Series 57 practice test

A: An approved booth clerk may process orders sent to the booth, while making or accepting bids and offers on the Floor stays limited to members. B: Physical access to the Floor is not the test the rule sets, which limits transacting business there to members. C: The NYSE Floor dealings rule permits only members to make or accept bids and offers, consummate transactions, or otherwise transact business on the Floor in a security admitted to dealings on the Exchange. D: Association with a member organization confers no permission to transact business on the Floor, because the rule names members.

A: An assignment of securities is not the statutory test, which turns on the specialist being permitted to act as a dealer. B: Agency representation of orders describes a floor broker's work, and each statutory category rests on dealer activity. C: Registration with FINRA belongs to the alternative display facility market maker definition, not to the statute's specialist category. D: The definition opens with any specialist permitted to act as a dealer, so the permission to deal is what brings the specialist inside it.

A: Market makers may bring proceedings seeking review of a denial of an excused withdrawal or of the conditions imposed on their reentry. B: Nothing makes those conditions final, and they are one of the two subjects the review reaches. C: Review reaches the two named subjects rather than the facility's quotation decisions generally. D: Review reaches a denial and, separately, the conditions imposed on reentry.

A: Permission to combine order types and modifiers unless their terms are inconsistent comes from the equities order types rule's commentary, and it is not the sentence either options rule opens with. B: Both options order types rules open with the same line stating that the rule is not applicable to trading on Pillar, so a scenario that places one of their order types on that platform is really testing the opening sentence. C: Order sizes written as an amount of a security belong to the equities order types rule. Both options rules state their types in a number of option contracts, and neither opens with a sentence about order size. D: That closed list of three time-in-force choices sits in the commentary to the NYSE Arca options order types rule rather than in an opening line, and the NYSE American rule prints no equivalent sentence at all.

A: The limit price caps the adjustment rather than setting the working price, so an order to buy priced at $18.40 works at the $18.32 match price. B: The working price of a participating order is adjusted to equal the Indicative Match Price, provided that price is not higher than the limit price of an order to buy, and $18.32 sits below the $18.40 limit. C: The adjustment is made so the order can take part in the auction, not after the auction has been run. D: No midpoint is taken. The adjustment moves the working price to the Indicative Match Price itself.

A: Arriving into a locked or crossed protected quotation is the one branch that rejects an order outright, and it belongs to the primary peg. B: An arriving market peg waits for a quotation that is not locked or crossed before its working price is adjusted. C: An arriving discretionary peg waits in the same way a market peg does, so it survives the crossed quotation. D: Two of the three wait rather than die, and only the primary peg is rejected on arrival into a crossed quotation.

A: Customer status does not put a firm inside the definition, which turns on the firm's own standing at the venue. B: The two statuses are reversed here. The word respectively pairs membership with the exchange and subscription with the ATS. C: Access that results from being a member of the exchange, or a subscriber of the ATS, is market access under the first branch, and the word respectively pairs each status with its own venue. D: Clearing for a member or a subscriber is not the same as holding that status, so it does not bring the firm within this branch.

A: Credit thresholds are required for each customer for which a firm provides market access, and that expressly includes broker-dealer customers. B: A review after the fact does not prevent the entry of a breaching order, and it does not substitute for a pre-set threshold. C: Documenting a reason does not remove the member's own threshold obligation. D: A capital threshold covers a firm's trading for its own account; it does not cover the exposure the member takes on by providing access.

A: Halts sit among the requirements owed before entry, which places them with the pre-order entry control rather than with the restricted list. B: Odd-lot orders do belong to the pre-trade category, and nothing in this desk's facts turns on an odd lot, so the defect remains that the checks come after entry. C: The control is phrased as preventing the entry of orders, which requires the checks to be applied on a pre-trade basis before orders route to the exchange or alternative trading system, and a review of orders already entered comes too late. D: Who performs a check is not the defect here, and the failure is one of timing.

A: An obvious error in any term is what the definition turns on, and it prints price, number of shares or other unit of trading, and identification of the security as examples of such a term. B: An admission by the member is not what the definition turns on, and a simple assertion of a mistake may not be sufficient to establish that a transaction was clearly erroneous. C: Price is one example the definition prints rather than the boundary of the definition, which reaches an obvious error in any term. D: Agreement between the two sides about what they intended is not the test; whether the error in a term is obvious is.

