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Question 1 of 10
1. Question
Which of the following correctly describe Permissible Quotation Entries?
I. A member firm that has qualified as a market maker in a particular OTCBB-eligible security may enter into the Service a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” and “offer wanted” indications) or a bid or offer accompanied by a modifier to reflect unsolicited customer interest. Every quotation entry must include the appropriate telephone number for the firm’s trading desk
II. A priced bid and/or offer entered into the Service for a domestic equity security must be firm up to the minimum quotation size specified in Rule 6433. This firmness requirement applies only during normal business hours, i.e., 9:30 a.m. to 4:00 p.m. Eastern Time
III. No member or person associated with a member shall enter into the Service a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” or “offer wanted” indications), or a bid or offer accompanied by a modifier to reflect unsolicited customer interest in any security that does not satisfy the requirements of Rule 6530
IV. A priced bid and/or offer entered into the Service for a Direct Participation Program security shall be non-firm.1 Moreover, a market maker is only permitted to update quotation entries in such securities twice daily
Correct
FINRA Rule 6540. Requirements Applicable to Market Makers
(1) Permissible Quotation Entries
(A) A member firm that has qualified as a market maker in a particular OTCBB-eligible security may enter into the Service a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” and “offer wanted” indications) or a bid or offer accompanied by a modifier to reflect unsolicited customer interest. Every quotation entry must include the appropriate telephone number for the firm’s trading desk.
(B) A priced bid and/or offer entered into the Service for a domestic equity security must be firm up to the minimum quotation size specified in Rule 6433. This firmness requirement applies only during normal business hours, i.e., 9:30 a.m. to 4:00 p.m. Eastern Time.
(C) A priced bid and/or offer entered into the Service for a Direct Participation Program security shall be non-firm.1 Moreover, a market maker is only permitted to update quotation entries in such securities twice daily, i.e., once between 8:30 a.m. and 9:30 a.m. Eastern Time, and once between noon and 12:30 p.m. Eastern Time.2
Incorrect
FINRA Rule 6540. Requirements Applicable to Market Makers
(1) Permissible Quotation Entries
(A) A member firm that has qualified as a market maker in a particular OTCBB-eligible security may enter into the Service a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” and “offer wanted” indications) or a bid or offer accompanied by a modifier to reflect unsolicited customer interest. Every quotation entry must include the appropriate telephone number for the firm’s trading desk.
(B) A priced bid and/or offer entered into the Service for a domestic equity security must be firm up to the minimum quotation size specified in Rule 6433. This firmness requirement applies only during normal business hours, i.e., 9:30 a.m. to 4:00 p.m. Eastern Time.
(C) A priced bid and/or offer entered into the Service for a Direct Participation Program security shall be non-firm.1 Moreover, a market maker is only permitted to update quotation entries in such securities twice daily, i.e., once between 8:30 a.m. and 9:30 a.m. Eastern Time, and once between noon and 12:30 p.m. Eastern Time.2
Question 2 of 10
2. Question
Which of the following of Transaction Reporting to the FINRA/NYSE Trade Reporting Facility Outside Normal Market Hours is correct?
