Series 57 Chapter 7

In a step-out arrangement, when does a BD allocate all or part of the trade to another BD before or after execution?

After execution

True or False: The OTC automatically reports trades that are executed for securities quoted on its system.

False. OTC trades are reported by the BD within 10 seconds to the OTC Reporting Facility (ORF).

What modifier is used for a trade that takes place during normal market hours, but is not reported within 10 seconds?

.Z and the time of the trade

An OTC equity trade is effected at 6:00 a.m., but not reported by 8:15 a.m., what modifier is used?

Trades reported after 8:15 a.m. must include a .U modifier.

If a blockbuster trade is reported to ACT Trade Scan, the clearing firm has ___ minutes to accept or decline the trade.

If a blockbuster trade is reported to ACT Trade Scan, the clearing firm has 15 minutes to accept or decline the trade.

If a trade occurs on the Nasdaq Market Center Execution System, who reports the trade to the TRF?

NMCES trades are automatically reported by the system and do not need to be manually reported by the executing BD.

Explain a give-up arrangement.

A participant BD agrees to accept and honor all trades reported on its behalf by an executing BD.

If a trade in a foreign OTC equity is reported to a foreign exchange or regulator, is reporting to the ORF required?

No. ORF reporting is not required since the trade had already been reported.

If an OTC equity trade is executed at 6:00 a.m., by what time must it be reported to the ORF and what modifier is used?

A trade executed between midnight and 8:00 a.m. must be reported by 8:15 a.m., and be designated with a .T modifier.

An OTC security trade occurs at 8:45 a.m., but is not reported within 10 seconds. What modifier is used for reporting?

The .U modifier is used.

What does the .C trade modifier indicate?

It indicates a cash trade was executed with settlement on the same day.

Two Nasdaq member firms effect a third-market trade. Who is responsible for reporting the trade?

The executing firm

Identify the acronym: SIP

Securities Information Processor

True or False: Reporting ECNs do not report trades directly to the Trade Reporting Facility (TRF).

False. These ECNs submit trade reports to the TRF and identify themselves as the reporting party.

If a trade originates from a firm's proprietary trading desk as a part of normal market making, is CAT filing required?

Yes

In a trade between two non-market makers, who must report it within 10 seconds?

The BD against whose quote the trade was executed

True or False: The ADF reporting system offers a trade comparison service to ADF participants.

True

Trades executed during normal market hours, but not reported within 10 seconds, use a ___ modifier.

Trades executed during normal market hours, but not reported within 10 seconds, use a .Z modifier.

Within how much time is a market maker obligated to report trades in Nasdaq and CQS securities to the TRF?

Within 10 seconds

How does CAT define an order?

Any oral, written, or electronic instructions to effect a trade received from clients, the member, or another firm

How are CAT market participants required to synchronize their clocks?

To within 50 milliseconds of the time maintained by the National Institute of Standards and Technology (NIST)

The system used by order entry-firms or MMs to accept, decline, correct, or cancel open trades is called .

The system used by order-entry firms or MMs to accept, decline, correct, or cancel open trades is called ACT Trade Scan.

Which detail is NOT included in a CAT report? Time of receipt, method of receipt, order terms, CUSIP number

A CUSIP number is not included in a CAT report.

CAT is used to track the life of orders for what types of securities?

Listed (NMS) stocks, OTC equity securities, and listed options.

In a trade between two member firms, who files the trade report?

The executing BD. In other words, the BD against whose quote the trade was executed files the report.

If a trade is executed between 8:00 a.m. and 9:30 a.m., when must it be reported and what modifier is used?

Such a trade is reported within 10 seconds using the .T modifier.

What does the .W trade modifier indicate?

It indicates stop stock trades or weighted average trades.

If an OTC Pink Market security trade occurs between 4:00 p.m. and 8:00 p.m., when is it reported and what modifier is used?

The trade must be reported within 10 seconds and use a .T modifier.

True or False: Trades executed on the NYSE floor are reported to the TRF and then the Consolidated Tape.

False. NYSE trades are reported directly to the Consolidated Tape.

True or False: OTC equity trades that are executed on the NMCES are automatically reported to the ORF.

False. OTC equity securities are not able to use the NMCES for execution.