A: The row states no Normal Market Hours guideline for these products and, outside those hours, the Normal Market Hours guideline multiplied by the leverage multiplier. B: Thirty percent belongs to a multi-stock event involving twenty or more securities. C: The Normal Market Hours column states no guideline at all for these products. D: The multiplier is applied to the Normal Market Hours guideline rather than to the outside-hours guideline.

A: Either route works. A transaction may arise out of the qualifying system or be reported through it. B: Quotation activity in the security is not the connection the rule requires. C: How the two sides came together is not what brings a transaction inside the rule. The connection to a qualifying FINRA trade reporting system is. D: The scope sentence reaches any transaction involving an OTC Equity Security arising out of or reported through a trade reporting system owned or operated by FINRA or FINRA Regulation and authorized by the SEC.

A: That start belongs to a class the exchange lists for regular trading hours only; an all-sessions class opens its window the evening before. B: The entry and cancellation window for an all-sessions class runs from 8:00 p.m. Eastern Time the previous day until Curb Trading Hours market close. C: 5:15 p.m. Eastern Time is the cut-off for cancelling a resting good til canceled or good til date order after the regular session closes, not a start time for entry. D: The opening of the underlying market does not set the entry window, which for an all-sessions class has been open since the evening before.

A: The certification record concerns a trading center's ability to display quotations and sets no trading unit. B: A market maker's willingness to buy and sell describes how it holds itself out rather than the size of a trading unit. C: A round lot is 100 shares where the average closing price during the prior evaluation period was $250.00 or less per share, and above that it steps down to 40, then 10, then a single share. D: A normal unit of trading is the round lot assigned to a security under the national market system rules.

A: The test names both routes: the methods may be supplied by providing a trading facility or by setting rules under which the orders interact. B: Rules are one of the two routes the test names, so a trading facility is not the only way. C: A trading facility is the other route the test names, so rules are not the only way. D: Agreement is reached on the terms of a trade under those methods; separate advance agreement is not how the methods are supplied.

A: Building a position is half the list; decreasing and liquidating are named in the same sentence. B: The prohibition names these four moves and no others, so trimming a position sits inside it alongside building one. C: Transferring a position between accounts is not among the named moves, and establishing a position, which is named, is left out. D: Hedging is not one of the named moves, and the two reduction verbs the prohibition does name are missing.

A: Those four relationships are the ones written into the family branch. B: The branch does not reach the whole family tree. It names a spouse, a parent, a child, and a sibling. C: A grandparent and a first cousin are not written into this branch, though the rule's open chapeau leaves room for a duty to arise elsewhere. D: Household membership is not the test the branch uses, since it names four specific relationships.

A: The paid route is written around inducing the purchase. B: The paid route is written around inducing the purchase, while the ordinary-course route reaches inducing the purchase or sale. C: Each route names it: the paid route reaches inducing the purchase, and the ordinary-course route reaches inducing the purchase or sale. D: The paid route is the narrower of the two, so this pairing has them the wrong way round.

A: A member that communicates a bid or offer for a national market system security to another member, at the location or through the facility the exchange designates, is the responsible broker or dealer in either capacity. B: Both capacities are named, so confining the label to principal trading leaves out every member that communicates a bid or offer for someone else. C: No market maker registration appears in this definition, so any member communicating the bid or offer in either capacity is the responsible broker or dealer for it. D: Agency is one of the two capacities named; a member quoting for its own account carries the label as well.

A: Members not designated for that testing are permitted to participate in any market-wide circuit breaker test. B: No such limit appears. An undesignated member may participate in any test. C: The annual requirement attaches to designated members. An undesignated member may take part but does not have to. D: Participation is open to undesignated members rather than closed to them.

A: Holding a position is not a condition, because circulating the quotation for another person is enough. B: The words for itself or for any other person put a member circulating another party's quotation squarely inside the branch. C: Quoting on behalf of someone else is inside the branch, which reaches a quotation circulated for itself or for any other person. D: The member circulating the quotation carries the standard too, since the branch covers a quotation circulated for any other person.

A: The reporting test is read at a single moment, immediately prior to the filing of that offering's registration statement, rather than across the life of the offering. B: A first sale to the public is not the test. Securities Act registration is one of the two facts the rule asks for, so an unregistered first sale fails it. C: Both parts have to hold: the offering carries Securities Act registration, and the issuer stood outside the Exchange Act reporting requirements immediately prior to filing the registration statement for that offering. D: The rule joins its two parts with the word and, so satisfying one part alone leaves the security outside the definition.