I. Last sale reports of transactions in designated securities executed between 10:00 a.m. and 11:30 a.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours
II. Last sale reports of transactions in designated securities executed between 4:00 p.m. and 8:00 p.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours
III. Last sale reports of transactions in designated securities executed between midnight and 8:00 a.m. Eastern Time shall be reported by 8:15 a.m. Eastern Time on trade date and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
IV. Last sale reports of transactions in designated securities executed (i) between 8:00 p.m. and midnight Eastern Time or (ii) on any non-business day (i.e., weekend or holiday) shall be reported the following business day by 9:15 a.m. Eastern Time, be designated “as/of” trades to denote their execution on a prior day and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours
Correct
FINRA Rule 6380B. Transaction Reporting
(a) When and How Transactions are Reported
(2) Transaction Reporting to the FINRA/NYSE Trade Reporting Facility Outside Normal Market Hours
(A) Last sale reports of transactions in designated securities executed between 8:00 a.m. and 9:30 a.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(B) Last sale reports of transactions in designated securities executed between 4:00 p.m. and 8:00 p.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(C) Last sale reports of transactions in designated securities executed between midnight and 8:00 a.m. Eastern Time shall be reported by 8:15 a.m. Eastern Time on trade date and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(D) Last sale reports of transactions in designated securities executed (i) between 8:00 p.m. and midnight Eastern Time or (ii) on any non-business day (i.e., weekend or holiday) shall be reported the following business day by 8:15 a.m. Eastern Time, be designated “as/of” trades to denote their execution on a prior day and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
Incorrect
FINRA Rule 6380B. Transaction Reporting
(a) When and How Transactions are Reported
(2) Transaction Reporting to the FINRA/NYSE Trade Reporting Facility Outside Normal Market Hours
(A) Last sale reports of transactions in designated securities executed between 8:00 a.m. and 9:30 a.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(B) Last sale reports of transactions in designated securities executed between 4:00 p.m. and 8:00 p.m. Eastern Time shall be reported as soon as practicable but no later than 10 seconds after execution and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(C) Last sale reports of transactions in designated securities executed between midnight and 8:00 a.m. Eastern Time shall be reported by 8:15 a.m. Eastern Time on trade date and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
(D) Last sale reports of transactions in designated securities executed (i) between 8:00 p.m. and midnight Eastern Time or (ii) on any non-business day (i.e., weekend or holiday) shall be reported the following business day by 8:15 a.m. Eastern Time, be designated “as/of” trades to denote their execution on a prior day and be designated with the unique trade report modifier, as specified by FINRA, to denote their execution outside normal market hours.
Question 3 of 10
3. Question
Which of the following refer to the amount, expressed as a percentage of the security’s conversion value, by which the price at issuance of a convertible security exceeds its conversion value?
Correct
Securities Act of 1933 (Securities Act) Securities Act Rule 144A — Private Resales of Securities to Institutions:
(7) For purposes of this section, effective conversion premium means the amount, expressed as a percentage of the security’s conversion value, by which the price at issuance of a convertible security exceeds its conversion value.
Incorrect
Securities Act of 1933 (Securities Act) Securities Act Rule 144A — Private Resales of Securities to Institutions:
(7) For purposes of this section, effective conversion premium means the amount, expressed as a percentage of the security’s conversion value, by which the price at issuance of a convertible security exceeds its conversion value.
Question 4 of 10
4. Question
Which of the following term refer to the member firm that has been identified in the System as principal for clearing and settling a trade, whether for its own account or for a correspondent firm?
Correct
FINRA Rule 7210B. Definitions
(a) The term “Clearing Broker-Dealer” or “Clearing Broker” shall mean the member firm that has been identified in the System as principal for clearing and settling a trade, whether for its own account or for a correspondent firm
Incorrect
FINRA Rule 7210B. Definitions
(a) The term “Clearing Broker-Dealer” or “Clearing Broker” shall mean the member firm that has been identified in the System as principal for clearing and settling a trade, whether for its own account or for a correspondent firm
Question 5 of 10
5. Question
Which of the following should a member seeking registration as an ADF Market Participant be doing?
I. Execute a Participant Agreement with FINRA at least six months (or such other shorter time period as may be designated by FINRA) prior to quoting or reporting trades on the ADF
II. Execute the Certification Record
III. Agrees that failing to submit 65% 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 Terms
IV. Provides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
Correct
FINRA Rule 6271. Registration as an ADF Market Maker or ADF ECN
A member seeking registration as an ADF Market Participant shall:
I. Execute a Participant Agreement with FINRA at least six months (or such other shorter time period as may be designated by FINRA) prior to quoting or reporting trades on the ADF
II. Execute the Certification Record
III. Agrees that failing to submit 65% 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 Terms
IV. Provides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
Incorrect
FINRA Rule 6271. Registration as an ADF Market Maker or ADF ECN
A member seeking registration as an ADF Market Participant shall:
I. Execute a Participant Agreement with FINRA at least six months (or such other shorter time period as may be designated by FINRA) prior to quoting or reporting trades on the ADF
II. Execute the Certification Record
III. Agrees that failing to submit 65% 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 Terms
IV. Provides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
Question 6 of 10
6. Question
Which of the following about Normal Business Hours is correct?
