Series 7 Trading Markets Section 2 (Nyse)

Front 1

What type of Trading is the NYSE?

Back 1

Floor-based and Computer order matching system (Arca ECN)

Front 2

What are the types of Broker/Dealers involved with the NYSE?

Back 2

Floor broker, $2 broker, Specialist/DMM

Front 3

Who are Floor Brokers and what do they do?

Back 3

employees of each brokerage firm, act as an agent to only Fill customer orders

Front 4

Who are $2 Brokers and what do they do?

Back 4

are independent brokers, but assist brokerage firms

Front 5

Who are Specialists/DMM and what do they do?

Back 5

These specialists are and Exchange Member
-only 1 DMM (designated market maker) per stock
-act as a market maker (dealer)
-execute market order to buy that arrive via SuperDisplayBook and match these orders with present sell orders that are placed electronically
-because it is a 'human' order matching, they can improve prices for a customer where as with a automated system this is not available

Front 6

What is the SuperDisplayBook and what does it do?

Back 6

-the electronic trading book for the NYSE Classic
-routes orders electronically to either a floor broker or the NYSE Specialists/DMM
-when a trade is executed, it reports the trade over the Consolidated Tape and reports the trade back to the firm that entered the order

Front 7

What is the max for market orders shares handled under the SuperDisplayBook?

Back 7

Up to 999,999 Shares

Front 8

What is the max for limit orders handled under the SuperDisplayBook?

Back 8

Up to 3,000,000 shares

Front 9

Under what basis are order filled?

Back 9

FIFO. First in First out

Front 10

What are the only 2 types of trades the DMM/Specialists can place on book?

Back 10

"Day" or "GTC"

- old orders on book are confirmed at least twice a year

Front 11

what is the difference between a ROUND LOT stock split/stock dividend and a ODD LOT stock split/dividend?

Back 11

Round lot : the number of shares are increase and the price is reduced

Odd lot: the number of shares is adjusted to nearest round lot (sometimes the number of shares will not change) and price is reduced

Front 12

Under the DMM's Positive Obligation, what must they do?

Back 12

If no one is buying a stock, they must buy. If no one is selling a stock, They must sell it.

Front 13

Under the DMM's Negative Obligation, what can it not do?

Back 13

if there are already buyers and sellers ready to trade at a given price, the DMM cannot position itself between willing traders

Front 14

What is "stopping stock"?

Back 14

Done by a DMM.
-if a trader feels the DMM's price for a stock is too high, the DMM can say "you are stopped at 15.25 for X amount of shares"
-the trader can go elsewhere, but if does not find lower price, he knows he's guaranteed 15.25 per share
-DMM only does this for public orders
-only done for short periods of time
-listed as s/t, not s.

Front 15

What are the time limits that a effected trade must be reported by and by who in the NYSE market?

Back 15

-Trades on the NYSE floor: within 90 Seconds by the Selling side
-Trades done OTC, including NYSE are reported within 30 Seconds

Front 16

What is the abbreviation for round lots and how many are in a round lot?

Back 16

"s" = Round lot of 100
--ex. 2s 114 - 2 round lots of 100 shares sold at $114

Front 17

What is a Block

Back 17

a block = 10,000 shares
--Ex. 10000s 114 - 10,000 shares sold at $114

Front 18

what does the abbreviation "s/s" stand for?

Back 18

"s/s" = round lots of 10 shares
(usually by companies that are inactively traded)

Front 19

How is a trade listed if it is reported late?

Back 19

If after the 90 sec. listed as "SLD"
=out of sequence trade and is not a current price

Front 20

What does OPD stand for?

Back 20

OPD = opening delayed; the stock had a delayed opening

Front 21

What is NYSE rule 76?

Back 21

-Prohibits the crossing of orders within a firm

-if the firm has both a seller and buyer with the same price indicated, must first to to the trading market and offer .01 more than the bid held by the firm.
-if not taken, THEN can cross within firm

Front 22

What is NYSE rule 77?

Back 22

-Prohibits person on the NYSE trading floor from:
1. betting on the course of the market
2. buying or selling dividends
3. buying or selling privileges to receive or deliver securities
4. buying or selling securities "at the close"
5. buying or selling securities at a "stop" price away from the current market

Front 23

What is NYSE rule 78?

Back 23

Prohibits PREARRANGED trades to sell that are linked to a buy back at the same price

Front 24

What is NYSE rule 92?

Back 24

Requires CUSTOMER ORDER receiving PRIORITY over firm's trading account (or a person that is associated with the firm)

Front 25

What is NYSE rule 410?

