Series 55 Exam Information

Here is some great information on ECNs for the series 55 exam.

Electronic Communication Networks / ECNs




Electronic Communication Networks, or ECNs, operate independently of FINRA. ECNs display and execute third party orders and are allowed access to the NASDAQ Market Center Execution System. ECNs are widely used by broker dealers, market makers and institutional investors to display and execute orders. ECNs are registered as broker dealers with the SEC and have their quotes included in the NASDAQ quote system. ECNs are not required to maintain a two-sided market like a market maker and ECNs do not take positions securities. ECN's will typically charge access fess to its subscribers and for incoming orders that execute against its displayed quotations. Many ECNs will offer rebates to subscribers who provide liquidity by entering non-marketable limit orders that are displayed by the ECN. There are two ways that the ECN may participate in the market. The ECN may be a full participation ECN or it may be an order delivery ECN. Full participation ECNs may:



 Display quotes

 Enter and accept directed and non directed orders

 Accept automatic executions

 May send orders for automatic execution through the NASDAQ Market Center Execution System



Full participation ECNs will have their ID followed by “#+” notation. Order entry ECNs may display quotes, enter and accept directed and non-directed orders. The order entry ECN may fill, decline, price improve, or allow an order it has received to expire. If the order sent to the order entry ECN expires, the order will be canceled and sent to the next participant at the inside market by the NASDAQ Market Center Execution System. Order entry ECNs will have their ID followed by a “#” notation.





TAKE NOTE!



If an ECN allows customers to enter orders which are broken down into smaller price increments than 1 cent, and that quote is part of the inside market, the NASDAQ system will round the quote to reflect the smallest price increment variation. Bids will be rounded down to the nearest cent and offers will be rounded up.


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Series 55 Exam Information

The series 55 exam can present many challenges for test takers. One of the areas students have issues with is the variety of orders that may be entered into the NASDAQ system. Here is some great information on just a few types of orders

Price to Comply Order - orders entered as price to comply orders that lock or cross an external market will automatically be adjusted by the NASDAQ system to comply with the locked and crossed market rules of regulation NMS. Buy orders entered at a price above the lowest offer will be adjusted to the price of the lowest offer. Orders to sell entered at a price below the highest bid will be adjusted to the price of the highest bid. If the market changes to cause the adjusted order to again lock or cross the market the order will be cancelled.




Minimum Quantity Orders - orders entered in the NASDAQ system that specify a minimum number of shares to be executed or cancelled may only be entered as market hours immediate or cancel or as system hours immediate or cancel. Market hours IOC orders may not be entered prior to the opening cross or after the closing cross.



Firms may also enter orders in the NASDAQ system that may be sent to other markets for execution. Orders that may be routed to other markets include:



SCAN Order- this order routing type will first try to execute the order in the NASDAQ system at a price better than the NBBO if the order is not executed it will then route the order to other markets for execution. If any portion of the order is not filled after being routed to other markets it will be returned to the NASDAQ system and be posted in the NASDAQ book. Once posted to the NASDAQ book the order will not be rerouted if the order subsequently locks or crosses an external market.



Reactive Electronic STGY Order- This order acts as a SCAN order, however the order will reroute after it is posted to the NASDAQ book if another market locks or crosses the order.



Aggressive Electronic SPDY Order - limit orders entered as SPDY orders act as STGY orders. Market orders entered as SPDY orders will track the inside market on the same side of the market for which the order is entered. SPDY market orders to buy will track the highest bid while SPDY market orders to sell will track the inside offer.



Pegged Orders


A pegged order is an order entered through NASDAQ which is designed to track the inside market of the stock for which it is entered for execution. A pegged order may be entered as a primary peg, as a mid point peg or as a market peg. A primary peg order to buy will track the best bid, while a primary peg order to sell will track the offer. A mid point peg order to buy or sell will track the mid point of the spread between the best bid and offer. A market peg order to buy will track the offer and a market peg order to sell will track the bid. As the market for the stock changes the pegged order will automatically adjust to track the market until the order is filled. All pegged orders must be entered as day orders.

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Series 24 Exam Information

Here is some great series 24 exam information regarding Rule 144
Rule 144



Rule 144 regulates how control or restricted securities may be sold. Rule 144 designates:


 The holding period for the security

 The amount of the security that may be sold

 Filing procedures

 Method of sale


Control securities are owned by officers, directors, and owners of 10% or more of the company’s outstanding stock. Control stock may be obtained by insiders through open market purchases or though the exercise of company stock options. There is no holding period for control securities. However, insiders are not allowed to earn a short swing profit through the purchase and sale of control stock in the open market. If the securities were held less than 6 months, the insider must return any profit to the company.


Restricted securities may be purchased by both insiders and investors though a private placement or be obtained through an offering other than a public sale. Securities obtained through a private placement or other non-public means need to be sold under rule 144 in order to allow the transfer of ownership. Restricted stock must be held fully paid for, for 6 months. After 6 months the securities may be sold freely by non-insiders. Rule 144 sets the following volume limits for both restricted and control stock during any 90-day period. The seller must file form 144 at the time the order is entered and for NYSE and NASDAQ listed securities the sale is limited to the greater of:


 The average weekly trading volume for the preceding four weeks; Or

 1% of the issuer’s total outstanding stock

Under Rule144 the volume limitation for Non NASDAQ securities is 1% of the issuer’s outstanding stock. All sales under Rule 144 require that the issuer have adequate financial information publicly available and is filing reports with the SEC. Form 144 does not need to be filed for orders for 5000 shares or less and that do not exceed $50,000.

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