Series 7 Exam Topic

Business Continuity and Disaster Recovery Plan




One of the regulations developed as a result of the attack on 9/11 is the requirement for FINRA member firms to develop and maintain plans and back up facilities to ensure that the firm can meet its obligations to its customers and counterparties in the event that its main facilities are damaged, destroyed or are inaccessible. The plan must provide for alternative means of communication as well as data backup. The Plan must be approved by a senior member of the firm’s management team and must provide plans to ensure customers have access to their funds. The plan must be provided to FINRA upon request and must identify two members of senior management as emergency contacts, one of which must be a registered principal with the firm.


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Series 4 Exam - Weekly Options

The CBOE has introduced weekly options designed to provide investors with the ability to speculate on the direction of a stock or index based on the release of pending news  such as an earnings release or an announcement from the Federal Reserve board relating to an interest rate decision. Weekly options will also allow investors who are long or short to hedge their positions for only the period of time that includes the pending news release.  As such the investor will be able to buy the hedge at a much lower premium due to the extremely short time frame of the option. Weekly options are listed on Thursday and expire the following Friday. New weeklys are listed each week however no new weeklys are listed that would expire during the expiration week for standard options (the third Friday of each month)

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Single stock circuit breakers

U.S. stock exchange that lists a stock is required to issue a trading “pause” in a stock if the stock price moves up or down by 10% or more in a five-minute period. The same pause will be in effect on all other U.S. stock and stock option markets, and the single-stock futures market, resulting in a uniform halt. After five minutes, the exchange that issued the pause may extend it if there are still significant imbalances between orders to buy and sell shares of the affected stock. After a ten-minute pause, other exchanges are free to resume trading in the stock and once that occurs, trading may resume in the over-the-counter markets.


To avoid potential disruption to market openings and closings (which already have special procedures designed to maintain fair and orderly markets), the individual stock circuit-breakers are in effect from 9:45 a.m. Eastern Time until 3:35 p.m. Eastern Time. They do not apply to after-hours trading. On days when the markets close early, the individual stock circuit breakers are in effect until 25 minutes before the close of the markets, for example, until 1:35 p.m. if the markets are closing at 2:00 p.m.

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