zero Display Reserve Order that tracks the inside quote of the same side of the market is defined as a --
answer
Primary Peg
question
A limit order with a portion of the quantity displayed ("display quantity") and with a reserve portion of the quantity ("reserve quantity") that is not displayed
answer
Reserve Order
question
In relation to routing and execution, what are 3 things that a Zero Display Order will be ineligible for?
answer
1. Routing to away trading centers 2. Execution during crossed market conditions in an NMS stock 3. If indicated by the user on an order-by-order basis, during locked market conditions
question
What is the term that defines the situation where a protected bid is priced higher than a protected offer?
answer
Crossed market
question
What is the term that defines the situation where a protected bid is equal to a protected offer?
answer
Locked market
question
What happens on the book to a Zero Display Reserve order during crossed or locked market conditions?
answer
It remains posted on the NSX book until the market is uncrossed, unlocked or the order is cancelled by the user
question
A Reserve Order with zero display quantity will be known as a --
answer
Zero Display Reserve Order
question
For equity options at the firm level, the auto exercise threshold is --
answer
Up to the firm
question
All options transactions executed on an exchange should be submitted for clearance to the --
answer
Options Clearing Corporation
question
Which of the following is true of a Lead Market Maker? A. May not receive economic incentives for role B. Expected to post a minimum bid and ask size C. Are selected by FINRA D. Are regulated by the CFTC
answer
Expected to post a minimum bid and ask size
question
What is a difference between an Exchange Traded note (ETN) and an Exchange Traded Fund (ETF)?
answer
The ETN is a debt instrument
question
Internal controls that seek to restrict the flow of potentially material non-public information between different divisions of the same firm are known as --
answer
Chinese Walls
question
Which platform that allows firms to trade all NASDAQ, AMEX, and NYSE securities on a single network?
answer
NASDAQ Market Center
question
Which of the following is considered a bullish option strategy? A. Uncovered Put Writing B. Straddle Writing C. Bear Spread D. At the Money Covered Call Writing
answer
Uncovered put writing
question
Sanctions of an SRO become effective --
answer
After a full review process is completed
question
What does NSCC stand for?
answer
National Securities Clearing Corporation
question
A settlement style in which the exercise settlement values of index options are based on the reported level of the index derived from the last reported prices of the component securities of the index at the close of market hours on the day of exercise
answer
PM Settlement
question
The difference between the exercise price of the index option and the exercise settlement value of the index on the day an exercise notice is tendered, multiplied by the index multiplier
answer
Exercise settlement amount
question
A notice submitted to OCC by clearing members to reflect their desire to exercise an option contract.
answer
Exercise notice
question
The allocation of an exercise notice to an index option writer (seller) that obligates him to pay (in the case of a call or put) the cash settlement amount for a particular index option if it is exercised by its holder
answer
Assignment
question
A settlement style in which the exercise settlement values of index options are based on the reported level of the index derived from the opening prices of the component securities on the day of exercise
answer
AM Settlement
question
The cutoff time for exercise of American style index options is --
answer
4:20 pm ET
question
When should a member or permit holder be obligated to reconcile all unmatched trades?
answer
Promptly upon discovering the error
question
What is true of an American Depository Receipt (ADR)?
answer
It may be redeemed for foreign shares
question
What is the breakeven point of the following option trade? Buy 1 XYZ 50 Put @ 2.50.
answer
47.50
question
What is the minimum equity requirement of a Joint Back Office participant?
answer
1 million
question
Which of the following is a right or liability that goes along with owning common shares? A. Potential liability of debts of the corporation. B. Right to receive declared dividends. C. Liability of lawsuits brought against the corporation. D. None of the above.
answer
Right to receive declared dividends
question
Which of the following is NOT a Self Regulatory Organization? A. Securities and Exchange Commission B. Chicago Board Options Exchange C. NASDAQ OMX Group D. International Securities Exchange
answer
Securities and Exchange Commission
question
In relation to exchange rules, what happens to a market order in a situation where two market participants are bidding together at the same price for an option contract?
answer
Any market order to sell at that price will be divided based on exchange rules
question
If a member fails to submit a tape report within the 30 seconds of trade execution the member must --
answer
report the execution and designate it as late
question
What is an audit trail of order, quote, and trade information for options trading that was developed by options exchanges to provide a time sequenced record of electronic and other orders, quotations, and transactions in certain option classes?
answer
Consolidated Options Audit Trail
question
After a Form U5 has been filed a firm discovers the information on the Form U5 is incomplete. When must an amendment to this form be submitted?
answer
Within 30 days
question
In relation to costs at SROs, the cost of access to quotations at an SRO display only facility should be --
answer
At a cost that is close to being equivalent to the level and cost of access on their trading network
question
An order at a certain price that is not for the account of a broker or dealer is --
answer
Customer limit order
question
A buy order entered with a limit that is above the national best offer would be known as --
answer
Marketable Limit Order
question
If a specialist is bidding for 10,000 XYZ at 51.00 and receives a customer limit order to buy 53 shares of XYZ at 51.00 he -
answer
may choose to make no change to his display quote
question
How often should a broker or dealer make publicly available a report on its routing of non-directed orders in NMS securities?
answer
Quarterly
question
In relation to order entry, an Intermarket Sweep Order is --
answer
Entered as a Limit Order
question
At what premium may a cabinet trade be transacted?
