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Question 1 of 10
1. Question
A member seeking registration as an ADF Market Participant shall file an application with FINRA in which the member:
I. Specifies whether the member is seeking registration in Nasdaq and/or CQS securities
II. Certifies the member’s good standing with FINRA
III. Demonstrates compliance with the net capital and other financial responsibility provisions of the Exchange Act
IV. Agrees that failing to submit 70% of the ADF Market Participant’s quoting and trading volume to the ADF will result in the forfeiture of some or all of the ADF Deposit Amount pursuant to the ADF Deposit TermsCorrect
FINRA Rule 6271
6271. Registration as an ADF Market Maker or ADF ECNIncorrect
FINRA Rule 6271
6271. Registration as an ADF Market Maker or ADF ECN -
Question 2 of 10
2. Question
No member or person associated with a member shall accept any payment or other consideration, directly or indirectly, from an issuer of a security, or any affiliate or promoter thereof, for publishing a quotation, acting as market maker in a security, or submitting an application in connection therewith. However, a member will not be precluded from accepting which of the following?
I. Payment for bona fide services, including, but not limited to, investment banking services (including underwriting compensation and fees)
II. Public offerings
III. Reimbursement of any payment for registration imposed by the SEC or state regulatory authorities and for listing of an issue of securities imposed by a self-regulatory organization
IV. Any payment expressly provided for under the rules of a national securities exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Exchange ActCorrect
FINRA Rule 5250. Payments for Market Making
(a) No member or person associated with a member shall accept any payment or other consideration, directly or indirectly, from an issuer of a security, or any affiliate or promoter thereof, for publishing a quotation, acting as market maker in a security, or submitting an application in connection therewith.
(b) The provisions of paragraph (a) shall not preclude a member from accepting:
(1) payment for bona fide services, including, but not limited to, investment banking services (including underwriting compensation and fees);
(2) reimbursement of any payment for registration imposed by the SEC or state regulatory authorities and for listing of an issue of securities imposed by a self-regulatory organization; and
(3) any payment expressly provided for under the rules of a national securities exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Exchange Act.Incorrect
FINRA Rule 5250. Payments for Market Making
(a) No member or person associated with a member shall accept any payment or other consideration, directly or indirectly, from an issuer of a security, or any affiliate or promoter thereof, for publishing a quotation, acting as market maker in a security, or submitting an application in connection therewith.
(b) The provisions of paragraph (a) shall not preclude a member from accepting:
(1) payment for bona fide services, including, but not limited to, investment banking services (including underwriting compensation and fees);
(2) reimbursement of any payment for registration imposed by the SEC or state regulatory authorities and for listing of an issue of securities imposed by a self-regulatory organization; and
(3) any payment expressly provided for under the rules of a national securities exchange that are effective after being filed with, or filed with and approved by, the SEC pursuant to the requirements of the Exchange Act. -
Question 3 of 10
3. Question
What are the factors which the Board believes that members and the Association’s committees should take into consideration in determining the fairness of a mark-up?
I. The Type of Security Involved
II. The Amount of Money Involved in a Transaction
III. The Pattern of Mark-Ups
IV. The Nature of the Member’s BusinessCorrect
2120. Commissions, Mark Ups and Charges
2121. Fair Prices and Commissions
(b) Relevant Factors
Some of the factors which the Board believes that members and the Association’s committees should take into consideration in determining the fairness of a mark-up are as follow:
I. The Type of Security Involved
II. The Amount of Money Involved in a Transaction
III. The Pattern of Mark-Ups
IV. The Nature of the Member’s BusinessIncorrect
2120. Commissions, Mark Ups and Charges
2121. Fair Prices and Commissions
(b) Relevant Factors
Some of the factors which the Board believes that members and the Association’s committees should take into consideration in determining the fairness of a mark-up are as follow:
I. The Type of Security Involved
II. The Amount of Money Involved in a Transaction
III. The Pattern of Mark-Ups
IV. The Nature of the Member’s Business -
Question 4 of 10
4. Question
No member or person associated with a member shall:
I. Coordinate the prices (including quotations), trades or trade reports of such member with any other member or person associated with a member, or any other person
II. Direct or request another member to alter a price (including a quotation)
III. Engage, directly or indirectly, in any conduct that threatens, harasses, coerces, intimidates or otherwise attempts improperly to influence another member, a person associated with a member, or any other person
IV. Engage in any underwriting (or any syndicate for the underwriting) of securities to the extent permitted by the federal securities lawsCorrect
FINRA Rule 5240. Anti-Intimidation/Coordination
No member or person associated with a member shall:
I. Coordinate the prices (including quotations), trades or trade reports of such member with any other member or person associated with a member, or any other person
II. Direct or request another member to alter a price (including a quotation)
III. Engage, directly or indirectly, in any conduct that threatens, harasses, coerces, intimidates or otherwise attempts improperly to influence another member, a person associated with a member, or any other personIncorrect
FINRA Rule 5240. Anti-Intimidation/Coordination
No member or person associated with a member shall:
I. Coordinate the prices (including quotations), trades or trade reports of such member with any other member or person associated with a member, or any other person
II. Direct or request another member to alter a price (including a quotation)
III. Engage, directly or indirectly, in any conduct that threatens, harasses, coerces, intimidates or otherwise attempts improperly to influence another member, a person associated with a member, or any other person -
Question 5 of 10
5. Question
Which of the following refer to an order that is captured by a member other than in an electronic order-routing or execution system?
