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Series 3 8 questions and answers verified 2024
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Series 3 8 questions and answers verified 2024
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Series 3A futures contract is a legal agreement between a buyer and seller governing
the future delivery of the specified commodity, financial instrument, index or
other underlying instrument. a. - correct answer ✔True
The buyer of a futures contract is called the: - correct answer ✔Long
The process by which a futures contract is terminated by a transaction that is
equal and opposite from the one that initiated the position is called: - correct
answer ✔Offset
Similar or identical futures contracts can be traded on: - correct answer
✔Multiple exchanges regardless of location
Which of the following items in a futures contract is standardized? - correct
answer ✔The size - the amount of the underlying item covered by the
contract.
Who determines the size, grades, delivery locations and deliver months of a
futures contract? - correct answer ✔The exchange on which the contract is
traded.
In contrast to futures, stocks or equities: - correct answer ✔Are not regulated
by the CFTC.
The number of futures contracts bought or sold over a specified period of time
is called: - correct answer ✔Volume.
,Open interest is: - correct answer ✔The number of outstanding long or short
futures contracts.
If a new long buys from a new short, open interest: - correct answer
✔Increases
Which of the following is essential to the operation of a successful futures
contract based on a physical commodity? - correct answer ✔Viable cash or
actuals market in the same or comparable cash commodities as those
underlying the futures market----Competitive market conditions in both
production and distribution channels of the cash market-----Access to
inspection and grading facilities-----Active trade participation
A principal function of a futures exchange is to: - correct answer ✔Provide a
trading market for foreign exchange
The speculator uses the futures markets to: - correct answer ✔Earn trading
profits
The activity of speculators in futures markets: - correct answer ✔Increases
trading volume-----Provides needed liquidity-----Enables the filling of orders
with a minimum of price disturbance
Through arbitrage, it is possible to earn virtually riskless profits: - correct
answer ✔True
Futures markets can be used to defray the cost of carrying commodity
inventories: - correct answer ✔True
,1. All futures exchanges in the U.S. are membership organizations. - correct
answer ✔False
2. Only persons who own or lease seats or trading rights on an exchange may
execute futures contracts on the exchange's trading floor or via the
exchange's electronic trading system. - correct answer ✔True
3. The clearinghouse is the guarantor of the financial integrity of every futures
contract open on its books. - correct answer ✔True
4. Variation margin: - correct answer ✔Is collected each day by a futures
clearinghouse from clearing members who have losses on their futures
contracts.
b. Is paid each day by a futures clearinghouse to clearing members who have
gains on their futures contracts.
5. Which of the following prices does a clearinghouse use in paying or
collecting variation margins? - correct answer ✔Settlement price
6. Delivery against a futures position is initiated by: - correct answer ✔The
seller
7. At maturity, all futures contracts are settled by delivery or by cash
settlement. - correct answer ✔True
8. An introducing broker (IB) in the futures industry: - correct answer
✔Services customer accounts
9. A commodity trading advisor (CTA): - correct answer ✔Is permitted to
trade individually managed accounts.
, 10. If an exchange member is "dual trading," under certain circumstances he
or she can give priority to his/her own trades over customers' orders. - correct
answer ✔False
11. Clearinghouses use guaranty deposits to: - correct answer ✔Meet the
financial obligations of a defaulting member to other clearing members.
12. Why are some futures transactions cleared a day late, "as of" the
preceding day? - correct answer ✔Trade records did not match so the
exchange members involved in the transaction had to resolve the discrepancy
before or on the opening of trading the next morning.
13. Because the clearinghouse substitutes itself as the counterparty to every
trade, individual traders can liquidate their positions without having to wait for
the other party to the original contract to liquidate. - correct answer ✔True
14. NFA Rule 2-30 (Customer Information and Risk Disclosure) requires
members and associates to obtain from customers who are individuals: -
correct answer ✔The customer's true name, address, and principle
occupation
b. The customer's current estimated annual income and net worth
c. The customer's approximate age
d. An indication of the customer's previous investment and futures trading
experience
15. CFTC regulations provide that customer funds generally, but not always,
must be segregated from the firm's proprietary funds. - correct answer
✔False (must always be segregated)
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