S57 Chapter 2

  1. What are the requirements for a stock to be issued on Nasdaq?
    Corporate governance standards
  2. Contrast Nasdaq Capital Markets (NCM), Nasdaq Global Markets (NGM), and Nasdaq Global Select Markets (NGSM)
    • NCM: minimum requirements for financial strength, public float, value, shareholders. >$4 bid
    • NGM: More stringent than NCM
    • NGSM: Top tier ranking with most stringent standards
  3. What are the differences in the three Nasdaq subscriber levels?
    • Level 1: Inside market with no MMs identified
    • Level 2: Quotes of all MMs, market data such as depth, last sale, high/low, and nchg. Allows a customer to call a MM and negotiate size/price.
    • Level 3: Available only to registered MMs and allows them to update price/quantity.
  4. What is the NMCES?
    • Order display, execution, and reporting system for Nasdaq and CQS securities
    • Orders are routed for best price and locked in
    • Maximum order size is 999,999 shares unless split into smaller orders
    • Displayed has priority over reserve and discretionary
  5. What is a discretionary order?
    They have a displayed limit order price and a non-displayed limit order price that will be traded if the market gets there
  6. When is a market maker registration effective?
    • When notified by FINRA
    • Expires if no quotes are made in 5 business days
  7. What are Nasdaq hours?
    • 4 AM to 8 PM ET
    • MM hours are 9:30 AM to 4:00 PM ET, anything else is pre and post market
  8. What are the MPIDs?
    • Primary MPID identifies the market maker
    • Subsequent MPIDs may be used for sponsored access, prime brokerage, and prop trading
    • They may not be used for passive MM or stabilization
    • You should report trades with the same MPID as the quotes
  9. What happens if a market maker enters a mixed lot?
    It is rounded down to the nearest round lot at that price level?
  10. What is the minimum MM quote size?
  11. What are the maximum deviations from the NBBO that MMs can enter?
    • 8% for SP500 and Russel 1000 Idx listed stocks
    • 28% for NMS stocks not on the indexes with prices >=$1.00
    • 30% for NMS stocks not on the indexes with prices < $1.00
  12. When are MM withdrawals permitted?
    • 5 business days for issues beyond control (e.g. system failure)
    • 60 calendar days for legal/regulatory compliance
    • Religious holidays
    • Vacation for small firms (<=3 level III terminals)
    • Participation in an underwriting
    • Termination of relationship with clearing firm
  13. What is SEC rule 15c3-5?
    Requires a broker dealer to have systems in place to prevent customers from placing erroneous/illegal orders (such as exceeding capital/credit limits).
  14. What are direct and sponsored access?
    • Direct access: orders go through BDs system
    • Sponsored access: orders do not go through BDs system
  15. What is an ACT Clearing Broker Scan checking for?
    • Super caps: Clearing firm placed limits on the max gross dollar amount of orders
    • Blockbuster trade: Trade of >=$1M
    • Risk management alert is subject to a 15 minute hold
  16. What is SEC rule 13h-1?
    • Large traders must file a form (13H) with the SEC and get an ID number
    • Large traders are people that invest in exchange-listed equities or options with > 2 million shares/$20 million value a day OR > $20 million shares/$200 million value a month
    • They must file an annual report
  17. What is Regulation NMS Rule 611?
    • Order protection rule that prevents trade-throughs
    • Only protects BBO
  18. What is an ISO?
    • Intermarket sweep order
    • Limit order that’s exempt from the order protection rule
    • A trader can trade at an inferior price in one market, while simultaneously directing orders for execution in to other markets with protected quotes (to get full size)
  19. What is a pegged order?
    • Customer orders that aren’t displayed in the system. They’re pegged outside of the NBBO
    • Primary pegged: Pegged outside of the spread, may be entered with a price cap (limit)
    • Market pegged: Pegged inside of the spread—buy pegged below ask, sell pegged above bid
    • Mid-point pegged: Pegged to the midpoint of the NBBO
  20. What is a minimum quantity order?
    An IOC order that specifies the min quantity of shares to be executed or else the order will be cancelled.
  21. What is a non-displayed order?
    • Limit orders not displayed in the system
    • Includes odd lots, pegged orders, and customer requests
Card Set
S57 Chapter 2
S57 Chapter 2