I. An ADF Trading Center shall be open for business as of 9:30 a.m. Eastern Time and shall close no earlier than 4:00 p.m. Eastern Time
II. An ADF Trading Center may be open for business on a voluntary basis for any period of time between 7:00 a.m. Eastern Time and 8:30 a.m. Eastern Time or between 4:00 p.m. Eastern Time and 6:30 p.m. Eastern Time
III. An ADF Trading Center whose quotes are open before 9:30 a.m. Eastern Time or after 4:00 p.m. Eastern Time shall be obligated to comply, while its quotes are open.
IV. With all FINRA rules that are not by their express terms, or by an official interpretation of FINRA, inapplicable to any part of the 8:00 a.m. to 9:30 a.m. Eastern Time or the 4:00 p.m. to 6:30 p.m. Eastern Time periods
Correct
FINRA Rule 6273. Normal Business Hours
An ADF Trading Center shall be open for business as of 9:30 a.m. Eastern Time and shall close no earlier than 4:00 p.m. Eastern Time. An ADF Trading Center may be open for business on a voluntary basis for any period of time between 8:00 a.m. Eastern Time and 9:30 a.m. Eastern Time or between 4:00 p.m. Eastern Time and 6:30 p.m. Eastern Time. An ADF Trading Center whose quotes are open before 9:30 a.m. Eastern Time or after 4:00 p.m. Eastern Time shall be obligated to comply, while its quotes are open, with all FINRA rules that are not by their express terms, or by an official interpretation of FINRA, inapplicable to any part of the 8:00 a.m. to 9:30 a.m. Eastern Time or the 4:00 p.m. to 6:30 p.m. Eastern Time periods.
Incorrect
FINRA Rule 6273. Normal Business Hours
An ADF Trading Center shall be open for business as of 9:30 a.m. Eastern Time and shall close no earlier than 4:00 p.m. Eastern Time. An ADF Trading Center may be open for business on a voluntary basis for any period of time between 8:00 a.m. Eastern Time and 9:30 a.m. Eastern Time or between 4:00 p.m. Eastern Time and 6:30 p.m. Eastern Time. An ADF Trading Center whose quotes are open before 9:30 a.m. Eastern Time or after 4:00 p.m. Eastern Time shall be obligated to comply, while its quotes are open, with all FINRA rules that are not by their express terms, or by an official interpretation of FINRA, inapplicable to any part of the 8:00 a.m. to 9:30 a.m. Eastern Time or the 4:00 p.m. to 6:30 p.m. Eastern Time periods.
Question 7 of 10
7. Question
Which on the following on Exceptions on Prohibition from Locking or Crossing Quotations in NMS Stocks is correct?
I. The locking or crossing quotation was displayed at a time when the trading center displaying the locked or crossed quotation was experiencing a failure, material delay, or malfunction of its systems or equipment
II. The locking or crossing quotation was displayed at a time when a protected bid was higher than a protected offer in the NMS stock
III. The locking or crossing quotation was an automated quotation, and the member displaying such automated quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of any locked or crossed protected quotation
IV. The locking or crossing quotation was a manual quotation that locked or crossed another manual quotation, and the member displaying the locking or crossing manual quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of the locked or crossed manual quotation.
Correct
FINRA Rule 6240. Prohibition from Locking or Crossing Quotations in NMS Stocks
Exceptions.
(1) The locking or crossing quotation was displayed at a time when the trading center displaying the locked or crossed quotation was experiencing a failure, material delay, or malfunction of its systems or equipment.
(2) The locking or crossing quotation was displayed at a time when a protected bid was higher than a protected offer in the NMS stock.
(3) The locking or crossing quotation was an automated quotation, and the member displaying such automated quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of any locked or crossed protected quotation.
(4) The locking or crossing quotation was a manual quotation that locked or crossed another manual quotation, and the member displaying the locking or crossing manual quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of the locked or crossed manual quotation.
Incorrect
FINRA Rule 6240. Prohibition from Locking or Crossing Quotations in NMS Stocks
Exceptions.
(1) The locking or crossing quotation was displayed at a time when the trading center displaying the locked or crossed quotation was experiencing a failure, material delay, or malfunction of its systems or equipment.