Back 25

Records of orders transmitted to the floor be kept for 3 Years

Front 26

What is NYSE rule 411?

Back 26

If the trade is reported erroneously (incorrectly), the customer must pay actual price of trade

Front 27

What is NYSE rule 435?

Back 27

Prohibits a member firm from:
1. Trading in excessive frequency or size
2. trading at successively higher or lower prices to create a misleading appearance of trading activity
3. Participating in manipulative operations
4. creating rumors that could influence market prices
5. Change the price of transaction before settlement date
6. Loaning money with securities as collateral

Front 28

What are the listing requirements for an existing company moving is listing from another market to the NYSE?

Back 28

1. 2,200 existing stockholders
2. 1,100,000 shares outstanding
3. 100,000,000 aggregate value of outstanding shares
4. 100,000 average shares traded monthly

Front 29

Define a LONG sale and give examples.

Back 29

1. cusomer owns stock and delivers on sale on settlement
2. customer owns a convertible security, and has given orders to convert and will deliver on settlement
customer wons rights, warrants, or call options and has exercised and will deliver on settlement

Front 30

What is Regulation SHO?

Back 30

was created to curb the potentially manipulative practice of "naked short selling" in all equity securities

Front 31

What is RULE 200 of Regulation SHO?

Back 31

Defines Short Sales as
-the sale of security that the seller does not own
-is settled by the delivery of a security that the seller does not own
-is settled by the delivery of a security borrowed by the seller or borrowed for the account of the seller

Defines being LONG

Customer is only LONG to the extent of their NET position. ie. has long and short

Every order ticket to sell must be marked either long sale or short sale.

Front 32

What is rule 201 of Regulation SHO?

Back 32

-If a stock's price drops by 10% or more from the previous days close, a CIRCUIT BREAKER is triggered

-for remainder of day AND entire next day, a short sale is only permitted at a price above the best bid for the security
--ex. if stock closes at $20, but next day is at $18 or lower, circuit breaker triggered. if short sale entered next day when NBB is 17.50-17.75. it can only be executed at 17.51 or higher

**only applies to NMS stocks, not OTCBB or Pink Sheets or:

Front 33

When does Rule 201 of regulation SHO NOT apply?

Back 33

1. when the stocks being traded are OTCBB or Pink Sheet stocks
2. short sales effected above the national best bid;
3. technical short sales where the seller owns the security but delivery is delayed
4. Odd lots
5. arbitrage transactions

Front 34

What is Rule 203 of regulation SHO?

Back 34

PRIOR to effecting a short sale in ANY equity security, the short seller must LOCATE the source from where the shares will be borrowed

Front 35

What is the "reasonable grounds test" and who is it performed by?

Back 35

By broker-dealers to determine if a security can be borrowed and delivered on settlement
-to meet this test, the broker dealer can create a list of "easy to Borrow" securities that are less than 2 hrs old

Front 36

What are "hard to borrow" securities lists, who are they created by and how often?

Back 36

Exchanges must create daily lists of "hard to borrow" securities ("threshold securities") [OTCBB and Pink Sheet issues are included in this]
-are securities failing to deliever 10,000 shares or more and the amount equals 0.5% of the company's total shares outstanding
-the security myst be on this list for 5 business days

Front 37

Under Regulation SHO, Rule 201 regarding Circuit breakers, how many different levels of Circuit breakers are there and what do each effect?

Back 37

2 levels:
-one effecting the whole market
-the other effecting sing-stocks

Front 38

How does the Market-Wide Circuit breaker work? and what does it apply to?

Back 38

-Applies to all NMS [ex. NYSE, AMEX, NASDAQ]
-market will close after the S&P 500 drops by a specified percentage from the prior day's close
--LEVEL 1 DROP: 7%
--LEVEL 2 DROP: 13%
--LEVEL 3 DROP: 20%

*If level 1 or 2 happens BEFORE 3:25, market closes for 15 min
*If Level 1 or 2 AFTER 3:25, market stays open till close
*If Level 3 happens anytime during day. Market closes for remainder of day

Front 39

How does Single-stock circuit breaker work? and what does it apply to?

Back 39

-The "limit up/down" rule tracks each NMS stocks price movement in 5-minute windows

TIER 1 (Actively traded) Stocks:
-trades 5% up or down from previous 5 minute average price or Prohibited
Stocks in the S&p 500; Russell 1000 and specific ETFs

TIER 2 (less actively traded NMS) Stocks:
-trades that are 10% up or down from previous 5 minute average price are Prohibited for all other listed stocks