Series 56 Practice Questions

The U4 needs to be updated for all of the following events except

How long after a U4 or U5 becomes inaccurate must it be updated?
30 Days

Supervisors must keep the trade blotter for how long?
6 years

When must the CE regulatory element be passed?
On the 2 year anniversary and 3 years after

What is the maximum gift amount that an exchange employee can receive?

3 types of punishment SROs can hand out
1. Censure
2. Monetary fine
3. Expulsion

SROs cannot hand out this specific form of punishment
Jail time

If a market maker continues to participate until 4:25, he may leave
Anytime after 6:30

What type of stock can be repurchased by the issuing corporation?
Callable preferred stock

Minority shareholders benefit from
Cumulative voting rights

A stock certificate…
Provides physical evidence of ownership

How much margin is required to purchase a penny stock?

3 responsibilities of the transfer agent
1. Account for lost shares
2. Act as a proxy for the firm
3. Handle issues relating to damaged certificates

One specific responsibility that is NOT handled by the transfer agent
Reimburse stockholders for share transfer payments

What happens to your ownership percentage if you do not subscribe to a firm’s rights offerings?
It decreases

3 risks associated with OTCBB stocks
1. Illiquid trading
2. Increased volatility
3. Threat of bankruptcy

1 risk not associated with OTCBB stocks
Tighter spreads

If I own XYZ calls and it goes ex-dividend today, how must I settle to receive the dividend?
I must settle on a cash basis

Which of the following will not change an option contract?

A. Stock dividend
B. Cash dividend
C. Even stock split
D. Odd stock split

B. Cash dividend

What will cause an automatic adjustment to an options contract?
A cash dividend of over $12.50

The index option settlement price is based on
Today’s closing price

Which currency does not have a contract size of 10,000
Japanese yen

How long does a trader have to report an erroneous trade?
30 minutes

During what time frame can a trading pause be enacted?
9:45 to 3:45

If a trader buys his own offer and there is no beneficial transfer of ownership, it is…
A wash trade

What is considered trade shredding?
Breaking up an order to make more commission

Which currency is quoted in hundredth of cents?
Japanese yen

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?
Trader X gets filled for 100 shares and trader Y gets filled for 500 shares

On the expiration date, what time do options expire?
11:59 PM

What is the max profit for the following option position?

Long 1 XYZ 45 call for $8
Short 1 XYZ 50 call for $3


When must a customer sign the Options Account Agreement?
Within 15 days of account approval

Who is responsible for supervision of accounts for branch offices?
The principal

The Securities Act of 1933 addresses

A. The primary market
B. The secondary market
C. The SEC

A. The primary market

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

D. Changes in market levels

3 Things that are on a trade blotter report
1. Entered orders
2. Executed orders
3. Canceled orders

Which of the following agencies cannot investigate a prop trading firm?



What is an auction market?
A market formed by competitive bids and offers

What is treasury stock?
The amount of shares that were issued and then repurchased by a company

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.

A. Interest payments

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?

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…
Marking the close

When does the opening trade rotation begin?
When the underlying stock opens for trading

When must you mark a short sale?
When the order is placed

A customer must inform which party that he is exercising an option?
His clearing firm

What should a participant do if there is a failure to deliver for 13 days?
Close out the position

A facilitation cross occurs when there are orders from which two parties?
Customer and broker

What is the minimum amount of capital a JBO must hold?
$1 million

What is the minimum number of contracts for a facilitation cross?

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?
A market maker may keep his display because it is a de minimus change to the offer

When is the last time a customer can exercise an option?
5:30 ET the day before expiration

When is the last time OCC clearing members can submit exercise notices?
8:00 ET the day before expiration

What is the difference between OATS and COATS?
COATS applies to options and OATS applies to equities

What must a market maker do to short a restricted security?
Mark the order “Market Maker Exempt”

Futures and stock transactions settle in how many days respectively?
Futures settle t+1 and stocks settle t+3

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

C. Dow Jones Transportation Index

Stock options and index options settle in which of the following ways, respectively
Stock and cash

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
A. Floor broker

Who sets options exercise limits?
Each individual exchange

A market maker firm must submit an exercise note to
Its clearing firm

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

C. Quoted bids and offers are inaccurate

A trading pause occurs when an S&P 500 stock moves
More than 10% in 5 minutes

The following be received by supervisor of any outside brokerage accounts
Monthly statements and trade confirmations

Which of the following regulations involves the dissemination of nonpublic material?
Reg FD

What’s the par value of a preferred stock?