Correct
FINRA Rule 7410. Definitions
“Manual Order” shall mean an order that is captured by a member other than in an electronic order-routing or execution system.Incorrect
FINRA Rule 7410. Definitions
“Manual Order” shall mean an order that is captured by a member other than in an electronic order-routing or execution system. -
Question 6 of 10
6. Question
Rule 5270 does not preclude transactions that the member can demonstrate are unrelated to the material, non-public market information received in connection with the customer order. These types of transactions may include:
I. Transactions where the member has information barriers established to prevent internal disclosure of such information
II. Transactions in the same security related to a prior customer order in that security
III. Transactions to correct bona fide errors
IV. Transactions to offset odd-lot ordersCorrect
FINRA Rule 5270. Front Running of Block Transactions
Rule 5270 does not preclude transactions that the member can demonstrate are unrelated to the material, non-public market information received in connection with the customer order. These types of transactions may include:
(1) transactions where the member has information barriers established to prevent internal disclosure of such information;
(2) transactions in the same security related to a prior customer order in that security;
(3) transactions to correct bona fide errors; or
(4) transactions to offset odd-lot orders.Incorrect
FINRA Rule 5270. Front Running of Block Transactions
Rule 5270 does not preclude transactions that the member can demonstrate are unrelated to the material, non-public market information received in connection with the customer order. These types of transactions may include:
(1) transactions where the member has information barriers established to prevent internal disclosure of such information;
(2) transactions in the same security related to a prior customer order in that security;
(3) transactions to correct bona fide errors; or
(4) transactions to offset odd-lot orders. -
Question 7 of 10
7. Question
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as follows:
I. For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.05 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities
II. For customer limit orders priced greater than or equal to $0.01 and less than $1.00, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread
III. For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread
IV. For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spreadCorrect
FINRA Rule 5320. Prohibition Against Trading Ahead of Customer Orders
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as follows:(a) For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.01 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities;
(b) For customer limit orders priced greater than or equal to $0.01 and less than $1.00, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread;
(c) For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread;
(d) For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spread;Incorrect
FINRA Rule 5320. Prohibition Against Trading Ahead of Customer Orders
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as follows:(a) For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.01 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities;
(b) For customer limit orders priced greater than or equal to $0.01 and less than $1.00, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread;
(c) For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread;
(d) For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spread; -
Question 8 of 10
8. Question
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain which of the following information for each account?
I. Name of the account, with names of all participants and their respective interests in profits and losses
II. A statement regarding the purpose of the account
III. Name of the member carrying and clearing the account
IV. A copy of any written agreement or instrument relating to the accountCorrect
FINRA Rule 6140. Other Trading Practices
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain the following information for each account:
(1) Name of the account, with names of all participants and their respective interests in profits and losses;
(2) a statement regarding the purpose of the account;
(3) name of the member carrying and clearing the account; and
(4) a copy of any written agreement or instrument relating to the account.Incorrect
FINRA Rule 6140. Other Trading Practices
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain the following information for each account:
(1) Name of the account, with names of all participants and their respective interests in profits and losses;
(2) a statement regarding the purpose of the account;
(3) name of the member carrying and clearing the account; and
(4) a copy of any written agreement or instrument relating to the account. -
Question 9 of 10
9. Question
A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01)
The provisions of paragraph above of this Rule shall not apply to which of the following?
I. Orders governed by the rules of a registered national securities exchange
II. Open stop orders to buy
III. Open sell orders
IV. Orders for the purchase or sale of securities where the issuer of the securities has reported a dividend, payment, or distribution pursuant to SEA Rule 10b-17Correct
FINRA Rule 5330. Adjustment of Orders
A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01)
The provisions of paragraph above of this Rule shall not apply to which of the following?
I. Orders governed by the rules of a registered national securities exchange
II. Open stop orders to buy
III. Open sell orders
IV. Orders for the purchase or sale of securities where the issuer of the securities has not reported a dividend, payment, or distribution pursuant to SEA Rule 10b-17Incorrect
FINRA Rule 5330. Adjustment of Orders
A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01)
The provisions of paragraph above of this Rule shall not apply to which of the following?
I. Orders governed by the rules of a registered national securities exchange
II. Open stop orders to buy
III. Open sell orders
IV. Orders for the purchase or sale of securities where the issuer of the securities has not reported a dividend, payment, or distribution pursuant to SEA Rule 10b-17 -
Question 10 of 10
10. Question
Which of the following refer to an ADF-eligible security that is included in the S&P 500® Index, Russell 1000® Index, or a pilot list of Exchange Traded Products?
Correct
FINRA Rule 6272. Character of Quotations
The term “Designated Stock” shall mean an ADF-eligible security that is included in the S&P 500® Index, Russell 1000® Index, or a pilot list of Exchange Traded ProductsIncorrect
FINRA Rule 6272. Character of Quotations
The term “Designated Stock” shall mean an ADF-eligible security that is included in the S&P 500® Index, Russell 1000® Index, or a pilot list of Exchange Traded Products