Welcome to Achieving Market Making Status: the unit that sets out who counts as a market maker, how a firm registers to quote, and what capital it has to hold to do the job.
Exam Weight: about 2 of the 50 scored items (CertFuel planning estimate; FINRA publishes weights only by function, and Function 1, Trading Activities, is 41 items / 82%)
What You'll Learn
In this unit, you'll cover:
- The Role of the Floor Broker: who may transact on the NYSE Floor, what Floor Broker Interest is, the announcement and pricing steps a cross demands, the Cross Function timer and size tests, and how the designated market maker's duty differs
- The Use of Market Participant Identifiers (MPIDs): the identifier every trade-reporting participant must obtain before it inputs a trade, when a member may hold more than one, the separate identifier each alternative trading system needs, and why FINRA calls the grant a privilege
- Responsibilities of a Qualified Block Positioner: the credit-regulation scope clause that governs all three qualified categories, the three net capital minimums, and the block size, diligence and disposal conditions the block positioner must meet
- What Counts as a Market Maker: the statutory three-limb definition, the FINRA definitions that set status market by market, and the difference between holding out on a regular or continuous basis and on a regular and continuous basis
- Registration as an ADF Market Maker or ADF ECN: the eight items an application to quote on the Alternative Display Facility (ADF) must carry, the three conditions for effectiveness, the deposit amount, and the four deposit terms that move escrow money in both directions for a market maker or an electronic communications network (ECN)
- Withdrawal of Quotations and Voluntary Termination of Registration: every ground on which excused withdrawal status may be granted, the reasons that never qualify, the two routes to voluntary termination, and the bar on re-registering
- Payments for Market Making: what a member may never accept from an issuer, the three carve-outs, and the three defined terms that set how far the prohibition reaches
- Net Capital Requirements: the greater-of test, the two ratio standards, the six activity minimums, the per-security market maker computation, the liquidating equity election, the reverse repurchase add-on, and the three exemptions
Why This Matters
Market making status is a set of permissions a firm applies for and can lose. Almost every rule later in this course assumes the firm already holds that status: quoting obligations, trade reporting, short sale marking and clearance all run through the identifier and the registration this unit explains.
The unit moves from the people on an exchange floor to the firm-level machinery behind a quote:
- Who is allowed to trade where, and under what announcement duties
- How FINRA identifies a member's quotes and trade reports
- Which definitions actually confer market maker status, and in which market
- What it costs in capital to carry the positions the status produces
Let's start on the Exchange Floor, where orders are still represented out loud.