An option contract is adjusted for a dividend at this time
Ex-dividend date

Except for the Japanese Yen, what is the standard contract size for a Forex option?

What is the auto-exercise threshold for in-the-money options?

A trader buys 1 June XYZ 45 call and 1 June XYZ 45 put. This is an example of a

What is the method for determining order priority?
Price then time

For American style options, assignments to sellers can happen
At any time

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…
Front-running violation

What does T+N refer to?
The number of days after the transaction that the settlement occurs

A broker-dealer assigns options exercises to sellers by these three methods
1. Completely at random
2. First in, first out
3. Fair and equitable

Which agency provides the threshold stock list?
The exchange

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

The manning rule

The Securities Act of 1934 includes…
Trading of any security within the US

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?
Trader A sells 95,000 shares at $100.25

Exchange A has a system error and cannot route orders to exchange B. What happens?
Exchange B declares self-help against Exchange A

What time does ACT close?

In terms of information, the following is true about bulletin board securities in relation to listed securities
Less information must be disseminated to investors regarding company information

On what basis are foreign currency options settled?

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?

What is NOT true of the code of arbitration in regards to the rules of parties withdrawing.
Both parties can withdraw at any point

You are long 1 XYZ 25 call and short 1 XYZ 30 call with a net debit of $3. What is the maximum profit?

How long do you have to report OTC trades?
30 seconds

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…

3 things that are true of warrants
1. They can receive stock dividends
2. They can be perpetual
3. If a warrant is exercised, the company will issue new shares

Which of the following trading facilities is an ATS?

C. Dark pool


John owns 1 March XYZ call @ $25. XYZ gets a hostile takeover bid for $28. What happens to the contracts?
Option contract adjustments for mergers and acquisitions are handled on a case by case basis

A buy limit order designated to a specific market center, while a better offer is available on another exchange is called…
An Inter-Market Sweep Order

Who is in charge of choosing lead market makers, specialists and so forth?
The exchange

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


How is the position limit for a broad index calculated?
The number of outstanding shares and the volume for the last 6 months

When must a customer receive the risk disclosure document?
At or prior to account approval

The maximum spread allowed by market makers of options between the prices of $5 and $10 is

If a trade occurs between 8:00pm and 8:00am when is it reported?
15 minutes before the open

When a trader is short Aug 35 calls and long Aug 55 calls, what type of option strategy is being used?
Bear call spread

You are long 5 XYZ Aug 20 calls, and XYZ is at $25. You close the position. What happens to your account?
Increased by $2,500

What is the maximum gift amount that a trader can receive?

In order to close out a short position, a trader must
Buy to close

If a trader does not complete the continuing education requirement
He must retake the qualifying exam

Market makers have how long to settle a fail-to-deliver?

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?
A marking-the-close violation

An option market maker’s displayed quote…
Should be considered a firm quote for all investors

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

D. All outside research reports used by employees

Tickets that are marked on an “as/of” (T+N) basis signify
Trades that happened earlier and have not yet been reported

A trader is short Aug 35 calls and long Aug 55 calls. What type of option strategy is being used?
A bear call spread

Two responsibilities of a Specialist
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

1 key trading restriction placed on Specialists by the exchange rules
Prohibited to trade ahead of investors in a given security who have placed buy or sell orders for the same price

The acceptance of the delivery of shares prior to the delivery date is at the option of which member
The receiving member

If an option trade remains unmatched after a trade day, when is the deadline to resolve the error?
15 minutes before the market open

In what case may a registered representative share directly or indirectly in the profits or losses of a customer account?
If there is a profit sharing agreement in writing

What system was developed by the Options Clearing Corporation to support portfolio margining of customer accounts?
Customer Portfolio Margin System

In terms of the exchange rules, every employee of a member or permit holding firm should be…
Acceptable to the exchange

The Option Price Reporting Authority (OPRA)
Reports last sale and current quotes from all participating option exchanges

On what date do shares adjust in price based on a declared dividend?
Ex-dividend date

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?
Outstanding stock

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
Ratio order

What type of order has no priority on the book?
A contingency order

Who is the party that is defined as the member that receives an order for handling or execution against its quote?
Executing party

What term refers to compensation that a broker receives from a third party who wants to influence how the broker routes their customer orders?
Payment for order flow

Trades executed between midnight and 8:00 am eastern should be reported to the tape by _____ on the trade date
8:15 am ET