OTC equity transactions are reported within ___ seconds to the ____ Reporting Facility.

OTC equity transactions are reported within 10 seconds to the OTC Reporting Facility (ORF).

Within what time period is an order-entry firm obligated to accept a reported trade or enter its version of the trade?

Within 20 minutes of execution

Define executing broker for reporting purposes.

A firm that receives an order from a client or has an order routed to it and executes the trade against its quote

How often is a CAT report required to be transmitted?

Daily

True or False: Nasdaq Market Center Execution System trades are automatically reported by the system.

True

Who provides price improvement, liquidity, and trade reporting?

The market maker against whose quote an order was executed.

When is the .O trade modifier used?

It is used when the inside market changes within the 30-second reporting requirement (price override).

Trades involving securities with no ticker symbol are reported on Form _ and sent to the _ Department.

Trades involving securities with no ticker symbol are reported on Form T and sent to the Market Regulation Department.

What modifier is used for trades executed between 8:00 a.m. and 9:30 a.m., but not reported within 10 seconds?

The .U modifier is used.

Generally, which BD is responsible for filing an equity trade report?

The executing BD. In other words, it is the BD against whose quote the trade was executed.

True or False: Transactions that are part of a private placement offering are not reported to the TRF.

True

A ___ modifier is used for OTC Pink Market trades between 4:00 p.m. and 8:00 p.m., but not reported within 10 seconds.

A .U modifier is used for OTC Pink Market trades between 4:00 p.m. and 8:00 p.m., but not reported within 10 seconds.

What information is included in a CAT report?

The life of an order including receipt, routing, display, modification, cancellation, execution

What is required if two BDs enter into a give-up arrangement?

Both BDs must execute and submit a written agreement to Nasdaq.

A trade in a Nasdaq security executed on a proprietary system must be reported to the TRF within ___ seconds.

A trade in a Nasdaq security executed on a proprietary system must be reported to the TRF within 10 seconds.

ADF reporting system hours of operation are from a.m. to p.m.

ADF reporting system hours of operation are from 8:00 a.m. to 6:30 p.m.

Are purchases or sales related to the exercise of options or convertibles at preset prices reported to TRF?

No

If a trade is executed between 4:00 p.m. and 8:00 p.m., but not reported within 10 seconds, a ___ modifier is used.

If a trade is executed between 4:00 p.m. and 8:00 p.m., but not reported within 10 seconds, a .U modifier is used.

What is the trade reporting system for Nasdaq securities?

Trade Reporting Facility (TRF) - formerly the Automated Confirmation Transaction system (ACT)

In a trade between two firms that meet the definition of the executing party, which firm must report the trade?

The seller

How often must CAT reports be submitted to FINRA?

Daily

True or False: Both parties to a trade must report to the TRF or ORF within 10 seconds of execution.

False. To avoid double counting, only one side of the trade is responsible for reporting.

True or False: During premarket hours, OTC trades are reported within 90 seconds.

False. OTC trades executed during pre, regular, or aftermarket hours are reported to the ORF within 10 seconds.

If a trade is effected between two member firms, who is responsible for reporting the trade?

The executing firm

Explain the use of the .P modifier for prior reference price.

A trade was not executed when it should have been; therefore, to correct the error, it was executed at an earlier price.

True or False: Trades executed through the Nasdaq Market Center Execution System do not have to be manually reported.

True. They are automatically reported by the system.

If an order is executed before 9:30 a.m., its trade report will show a ___ modifier.

If an order is executed before 9:30 a.m., its trade report will show a .T modifier.

A or__ modifier is used for OTC trades effected during normal market hours, but not reported within 10 seconds.

A .Z or .SLD modifier is used for OTC trades effected during normal market hours, but not reported within 10 seconds.

What does the trade modifier .P indicate?

Prior reference price (some systems use .PRP instead)

A blockbuster trade is a trade that is in excess of $__.

A blockbuster trade is a trade that is in excess of $1 million.

True or False: CQS transactions must be reported within 10 seconds of execution.

True

True or False: A CAT report will include the capacity in which the reporting market participant acted.

True. The report will identify the capacity as agent, principal, or riskless principal.

True or False: A trade executed on the NMCES is reported to the TRF by the executing BD within 10 seconds.