answer
$1.00
question
If a call holder exercises a call option before an ex-dividend date he is --
answer
entitled to the dividend on payment date
question
Which of the following is NOT true of a Designated Market Maker? A. Receives a 'look' at orders before other market participants B. Is a successor to the specialist system C. May update quotes using an algorithm D. May be required to provide continuous bids and offers
answer
Receives a "look" at orders before other market participants
question
The Securities and Exchange Act of 1934 established laws to govern - A. Primary market trading B. Only the option markets C. Trading of commodities D. Secondary Trading of Securities
answer
Secondary trading of securities
question
According to Regulation SHO, in what case below would a broker not need to have reasonable assurance that the borrowing of a security has been arranged? A. A Long Sale B. In conjunction with a short sale in a paired trade C. Short Exempt Trades D. Short Sales associated with Arbitrage
answer
A long sale
question
The illegal practice of a stock broker executing orders on a security for its own account while taking advantage of orders from its customers is known as -
answer
Front running
question
Attempting to influence a securities closing price through buying or selling of that security near the market close would be known as -
answer
Marking the close
question
What is true of a Global Depository Receipt (GDR)?
answer
It may trade in multiple currencies
question
How much does an investor pay to purchase 5 call options contracts at a premium of $2.00?
answer
$1,000
question
What may be true of a Transfer Package? A. It must be bid for at a discount to the value of the instruments B. It must be bid for at a discount to the value of the instruments C. It may include stock as well as option positions D. The change in ownership does not need to be reported to the OCC
answer
It may include stock as well as option positions
question
What entity keeps records for a company regarding investors and records of transactions?
answer
Transfer Agent
question
Which of the following is not true regarding the Option Clearing Corporation? A. Protects members from counterparty risk B. Is regulated by the SEC C. Is regulated by the CFTC D. Regulates the trading of stocks
answer
Regulates the trading of stocks
question
All OTC transactions in equity securities to which a FINRA member is a party must --
answer
Be reported to FINRA
question
What is the FINRA established system to audit order, quote, and trade information for NASDAQ and OTC equity securities?
answer
Order Audit Trail System
question
How often should a broker inform customers of the availability of a report regarding the routing of orders?
answer
Quarterly
question
What was enacted to initiate a series of initiates designed to modernize and strengthen the national market system for equity securities?
answer
Regulation NMS
question
An order that is routed to execute at the full display size on the bid or offer is known as a --
answer
Inter-market Sweep Order
question
Which of the following positions would qualify under an equity hedge exemption regarding firm positions limits? A. Long Call and Long Stock B. Short Call and Long Stock C. Long Put and Long Call D. Long Put and Short Stock
answer
Short call and long stock
question
The OCC's clearing members may submit exercise notices until _____ pm ET
answer
8:00
question
Background and financial information of customers who have been approved for options transactions shall be maintained --
answer
At both the branch office servicing the account and the principal supervisory office
question
Pursuant to exchange rules, what action must be taken by the parties involved if an unmatched options trade cannot be resolved by mutual agreement?
answer
Than transaction shall be promptly closed out by the parties
question
If an unmatched options trade is not resolved by fifteen minutes prior to the opening of trading on the following business day, due to one of the executing brokers not being present or represented on the Exchange floor, the trade shall be submitted to --
answer
The Options Clearing Corporation
question
With respect to American-Style Cash-settled Index Options, for all contracts exercised by the Member or by any customer of the Member, an "exercise advice" must be delivered by the Member no later than ____ p.m. Eastern time
answer
4:20
question
With respect to American-Style Cash-settled Index Options, if normal trading hours have been extended or modified, by what time must all members submit any "exercise advice" or "advice cancel" notices?
answer
5 minutes after the close of trading on that day
question
The exercise of American- style cash-settled index options is normally prohibited when trading such options is delayed, halted or suspended. What are the 3 exceptions to this rule?
answer
1. If it can be documented that the exercise decision was made prior to these market conditions 2. It is the day before the option expires 3. A trading halt occurs at or after 4:00 pm ET
question
In regards to the exercise of American style index options, If there is a trading halt at or after 4:00 pm ET and then trading resumes again when are you allowed to exercise the option?
answer
During the resumption of trading and for 5 minutes after the close of the resumption of trading
question
Prior to what time is the Daily Cash Settlement Report available?
answer
10:00 AM ET
question
Wen do options settle after they have been exercised?
answer
T+3
question
The delivery obligation in respect of such underlying security shall be deemed to be ____ ______ when the total number of units reported to be delivered and received equals the total quantity of the underlying security to be delivered (received) as set forth in the applicable Delivery Advice
answer
Fully Discharged
question
Exchange Traded Options are also know as --
answer
Listed options
question
What act is regulation SP and what does it deal with?
answer
The Privacy Act, deals with privacy of customer information
question
What is true of brokers during fast market conditions?
answer
They are not held to the same constraints as they are during regular market conditions
question
Market term best describes the condition that is officially declared by an options market exchange when the financial markets are experiencing unusually high levels of volatility combined with unusually heavy trading?
answer
Fast Market
question
What are 5 records that must be kept for 6 years?
answer
1. Blotters 2. General ledger 3. Customer account ledgers 4. Position record 5. Cash and margin account records
question
Define Interpositioning
answer
The unlawful practice of adding an extra broker/dealer as a principal on a trade, even if no service is provided.
question
When would the prohibition of interpositioning not apply?
answer
If the member firm can demostrate that the customer received the best price possible because of the intervention of a thrid party
question
What does the Manning Rule prohibit?
answer
An NASD member firm from placing the firm's interest before/above the financial interests of the client
question
Why was Regulation SHO adopted by the SEC?
answer
To modernize and update old rules that regulated short sales
question
What type of securities does Regulation SHO apply to?
answer
Equity securities and any security that is convertible into an equity security
question
What does the Order Marking Requirement of Rule 200 of Regulation SHO require?
answer
Requires broker-dealers to mark all orders either long or short
question
What kinds of securities does the SEC Rule 200 Order Marking Requirement apply to?
answer
Equity securities that are traded OTC, on Nasdaq or on an exchange