A: Total assets and total revenue are joined, so a company meets this criterion only where each reaches $75 million. B: No summing appears in the criterion; each measure is tested against the threshold on its own. C: Reading the pairing as a choice loosens the criterion; both measures carry the same threshold and both must reach it. D: The $30 million figure is the shareholders' equity threshold in a different criterion and has no role here.

A: The excuse turns on the form of the assumption, and a telephone agreement is not the writing the rule calls for. B: Another member's assumption of responsibility relieves a member only where that assumption is in writing, so an oral understanding leaves the duty where it was. C: Nothing limits a distribution to a single notice, and each member in the fallback owes the notice unless relieved in writing. D: Being a distribution participant is enough to bring a member inside the fallback, and affiliated purchaser status is an alternative route in rather than a condition.

A: The definition covers equity only, and it does not open on where the security trades; a security's market matters only through the exclusions. B: The statute reaches any equity security and then removes the securities its five clauses describe, so the opening category is equity and nothing narrower. C: Issuer reporting status plays no part in the opening category; the definition reaches equity securities of reporting and non-reporting issuers alike. D: Debt instruments sit outside the definition from the start, and the definition does not open on a listing test; listing status enters only through the exclusions.

A: A principal dealer may disclose its own offer only when the qualifying sales history, consistency and good-faith criteria are satisfied. These facts state that the dealer cannot meet them. B: The dealer must disclose both the failure to sell consistently at its offer and the price of its last bona fide sale to another dealer. The last sale price alone omits the first required disclosure. C: That substitute applies to an agency transaction or a non-market-maker principal transaction offsetting a contemporaneous customer trade. The dealer is acting as principal without such an offset. D: Because the dealer's offer fails the own-price criteria, it must disclose that it has not made interdealer sales consistently at that offer and must give the price at which it last sold the stock to another dealer in a bona fide transaction.

A: That reverses which price is best on each side of the market. B: The rule defines best bid as the highest priced bid and best offer as the lowest priced offer. C: Entry time does not replace the highest-bid and lowest-offer price tests. D: These definitions select by price rather than by quoted size.

A: Those instructions govern routing and liquidity removal. B: Those are order instructions that convert an order after a trigger. C: Those are Times-in-Force that control duration. D: The order-type category contains only limit orders and market orders.

A: The named index class estimates expected volatility for its corresponding stock or exchange-traded fund. B: The calculation concerns option-implied volatility rather than corporate earnings. C: The index estimates expected volatility on an up-to-the-minute basis rather than historical return. D: The index corresponds to one stock or fund and estimates expected, not realized, volatility.

A: An existing excess calls for prompt compliance action, not further expansion. B: The firm's duty does not depend on a customer request. C: Reporting alone does not satisfy the duty to bring the position into compliance. D: The rule creates an affirmative prompt-correction duty once the firm has reason to believe an excess exists.

A: Lacking title may matter to ownership, but this wording adds a delivery fact that does not state either complete branch of the definition. B: Either lack of ownership or delivery of stock borrowed by or for the seller independently makes the sale short. C: An expectation about price does not determine whether a sale is short. D: A locate condition governs accepting or effecting a short sale and does not decide whether the sale itself is short.

A: The issuer is not assigned the trading-center procedure duty. B: The rule places the procedure duty on the trading center rather than the seller. C: Settlement responsibility does not carry this order-handling procedure duty. D: A trading center must establish, maintain, and enforce reasonably designed written policies and procedures.

A: The required books-and-records condition is missing despite the qualifying purchase. B: Either net flat or net long satisfies the condition; the problem is that this firm is net short. C: The firm's eligibility for this route is tested on its own stated conditions. D: Full quantity does not replace the separate net-position condition.

A: Listing count does not itself define whether market participants can buy and sell readily. B: The disclosure defines liquidity as the ability to buy and sell and notes that more available orders generally increase it. C: That difference is the spread rather than the definition of liquidity. D: Price swings describe volatility, which is a separate extended hours risk.

A: Limit orders are among the examples and do not exhaust the definition. B: A definite-period order can also qualify, so this duration label is not mandatory. C: Stop limit orders are examples nested within the broader two-branch definition. D: The order types are introduced as nonexclusive examples, while the two stated branches set the definition's boundary.

A: Historic customer cost does not become the prevailing market by default. B: Economic models are a final fallback after the earlier market evidence categories yield no information. C: An isolated transaction generally receives little or no weight and is not controlling without representative support. D: Consent does not substitute for a defensible prevailing-market-price measure.