(2) The locking or crossing quotation was displayed at a time when a protected bid was higher than a protected offer in the NMS stock.
(3) The locking or crossing quotation was an automated quotation, and the member displaying such automated quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of any locked or crossed protected quotation.
(4) The locking or crossing quotation was a manual quotation that locked or crossed another manual quotation, and the member displaying the locking or crossing manual quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of the locked or crossed manual quotation.
Question 8 of 10
8. Question
Which of the following delivery shall be made at the office of the purchaser on the date on which the option expires; except that delivery may be made by the seller on any business day after the second business day following the date of transaction and prior to the expiration of the option, provided the seller delivers at the office of purchaser, on a business day preceding the day of delivery, written notice of intention to deliver?
Correct
FINRA/Nasdaq Uniform Practice Codes
Rule 11320 — Dates of Delivery
“Seller’s Option”
In connection with a transaction “seller’s option,” delivery shall be made at the office of the purchaser on the date on which the option expires; except that delivery may be made by the seller on any business day after the second business day following the date of transaction and prior to the expiration of the option, provided the seller delivers at the office of purchaser, on a business day preceding the day of delivery, written notice of intention to deliver.
Incorrect
FINRA/Nasdaq Uniform Practice Codes
Rule 11320 — Dates of Delivery
“Seller’s Option”
In connection with a transaction “seller’s option,” delivery shall be made at the office of the purchaser on the date on which the option expires; except that delivery may be made by the seller on any business day after the second business day following the date of transaction and prior to the expiration of the option, provided the seller delivers at the office of purchaser, on a business day preceding the day of delivery, written notice of intention to deliver.
Question 9 of 10
9. Question
All transactions, except “cash” transactions, in bonds or similar evidences of indebtedness which are traded “flat” shall be “ex-interest” as prescribed by which of the following provisions?
I. On the first business day preceding the record date if the record date falls on a business day
II. On the second business day preceding the record date if the record date falls on a day other than a business day
III. On the second business day preceding the date on which an interest payment is to be made if no record date has been fixed
IV. On the first business day preceding liquidating payments or payments on account of principal in accordance with the formula set forth in Rules 11140 and 11150
Correct
FINRA Rule 11150. Transactions “Ex-Interest” in Bonds Which Are Dealt in “Flat”
(a) Normal Ex-Interest Dates
All transactions, except “cash” transactions, in bonds or similar evidences of indebtedness which are traded “flat” shall be “ex-interest” as prescribed by the following provisions:
(1) On the first business day preceding the record date if the record date falls on a business day.
(2) On the second business day preceding the record date if the record date falls on a day other than a business day.
(3) On the second business day preceding the date on which an interest payment is to be made if no record date has been fixed.
Incorrect
FINRA Rule 11150. Transactions “Ex-Interest” in Bonds Which Are Dealt in “Flat”
(a) Normal Ex-Interest Dates
All transactions, except “cash” transactions, in bonds or similar evidences of indebtedness which are traded “flat” shall be “ex-interest” as prescribed by the following provisions:
(1) On the first business day preceding the record date if the record date falls on a business day.
(2) On the second business day preceding the record date if the record date falls on a day other than a business day.
(3) On the second business day preceding the date on which an interest payment is to be made if no record date has been fixed.
Question 10 of 10
10. Question
Which of the following refers to any inter-dealer quotation system or any publication or electronic communications network or other device that is used by brokers or dealers to make known to others their interest in transactions in any OTC Equity Security, including offers to buy or sell at a stated price or otherwise, or invitations of offers to buy or sell?
Correct
FINRA Rule 6420
“Quotation medium” means any inter-dealer quotation system or any publication or electronic communications network or other device that is used by brokers or dealers to make known to others their interest in transactions in any OTC Equity Security, including offers to buy or sell at a stated price or otherwise, or invitations of offers to buy or sell.
Incorrect
FINRA Rule 6420
“Quotation medium” means any inter-dealer quotation system or any publication or electronic communications network or other device that is used by brokers or dealers to make known to others their interest in transactions in any OTC Equity Security, including offers to buy or sell at a stated price or otherwise, or invitations of offers to buy or sell.
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