When the lowest offer for an option contract is 0.05…
A market order will be considered a limit order to sell at 0.05

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

Individuals who are engaged in the training of proprietary traders

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

Account ID

At an Automated Trading Center any quotation that is not automated would be identified as —
A manual order

With respect to an options class, the time period on a national securities exchange when continuous trading has not yet commenced is a —
Trading rotation

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 –
Execute part of the order equal to the published quotation size and revise their quote

If an order is filled at the national best bid or offer the order is referred to as being —
Executed at the quote

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 –
A trade through

A list of securities that a firm may compile that indicates what stocks the firm’s employees should avoid trading is known as —
Do-not-trade lists

What is the general term for computerized trading used primarily by institutional investors for large volume orders?
Program Trading

On the last business day before expiration options that are in-the-money should be —
Exercised automatically

What entity is responsible for the option exercise and assignment process?

Why should a holder of a short position in a call option be aware of ex-dividend dates?
The likelihood of an in the money call being exercised increases as the ex-dividend date approaches

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

Expected to post a minimum bid and ask size

The document titled Characteristics and Risks of Standardized Options that should be distributed to individuals opening an options account is also known as the –
Options Disclosure Document

What is a risk that accompanies purchasing an Exchange Traded Note (ETN) that does not accompany ownership of an Exchange Traded Fund (ETF)?
The debt rating of the issuer

Under relation SHO a broker dealer may combine all long and short positions to determine a net firm position. This is known as —

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

Assurance the broker will receive commissions based on the execution

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

An Over The Counter stock is one that is traded through
A dealer network

An open end management type investment company is commonly known as a
Mutual fund

What is Painting The Tape?
Illegal practice by traders who manipulate the market by buying and selling a security to create the illusion of high trading activity

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

Straddle buying

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

They are expected to avoid any acts that may be detrimental to the interest of the Exchange

What type of voting rights may be issued to Preferred Shareholders?
Contingent voting rights

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


In what case may a member or permit holder guarantee profits to a customer?

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.

The office has less than 3 registered representatives and proper supervision from an offsite Options Principal has been documented

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

Unlimited Liability

What term refers to the number of shares that may be potentially sold to the public?
Authorized stock

What is the minimum size for a Qualified Contingent Cross Order?
1,000 contracts

Multiple customer orders in the order book at the same price will be ranked by —
Time the orders were received

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

Broker customer orders

On what form would an employee termination be reported?
Form U-5

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 —
Locked quotation

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 —
SRO Trading Facility

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 –
May choose to make no change to his displayed quote

What type of orders may be excluded from monthly market center quoting reports?
Limit orders 10% away from the market price

An offer that is being displayed by an automated trading center and is being disseminated pursuant to a national market system plan is —
A protected offer

A pegged Zero Display Reserve Order which tracks the inside quote of the opposite side of the market is
Market Peg

A pegged Zero Display Reserve Order that tracks the midpoint is defined as a —
Midpoint Peg

A pegged Zero Display Reserve Order that tracks the inside quote of the same side of the market is defined as a —
Primary Peg

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
Reserve Order

In relation to routing and execution, what are 3 things that a Zero Display Order will be ineligible for?
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

What is the term that defines the situation where a protected bid is priced higher than a protected offer?
Crossed market

What is the term that defines the situation where a protected bid is equal to a protected offer?
Locked market

What happens on the book to a Zero Display Reserve order during crossed or locked market conditions?
It remains posted on the NSX book until the market is uncrossed, unlocked or the order is cancelled by the user

A Reserve Order with zero display quantity will be known as a —
Zero Display Reserve Order

For equity options at the firm level, the auto exercise threshold is —
Up to the firm

All options transactions executed on an exchange should be submitted for clearance to the —
Options Clearing Corporation

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

Expected to post a minimum bid and ask size

What is a difference between an Exchange Traded note (ETN) and an Exchange Traded Fund (ETF)?
The ETN is a debt instrument

Internal controls that seek to restrict the flow of potentially material non-public information between different divisions of the same firm are known as —
Chinese Walls

Which platform that allows firms to trade all NASDAQ, AMEX, and NYSE securities on a single network?
NASDAQ Market Center

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

Uncovered put writing

Sanctions of an SRO become effective —
After a full review process is completed

What does NSCC stand for?
National Securities Clearing Corporation

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
PM Settlement

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
Exercise settlement amount

A notice submitted to OCC by clearing members to reflect their desire to exercise an option contract.
Exercise notice

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

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
AM Settlement

The cutoff time for exercise of American style index options is —
4:20 pm ET

When should a member or permit holder be obligated to reconcile all unmatched trades?
Promptly upon discovering the error

What is true of an American Depository Receipt (ADR)?
It may be redeemed for foreign shares

What is the breakeven point of the following option trade?

