Market Making and Quotations: Rapid Fire

What this video covers

• The four market tiers: first market (exchange), second market (over-the-counter, OTC, unlisted), third market (OTC of exchange-listed), and fourth market (institution-to-institution via Electronic Communications Networks, ECNs)
• How the New York Stock Exchange (NYSE) auction model uses one Designated Market Maker (DMM) per security with affirmative and negative obligations, versus the Nasdaq dealer model with multiple competing market makers
• Which quotes are binding: firm quotes must execute at price and size, and backing away is a violation of just and equitable principles of trade
• The five quotation types (firm, subject, workout, nominal, bid wanted or offer wanted) and when each appears on exam day
• Market-wide circuit breakers at 7%, 13%, and 20% with the 3:25 PM Eastern Time cutoff for Level 1 and Level 2, versus Limit Up-Limit Down (LULD) pausing a single security after 15 seconds unresolved outside its rolling 5-minute average price band
• Transaction reporting systems: Trade Reporting and Compliance Engine (TRACE) for corporate bonds, Electronic Municipal Market Access (EMMA) for municipals, Trade Reporting Facility (TRF) for listed stocks traded OTC, and OTC Reporting Facility (ORF) for unlisted OTC equities, all within 15 minutes
• Why customers always get the worse side of the spread, how interpositioning only violates when execution price worsens, and which open orders reduce on the ex-dividend date