How is compliance with the Order Protection Rule (of Reg NMS) guaranteed in the face of latency?
What is a Reg NMS security?
Regulation National Market System (or Reg NMS) is a US financial regulation promulgated and described by the United States Securities and Exchange Commission (SEC) as “a series of initiatives designed to modernize and strengthen the National Market System for equity securities“.
What is the trade through rule of Regulation NMS?
The SEC explained it in their final rule on Reg NMS: “A trade-through occurs when one trading center executes an order at a price that is inferior to the price of a protected quotation, often representing an investor limit order, displayed by another trading center.”
What is a non NMS security?
You might have heard of stocks trading on the over-the-counter bulletin board (OTCBB). This means the security isn’t traded on a national securities exchange (non-NMS securities) but it does quote on the Financial Industry Regulatory Authority’s (FINRA) interdealer quotation service.
Which rule provides intermarket price priority for quotations that are immediately and automatically accessible?
To be protected, a quotation must be immediately and automatically accessible. Rule 611(b) also sets forth a series of exceptions that are designed to provide efficient and workable intermarket price priority.
What exchange is NMS?
The National Market System (NMS) is the national system for trading equities in the United States. The System includes all the facilities and entities which are used by broker-dealers to fulfill trade orders for securities. This includes: Major stock exchanges, such as New York Stock Exchange and Nasdaq.
How many Reg NMS securities are there?
There are 14 separate “rules” that makeup Reg NMS (see Table 1 below), which are grouped into six main categories with some common themes: Definitions: Rule 600 defines concepts and terms, which is sometimes pivotal to how the later rules work.
What is the trade through rule?
The Order Protection Rule – also known as the trade through rule, mandated that investors receive the best price on routed orders by requiring exchanges to route orders to other exchanges if they are displaying better prices.
What is the trade at rule?
Rule 6.6 (colloquially referred to by some as the “Trade At Rule”) is a form of exception to this Order Exposure Rule by permitting trading of retail orders in a dark pool provided there is price improvement over the current NBBO. natural resource and other start-up companies.
Why does the SEC prohibit locking and crossing quotations in the US equity market ie non positive spreads )?
The SEC’s recent Regulation NMS recommends that market participants avoid initiating non-positive spreads, because locks and crosses are ”inconsistent with fair and orderly markets and detract [y] from market efficiency.
How does an intermarket sweep order work?
Intermarket sweep orders (ISO) is a type of stock market order that sweeps several different market centers and scoop up as many shares as possible from them all. These work against the order-protection rule under regulation NMS.
What is a protected quotation?
To be protected, a quotation must, among other things, be immediately and automatically accessible and be the best bid or best offer of a national securities exchange or national securities association (collectively, “self-regulatory organizations” or “SROs”).
What does the SEC’s Regulation SP require?
Reg S-P requires broker-dealers, investment advisers, and investment companies to notify customers of their privacy policies and establish sufficient safeguards for their personal and financial information.
Which regulation requires firms to adopt written policies and procedures that address safeguards for the protection of customer records and personal information?
Protection of financial and personal customer information is a key responsibility and obligation of FINRA member firms. Under the SEC’s Regulation S-P, firms are required to have policies and procedures addressing the protection of customer information and records.
Who does Regulation SK apply to?
Applicability. In a company’s history, Regulation S-K first applies with the Form S-1 that companies use to register their securities with the U.S. Securities and Exchange Commission (SEC) as the “registration statement under the Securities Act of 1933”.
Which of the following statements is true about the SEC customer protection rule?
Which of the following statements is TRUE about the SEC Customer Protection Rule? If a client sells securities and fails to deliver them within 10 business days of the settlement date, the broker-dealer must buy-in the customer.
Which of the following will help the manager of an actively managed fund achieve superior returns?
Which of the following will help the manager of an actively managed fund achieve superior returns? Generally, the objective of the risk management function is to: assist the firm to maximise returns. balance risk against other objectives.
Which of the following securities are typically subject to state registration requirements?
Which of the following securities are typically subject to state registration requirements? B. Intrastate offerings ( State registration is not required for those securities that are exempt under the Federal Securities Acts, such as U.S. Government debt, municipal debt, and state chartered bank issues.
What is the purpose of the net capital rule?
Exchange Act Rule 15c3-1 (Net Capital Rule) requires that firms must at all times have and maintain net capital at specific levels to protect customers and creditors from monetary losses that can occur when firms fail.
What are current capital requirements?
(1) A national bank or Federal savings association must maintain the following minimum capital ratios: (i) A common equity tier 1 capital ratio of 4.5 percent. (ii) A tier 1 capital ratio of 6 percent. (iii) A total capital ratio of 8 percent.
What is the capital rule?
Such rules include rules requiring financial institutions to maintain total capital in amounts based upon percentages of outstanding loans, binding loan commitments and letters of credit.
What is broker/dealer net capital requirements?
A broker or dealer (other than one described in paragraphs (a)(2)(ii) or (a)(8) of this section) shall maintain net capital of not less than $250,000 if it carries customer or broker or dealer accounts and receives or holds funds or securities for those persons.
What is a Reg T margin account?
Investors who want to purchase securities using broker-dealer credit need to apply for a margin account. Reg T mandates that investors can borrow no more than 50% of the purchase price while the remaining balance must be paid in cash.
What’s the big deal about Rule 15c3 3?
Rule 15c3-3 requires banks to compare what they owe clients and what clients owe them on at least a weekly basis, and safeguard the difference representing what they owe clients, on a net basis.
What is net capital computation?
Net Capital Computations
Net capital can be best defined as a computation of a broker dealer’s liquidity, or the ability to convert current assets and liabilities into net cash in the event of a liquidation.
What is undue concentration?
Undue Concentration. This refers to a situation where a broker-dealer has a securities position. for which the market value is more than 10 percent of the broker-dealer’s net capital before haircuts (i.e., “tentative net capital”).
Which items are allowable assets for the net capital computation?
When calculating net capital, a broker-dealer is required to sum all “allowable” assets, including securities positions and certain qualifying subordinated debt. Examples of “non-allowable” assets include unsecured receivables, fixed assets, real estate and other illiquid assets.