Buy 1 XYZ 50 Put @ 2.50.


What is the minimum equity requirement of a Joint Back Office participant?
1 million

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.

Right to receive declared dividends

Which of the following is NOT a Self Regulatory Organization?

A. Securities and Exchange Commission
B. Chicago Board Options Exchange
D. International Securities Exchange

Securities and Exchange Commission

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?
Any market order to sell at that price will be divided based on exchange rules

If a member fails to submit a tape report within the 30 seconds of trade execution the member must —
report the execution and designate it as late

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?
Consolidated Options Audit Trail

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?
Within 30 days

In relation to costs at SROs, the cost of access to quotations at an SRO display only facility should be —
At a cost that is close to being equivalent to the level and cost of access on their trading network

An order at a certain price that is not for the account of a broker or dealer is —
Customer limit order

A buy order entered with a limit that is above the national best offer would be known as —
Marketable Limit Order

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 –
may choose to make no change to his display quote

How often should a broker or dealer make publicly available a report on its routing of non-directed orders in NMS securities?

In relation to order entry, an Intermarket Sweep Order is —
Entered as a Limit Order

At what premium may a cabinet trade be transacted?

If a call holder exercises a call option before an ex-dividend date he is —
entitled to the dividend on payment date

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

Receives a “look” at orders before other market participants

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

Secondary trading of securities

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

A long sale

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 –
Front running

Attempting to influence a securities closing price through buying or selling of that security near the market close would be known as –
Marking the close

What is true of a Global Depository Receipt (GDR)?
It may trade in multiple currencies

How much does an investor pay to purchase 5 call options contracts at a premium of $2.00?

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

It may include stock as well as option positions

What entity keeps records for a company regarding investors and records of transactions?
Transfer Agent

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

Regulates the trading of stocks

All OTC transactions in equity securities to which a FINRA member is a party must —
Be reported to FINRA

What is the FINRA established system to audit order, quote, and trade information for NASDAQ and OTC equity securities?
Order Audit Trail System

How often should a broker inform customers of the availability of a report regarding the routing of orders?

What was enacted to initiate a series of initiates designed to modernize and strengthen the national market system for equity securities?
Regulation NMS

An order that is routed to execute at the full display size on the bid or offer is known as a —
Inter-market Sweep Order

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

Short call and long stock

The OCC’s clearing members may submit exercise notices until _____ pm ET

Background and financial information of customers who have been approved for options transactions shall be maintained —
At both the branch office servicing the account and the principal supervisory office

Pursuant to exchange rules, what action must be taken by the parties involved if an unmatched options trade cannot be resolved by mutual agreement?
Than transaction shall be promptly closed out by the parties

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 —
The Options Clearing Corporation

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

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?
5 minutes after the close of trading on that day

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?
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

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?
During the resumption of trading and for 5 minutes after the close of the resumption of trading

Prior to what time is the Daily Cash Settlement Report available?
10:00 AM ET

Wen do options settle after they have been exercised?

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
Fully Discharged

Exchange Traded Options are also know as —
Listed options

What act is regulation SP and what does it deal with?
The Privacy Act, deals with privacy of customer information

What is true of brokers during fast market conditions?
They are not held to the same constraints as they are during regular market conditions

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?
Fast Market

What are 5 records that must be kept for 6 years?
1. Blotters
2. General ledger
3. Customer account ledgers
4. Position record
5. Cash and margin account records

Define Interpositioning
The unlawful practice of adding an extra broker/dealer as a principal on a trade, even if no service is provided.

When would the prohibition of interpositioning not apply?
If the member firm can demostrate that the customer received the best price possible because of the intervention of a thrid party

What does the Manning Rule prohibit?
An NASD member firm from placing the firm’s interest before/above the financial interests of the client

Why was Regulation SHO adopted by the SEC?
To modernize and update old rules that regulated short sales

What type of securities does Regulation SHO apply to?
Equity securities and any security that is convertible into an equity security

What does the Order Marking Requirement of Rule 200 of Regulation SHO require?
Requires broker-dealers to mark all orders either long or short

What kinds of securities does the SEC Rule 200 Order Marking Requirement apply to?
Equity securities that are traded OTC, on Nasdaq or on an exchange

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