A: Continued holding without execution is one of the facts that makes the same-side proprietary purchase prohibited. B: The held equity order, same-side proprietary purchase, satisfying price, absence of an exception and absence of the immediate cure establish the violation. C: An intent to execute later does not supply the required immediate customer fill. D: The proprietary trade need not be larger than the customer order for the prohibition to apply.

A: The reporting condition expressly permits another self-regulatory organization when FINRA reporting is not required. B: A clearing broker is not the stated substitute regulatory destination. C: Issuer notice does not satisfy the contemporaneous regulatory reporting condition. D: The alternative destination applies when the trade is not required to be reported under FINRA rules.

A: Order terms remain a separate limit alongside price and size. B: Equal price improvement is not a universal crossing condition. C: A principal intermediary is one permitted method, not a mandatory feature of every cross. D: The crossing requirement is not limited to an opening auction.

A: An NMS stock is an NMS security other than an option. Each of the three named duties runs on NMS stocks. B: The reporting plan brings the listed option into the wider NMS security class, but the NMS stock definition removes options. C: The NMS security definition expressly reaches listed options reported under an effective national market system plan. D: Product classification does not change with the time of day. A listed option remains outside the NMS stock definition.

A: The block exception yields when the customer placing the order requests display. B: Once the exception is switched off, the improving-order limb requires full size rather than a standard lot. C: The customer's display request removes the block exception without any reduction in size. D: The customer's request switches off the block exception, leaving the ordinary improving-order display duty.

A: The trade was not effected on or through an exchange, so the off-exchange reporting obligation sends it to FINRA. B: Members report off-exchange transactions in NMS stocks to FINRA through an authorized reporting facility. C: The Options Clearing Corporation clears options and is not the destination for an off-exchange NMS stock trade report. D: A transfer agent maintains ownership records and does not receive the required market trade report.

A: The definition reaches an exchange-traded fund trade agreed during normal hours and executed from the post-close net asset value of its underlying investments. B: Execution time and a prior close do not establish the specified agreement and net asset value facts. C: The named branch requires agreement during normal market hours and pricing from a post-close net asset value. D: An outside-hours modifier is not the special-pricing and transaction-source combination the definition requires.

A: That transaction is submitted for fee assessment rather than dissemination. B: The input rules include an OTC option exercise in the fee-only category. C: An ordinary reportable trade is published and does not belong to the special fee-only list. D: That transfer is reported for fee assessment rather than publication when its conditions and notice duties are met.

A: Voluntary filing is an independent route to current large trader status, not a notice of possible future status. B: The voluntary route does not wait for a later transaction or activity threshold. C: Voluntary electronic registration on Form 13H is one of the two routes to large trader status. D: A voluntary filer identifies itself and becomes a large trader; it is not treated as unidentified.

A: Unlike the public quarterly report, the customer-request disclosure includes both routing classifications. B: The directed-order exclusion applies to the public aggregate report rather than this customer-specific request. C: Payment arrangements do not determine whether the customer's directed order is disclosed. D: The disclosure covers routed orders and gives transaction times if any; an execution is not a condition for including the routing.

A: A post-close system return moves expected backlog entry to the next business day. B: That time has already passed when the systems become available. C: The outage rule uses the next business day rather than an annual-filing clock. D: Backlog entry follows system availability and does not wait for an investigation.

A: The customer confirmation duty is satisfied only when written notification is given or sent at or before completion of the transaction. B: The rule uses completion of the transaction, which may occur after the trade date, rather than the close of trading. C: Order acceptance is not the timing event; the duty is tied to completion of the transaction. D: Settlement date is not the governing deadline because completion is defined by payment, delivery, or an account entry on the stated facts.

A: The seller does not unilaterally establish the ordinary settlement date. B: The purchaser does not obtain sole date-setting authority. C: The rule places the determination with the Committee once enough of the issue is outstanding. D: These contracts have no fixed cycle; the Committee declares the settlement date after the stated issuance condition is met.

A: The customer identifier permits assignment to a specific customer rather than the full omnibus population. B: Assignment follows the identifier tied to the short position being exercised rather than the order in which positions in the account were opened. C: The Corporation's customer-identifier assignment fixes the customer to whom the member must allocate. D: For a covered OTC short with a customer identifier, OCC assigns directly to that specific identifier.