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SERIES 7 TOP-OFF EXAM - Orders and trade execution questions with correct answers
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SERIES 7 TOP-OFF EXAM - Orders and trade execution questions with correct answers
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SERIES 7 TOP-OFF EXAM - Orders andtrade execution
Immediate-or-cancel (IOC) order - correct answer ✔✔It indicates that as much of the order as possible
must be executed immediately
Any portion of the order that is not executed is cancelled
Listed securities - correct answer ✔✔Any equity securities that meet the standards for trading on a
national exchange (NYSE, Nasdaq, Etc)
Securities that are not traded on an exchange - correct answer ✔✔OTC equities or non-exchange traded
securities
Trading order - correct answer ✔✔1- Order entry
2- Execution
3- Clearing
Market maker - correct answer ✔✔A dealer (principal) that always stands ready to buy or sell a specific
stock for its own account and assumes risk by taking the other side of the trade
A dealer provides a two-sided quote: bid and ask
Bid - correct answer ✔✔It's the price at which it's willing to buy stock. The first part of the quote is the
bid
ask/offer price - correct answer ✔✔The price at which it will sell the stock. The second part of the quote
is the bid
spread - correct answer ✔✔The difference between the bid and the ask. This is the source of profit for
the market maker
,Broker - correct answer ✔✔Firm that executes a customer order by locating another party willing to take
the other side of the transaction
Words connected to "Broker" - correct answer ✔✔Agency
Broker
Commission
No risk assumed
A dealer - correct answer ✔✔Firm that executes a customer order by taking the other side of the
transaction itself
Words connected to "Dealer" - correct answer ✔✔Principal
Dealer
Markup/Markdown
Market Maker
Own inventory
Assumes risk
The Designated market maker (DMM) - correct answer ✔✔NYSE members who act as dealers in
particular stocks. Formerly known as "specialists"The DMM must be
a buyer when there are no buyers and be a seller when there are no sellers
The DMM is expected to supply stock to the market if there's a large imbalance between supply and
demand and may be required to sell short to accomplish this
DMM may not compete with public orders, it may only bid for stock higher or offer stock lower than the
prevailing market price to reduce the spread
It's allowed to engage in stopping stock
Role of the DMM - correct answer ✔✔1- Maintaining liquidity
2- Promoting a fair and orderly market
3- Resolving trade imbalances that result form a temporary lack of supply and demand in a particular
security
, Super Display Book System - correct answer ✔✔the new server-based electronic trading system at the
NYSE
Fair and orderly market - correct answer ✔✔A market in which there is continuity and reasonable depth.
To maintain this type of market, DMM is required to maintain a reasonably small spread
Stopping stock is allowed only for: - correct answer ✔✔A. dealer orders
B. member orders
C. public orders
D. agent orders
Stopping stock - correct answer ✔✔This is an activity that involves guaranteeing a floor broker that a
customer's order will be executed at a specific price unless a better price is able to be obtained in the
trading crowd
Dealer-to-dealer markets are also known as - correct answer ✔✔OTC markets
What type of debt securities are traded in OTC markets? - correct answer ✔✔- Corporate bonds
- Municipal securities
- US Government and government agency securities
NASDAQ - correct answer ✔✔National Association of Securities Dealers Automated Quotation System.
This is dealer-to-dealer or OTC market
Backing away - correct answer ✔✔This is a violation of industry rules. It refers to the act of providing a
firm quote and then failing to to fill an order on the basis of the quotation
Firm quote - correct answer ✔✔The actual price at which a trading unit of a security (such as 100 shares
of stock or five bonds) may be bought or sold. All quotes are firm quotes unless otherwise indicated.
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