Trading Platforms & Regulatory Compliance Flashcards

Under FINRA Rule 4370, broker-dealers must maintain a Business Continuity Plan (BCP) that addresses which scenario?

Answer: Significant business disruptions including both internal and external events

FINRA Rule 4370 requires BCPs to address significant business disruptions of any kind, covering both internal failures and external events.

Which order type on a trading platform guarantees execution but NOT price?

Answer: Market order

A market order guarantees execution at the best available price but does not guarantee a specific execution price.

A trader using Direct Market Access (DMA) bypasses which intermediary?

Answer: The broker-dealer's order desk

DMA allows traders to submit orders directly to an exchange's order book, bypassing the broker-dealer's internal order desk.

Under SEC Regulation SHO, a trader must locate shares before executing which type of trade?

Answer: Short sale

Regulation SHO requires broker-dealers to locate shares available for borrowing before executing a short sale to prevent naked short selling.

What is the primary function of a Level 2 quote screen on a trading platform?

Answer: Showing the full order book depth with market maker quotes

Level 2 quotes display the full depth of the order book, showing all bids and asks from various market makers and ECNs.

Which regulatory body oversees the National Futures Association (NFA)?

Answer: CFTC

The Commodity Futures Trading Commission (CFTC) is the federal regulator that oversees the NFA, which is the self-regulatory organization for the US derivatives industry.

A 'fat finger' error on a trading platform most commonly refers to which scenario?

Answer: An unintentional trade entry due to keystroke or input mistakes

A fat finger error is an unintended trade caused by incorrectly entering order details, such as wrong quantity or price, due to human input mistakes.