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Question 1 of 10
1. Question
What does the following statement refer to in the context of debt market?
‘When quotations are available, FINRA will consider the accessibility of such quotations when examining whether a member has used reasonable diligence. For purposes of debt securities, the term “quotation” refers to either dollar (or other currency) pricing or yield pricing.’Correct
When talking in terms of the debt market, the phrase “accessibility of the quotation” means that when quotations are available, FINRA will consider the accessibility of such quotations when examining whether a member has used reasonable diligence. The term “quotation” refers to either dollar (or other currency) pricing or yield pricing for purposes of debt securities. Accessibility is only one of the non-exhaustive reasonable diligence factors.
Incorrect
When talking in terms of the debt market, the phrase “accessibility of the quotation” means that when quotations are available, FINRA will consider the accessibility of such quotations when examining whether a member has used reasonable diligence. The term “quotation” refers to either dollar (or other currency) pricing or yield pricing for purposes of debt securities. Accessibility is only one of the non-exhaustive reasonable diligence factors.
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Question 2 of 10
2. Question
According to “Best execution and Inter-positioning” (FINRA Rule 5310) when does the duty to provide best execution to customer orders received from other broker-dealers arise?
Correct
A member’s duty to provide best execution in any transaction “for or with a customer of another broker-dealer” arises only when an order is routed from the broker-dealer to the member for the purpose of order handling and execution. It does not apply in instances when another broker-dealer is simply executing a customer order against the member’s quote.
Incorrect
A member’s duty to provide best execution in any transaction “for or with a customer of another broker-dealer” arises only when an order is routed from the broker-dealer to the member for the purpose of order handling and execution. It does not apply in instances when another broker-dealer is simply executing a customer order against the member’s quote.
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Question 3 of 10
3. Question
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320) when is a member permitted to trade a security on the same side of the market for its own account at a price that would satisfy such customer order?
Correct
A member is permitted to trade a security on the same side of the market for its own account at a price that would satisfy such customer order only in the following situations:
-with respect to orders for customer accounts that meet the definition of an “institutional account”;or
-for orders of 10,000 shares or more (unless such orders are less than $100,000 in value), given that the member has provided clear and comprehensive written disclosure to such customer at account opening and annually thereafter that:(a) discloses that the member may trade proprietorially at prices that would satisfy the customer order, and
(b) provides the customer with a meaningful opportunity to opt in to the Rule 5320 protections with respect to all or any portion of its order.Incorrect
A member is permitted to trade a security on the same side of the market for its own account at a price that would satisfy such customer order only in the following situations:
-with respect to orders for customer accounts that meet the definition of an “institutional account”;or
-for orders of 10,000 shares or more (unless such orders are less than $100,000 in value), given that the member has provided clear and comprehensive written disclosure to such customer at account opening and annually thereafter that:(a) discloses that the member may trade proprietorially at prices that would satisfy the customer order, and
(b) provides the customer with a meaningful opportunity to opt in to the Rule 5320 protections with respect to all or any portion of its order. -
Question 4 of 10
4. Question
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), which of the following is NOT 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?
Correct
A few examples of when holding an unexecuted limit order in that same security, and not be required to execute the held limit order the minimum amount of price improvement necessary for a member to execute an order on a proprietary basis are 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
A few examples of when holding an unexecuted limit order in that same security, and not be required to execute the held limit order the minimum amount of price improvement necessary for a member to execute an order on a proprietary basis are 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 5 of 10
5. Question
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), when can members calculate a current inside spread by contacting and obtaining priced quotations from at least two unaffiliated dealers and using the highest bid and lowest offer obtained in calculating the current inside spread?
Correct
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), members may calculate a current inside spread by contacting and obtaining priced quotations from at least two unaffiliated dealers and using the highest bid and lowest offer obtained in calculating the current inside spread for purposes of determining the minimum price improvement standards for customer limit orders in OTC equity securities priced below $1.00 where there is no published current inside spread.
Incorrect
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), members may calculate a current inside spread by contacting and obtaining priced quotations from at least two unaffiliated dealers and using the highest bid and lowest offer obtained in calculating the current inside spread for purposes of determining the minimum price improvement standards for customer limit orders in OTC equity securities priced below $1.00 where there is no published current inside spread.
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Question 6 of 10
6. Question
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), what should the members do where there is only a one-sided quote in an OTC equity security priced below $1.00?
Correct
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), by contacting and obtaining priced quotations from at least TWO unaffiliated dealers and using the best price obtained on the other side of the quote, members may calculate the current inside spread where there is only a one-sided quote in an OTC equity security priced below $1.00, . Members must also document the following:
-the name of each dealer contacted; and
-the quotations received for purposes of determining the current inside spreadIncorrect
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), by contacting and obtaining priced quotations from at least TWO unaffiliated dealers and using the best price obtained on the other side of the quote, members may calculate the current inside spread where there is only a one-sided quote in an OTC equity security priced below $1.00, . Members must also document the following:
-the name of each dealer contacted; and
-the quotations received for purposes of determining the current inside spread -
Question 7 of 10
7. Question
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), what is the period of the normal market hours when members generally may limit the life of a customer order?
Correct
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), when trading outside normal market hours, members generally may limit the life of a customer order to the period of normal market hours of 9:30 a.m. to 4:00 p.m. Eastern Time.
Incorrect
According to ‘ Prohibition Against Trading Ahead of Customer Orders’ (FINRA Rule 5320), when trading outside normal market hours, members generally may limit the life of a customer order to the period of normal market hours of 9:30 a.m. to 4:00 p.m. Eastern Time.
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Question 8 of 10
8. Question
According to ‘Front Running of Block Transactions’ (FINRA Rule 5270), in the context of equity securities what kind of a transaction is generally NOT deemed to be a block transaction?
Correct
According to ‘Front Running of Block Transactions’ (FINRA Rule 5270), for a transaction to be deemed as a blocked transaction in the context of equity securities, it must be:
-a transaction involving 10,000 shares or more of a security
-an underlying security
-a related financial instrument overlying such number of sharesHowever, a transaction of fewer than 10,000 shares could be considered a block transaction.
Incorrect
According to ‘Front Running of Block Transactions’ (FINRA Rule 5270), for a transaction to be deemed as a blocked transaction in the context of equity securities, it must be:
-a transaction involving 10,000 shares or more of a security
-an underlying security
-a related financial instrument overlying such number of sharesHowever, a transaction of fewer than 10,000 shares could be considered a block transaction.
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Question 9 of 10
9. Question
According to FINRA Rule 6380A ‘Transaction Reporting’, which party shall report the trade in transactions between two members?
Correct
According to FINRA Rule 6380A ‘Transaction Reporting’, in transactions between two members, the executing party shall report the trade.
Incorrect
According to FINRA Rule 6380A ‘Transaction Reporting’, in transactions between two members, the executing party shall report the trade.
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Question 10 of 10
10. Question
According to FINRA Rule 6380A ‘Transaction Reporting’, when shall the member report the trade?
Correct
According to FINRA Rule 6380A ‘Transaction Reporting’, in transactions between a member and a non-member or customer, the member shall report the trade.
Incorrect
According to FINRA Rule 6380A ‘Transaction Reporting’, in transactions between a member and a non-member or customer, the member shall report the trade.