SIE Market Structure and Trading

Question 1

What is the role of a market maker?

Accepted Answer

To provide liquidity by continuously quoting bid and ask prices

Answer

To regulate trading activity on exchanges

Answer

To execute trades only for institutional investors

Answer

To set the official closing price of securities

Question 2

The bid price in a security quote represents:

Accepted Answer

The price at which a dealer will buy the security

Answer

The price at which a dealer will sell the security

Answer

The last traded price of the security

Answer

The average of buy and sell prices

Question 3

The National Best Bid and Offer (NBBO) rule requires broker-dealers to:

Accepted Answer

Execute customer orders at the best available prices across all exchanges

Answer

Execute all trades through the NYSE

Answer

Charge a minimum commission on all trades

Answer

Route orders to the largest market maker

Question 4

A limit order is an instruction to buy or sell a security:

Accepted Answer

At a specific price or better

Answer

Immediately at the best available market price

Answer

Only at the closing price

Answer

Only if trading volume exceeds a threshold

Question 5

What is the difference between a broker and a dealer?

Accepted Answer

Brokers act as agents for customers; dealers trade for their own account as principals

Answer

Brokers trade for their own account; dealers trade for customers

Answer

Dealers are regulated by FINRA; brokers are not

Answer

Brokers only handle government securities

Question 6

Regular-way settlement for most equity securities occurs:

Accepted Answer

1 business day after the trade (T+1)

Answer

Same day as the trade

Answer

2 business days after the trade (T+2)

Answer

3 business days after the trade (T+3)