Series 99 Trade Settlement & Clearance Procedures 5

Question 1

What is a 'depository participant' in the context of DTC?

Accepted Answer

A broker-dealer or bank that is a member of DTC and can access its book-entry settlement services

Answer

A DTC participant is a member firm (typically a broker-dealer or bank) that has direct access to DTC's custody and book-entry settlement services.

Question 2

Which regulation governs the time frame for broker-dealers to transmit payments to customers for securities sales proceeds?

Accepted Answer

SEC Rule 15c3-3 (the Customer Protection Rule)

Answer

SEC Rule 15c3-3 imposes obligations on broker-dealers to promptly pay customers proceeds from securities sales and to safeguard customer funds.

Question 3

What is 'Regulation SHO' primarily designed to address?

Accepted Answer

Abusive naked short selling and persistent fails to deliver

Answer

Regulation SHO establishes rules on short sales to curb abusive naked short selling and requires broker-dealers to close out fail-to-deliver positions within specified timeframes.

Question 4

What is the 'settlement cycle' for U.S. Treasury securities?

Accepted Answer

T+1 (next business day)

Answer

U.S. Treasury securities generally settle on a T+1 basis, one business day after the trade date, which differs from the T+2 cycle for most equities.

Question 5

In a correspondent clearing relationship, what is the 'introducing broker' responsible for?

Accepted Answer

Acquiring customers, executing trades, and forwarding account records to the clearing firm

Answer

The introducing broker is responsible for the customer-facing activities—soliciting business and executing trades—while delegating custody and settlement to the clearing firm.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Trade Settlement & Clearance Procedures 5