CME-1 Trading Mechanisms & Market Operations 2

Question 1

What is the purpose of a 'circuit breaker' mechanism in a stock exchange?

Accepted Answer

To temporarily halt trading when prices move beyond predetermined thresholds

Answer

To automatically execute large block trades during volatile periods

Answer

To limit the number of orders a single broker can submit

Answer

To prevent after-hours trading from affecting opening prices

Question 2

In Saudi market terminology, what is the 'Nomu' parallel market designed for?

Accepted Answer

Providing a lighter-regulatory listing venue primarily for small and medium enterprises

Answer

Trading government bonds and sukuk exclusively

Answer

Facilitating foreign currency exchange for capital market participants

Answer

Conducting over-the-counter derivatives trading

Question 3

What does 'price discovery' mean in the context of capital markets?

Accepted Answer

The mechanism by which buyers and sellers determine the fair market price through trading activity

Answer

The process of auditing a company's financial statements

Answer

The CMA's process of setting initial public offering prices

Answer

The calculation of net asset value for investment funds

Question 4

A broker receives an order to buy 1,000 shares at SAR 50 per share; shares are currently trading at SAR 52. Which order type would allow the purchase only if the price drops to SAR 50?

Accepted Answer

Limit buy order

Answer

Market order

Answer

Stop-loss order

Answer

All-or-none order

Question 5

What is 'margin trading' in the Saudi capital market?

Accepted Answer

Trading securities using borrowed funds from a licensed broker or bank

Answer

A trading strategy focused only on small-cap stocks

Answer

Buying securities at a discount to their market value

Answer

The process of netting buy and sell orders before settlement

Question 6

Which entity is responsible for clearing and settling equity trades executed on the Saudi Exchange (Tadawul)?

Accepted Answer

The Securities Depository Center (Edaa) in conjunction with the exchange

Answer

The Saudi Central Bank (SAMA)

Answer

The Capital Market Authority (CMA)

Answer

The Ministry of Finance

Question 7

What is an 'order book' in a stock exchange?

Accepted Answer

An electronic record of outstanding buy and sell orders arranged by price and time priority

Answer

A regulatory log of all broker license applications

Answer

A physical ledger kept by listed companies of shareholder orders

Answer

The CMA's annual publication of approved securities offerings