Series 10 Question of the Week

Your firm is a market maker and is participating in an offering of securities as a syndicate member. You firm is acting as a passive market maker and has purchased 12,000 shares which is 98% of its ADTV. An order comes into the firm’s trading desk to sell 3,000 shares at 2:40. Which of the following is true ?

A. Your firm may not purchase the stock as it would cause the firm to exceed its purchase limit

B. Your firm may purchase the stock

C. Your firm may purchase the stock so long as it finds an offsetting customer order within 30 seconds

D. Your firm may purchase the stock so long as it finds an offsetting customer order within 90 seconds

Correct Answer(s):

B. Your firm may purchase the stock

Explanation:

The firm may execute any single order even if that order would cause it to exceed its volume limitations. Once they have exceeded the volume limits they must withdraw for the rest of the day.