False. The Nasdaq Market Center Execution System automatically and immediately reports trades upon execution.

If a trade in a foreign OTC equity is not reported to a foreign exchange or regulator, to whom is it reported?

Within 10 seconds, the trade must be reported to the ORF in U.S. dollars.

Trades executed between 4:00 p.m. and 8:00 p.m. are reported within ___ seconds using the ___ modifier.

Trades executed between 4:00 p.m. and 8:00 p.m. are reported within 10 seconds using the .T modifier.

True or False: A CAT report will only include details on orders that have been executed.

False. A CAT report tracks an order from its receipt, to modification, to execution, or its cancellation.

For trades effected between a member firm and a nonmember firm or customer, the reports the trade.

For trades effected between a member firm and a nonmember firm or customer, the member reports the trade.

For securities that are quoted on the Pink Market, where are executed trades reported?

To the OTC Reporting Facility (ORF)

What is TRF?

The Trade Reporting Facility. TRF reports trades in Nasdaq and Third Market securities.

Who uses the ADF reporting system?

ADF participants. Remember, the ADF does not execute trades.

True or False: OTC markets have trade reporting requirements, but exchanges do not.

False. Both OTC and exchange markets require trade reporting.

When is the .U trade modifier used?

It is used to identify preopen and aftermarket trades that are reported late.

When is the .T trade modifier used?

It is used for after-hours execution.

Market participants who publish quotes for ADF-eligible securities would report the trades through what system?

The ADF reporting system

Trades executed during normal market hours must be reported within ___ seconds by the BD.

Trades executed during normal market hours must be reported within 10 seconds by the executing BD.

What happens if a clearing firm neither accepts nor declines a blockbuster trade with ACT Trade Scan within 15 minutes?

The order is accepted for normal processing.

If a trade is executed between midnight and 8 a.m., but is not reported by 8:15 a.m., what modifier is used?

The .U modifier is used.

What is the trade reporting system for OTC equities?

Over-the-Counter Reporting Facility (ORF)

True or False: Form T is used when trades cannot be reported to the TRF or ORF.

True

Explain a step-out clearing arrangement.

BDs that had previously executed trades will allocate all or part of the trades to another BD for clearing purposes

If a trade is executed between midnight and 8:00 a.m., when must it be reported?

By 8:15 a.m. on the trade date

An OTC Pink Market trade is effected from 8:00 p.m. to midnight, but not reported by 8:15 a.m., what modifier is used?

It is reported as/of and the .U modifier is used.

What is the ADF reporting system?

The ADF reporting system reports trades in securities quoted in the Alternative Display Facility (ADF).

List some of the order information that appears on a CAT report.

Entry party, date/time received, order terms, routing information, any modifications, execution details, firm capacity

True or False: A CAT report must be transmitted weekly.

False. CAT reports are transmitted daily.

What is CAT?

The Consolidated Audit Trail; it enables FINRA to review customer orders and market activity within a member firm.

OTC Pink Market trades effected from 8 p.m. to midnight are reported on a T+__ basis by ____ a.m. and designated _____.

OTC Pink Market trades effected from 8 p.m. to midnight are reported on a T+1 basis by 8:15 a.m. and designated as/of.

Trades executed between 8:00 p.m. and midnight are reported on a T+__ basis by a.m. and are designated _.

Trades executed between 8:00 p.m. and midnight are reported on a T+1 basis by 8:15 a.m. and are designated as/of.

If a Nasdaq trade is executed between 9:30 a.m. and 4:00 p.m., but not executed by the NMCES, how is it reported?

It is reported to TRF within 10 seconds

Trades involving securities quoted on the ADF are reported to the .

Trades involving securities quoted on the ADF are reported to the ADF reporting system.

If an OTC security trade is executed at 8:45 a.m., when must ORF reporting occur and what modifier is used?

The trade must be reported within 10 seconds and use a .T modifier.

When a BD reports a trade to the TRF, what type of information is included?

Nasdaq stock symbol, number of shares, price, whether a buy/sell/cross, execution time

True or False: For a riskless principal transaction, both legs are reported to the TRF for dissemination to the public.

False. Only one leg is reported for dissemination to the public.