Clearly Erroneous Transactions

What this video covers

• The exact definition of a clearly erroneous transaction: an execution price substantially away from the prevailing market price at the time of execution, not a simple order-entry mistake
• The critical distinction between a trade error (handled internally by the firm with cancel/rebill) and a clearly erroneous transaction (handled by Financial Industry Regulatory Authority (FINRA) or the exchange)
• The inverse threshold rules for exchange-listed securities during normal trading hours: 10% for stocks from $0.01 to $25.00, 5% for $25.01 to $50.00, and 3% for over $50.00
• Why cheaper stocks get wider thresholds and expensive stocks get tighter ones, using dollar-impact logic that the exam loves to test
• The multi-stock event rule: when 20 or more securities are impacted simultaneously, trades deviating by 30% or more from the reference price are nullified across the board
• How over-the-counter (OTC) equity securities differ, with wider thresholds due to lower liquidity, and FINRA's next-day deadline for action
• Why firms, brokers, and clients can never unilaterally break a clearly erroneous trade; only FINRA or the exchange can declare and nullify it