Welcome to Display, Execution and Trading Systems: the unit that covers where an order can be entered, how an options series opens, and what a firm owes the market when it displays quotations away from an exchange.
Exam Weight: about 3 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:
- Understanding Order Entry Parameters: the daily window for entering and cancelling orders, the one-bid-one-offer limit per executing firm identifier per bulk port, what fixes an order's time ranking, and what the exchange publishes about resting interest
- Trading Rotations: the queuing period, the five order categories the system handles as exceptions, from outright rejection to conversion, the opening auction updates, and the triggers that start a rotation
- Opening a Series in a Rotation: the width check that decides whether a series may open, the price the system picks, the priority and allocation that follow, and what a forced opening does instead
- After the Opening Rotation: where unexecuted interest goes, how a halted class reopens, when the exchange may deviate from the standard process, and what a limit up-limit down state does
- Fast Markets and Emergency Conditions: what two Floor Officials may do when order flow overwhelms a class, and the separate emergency powers of the Chief Executive Officer or the President
- The Use of the Alternative Display Facility: what the alternative display facility (ADF) is, who participates in it, which securities are eligible, and the defined terms the rest of the rules turn on
- Quote and Order Access Requirements: the seven access obligations, the two prohibitions that protect indirect access, the access definitions, and the certification record
- Minimum Performance Standards and System Outages: the automated quotation standard, the three-outage rule, the review timetable, and the thirty-day quoting test for an electronic communications network (ECN)
- Normal Business Hours and Locked or Crossed Quotations: the opening and closing floor, the voluntary sessions, and the four exceptions to the locking and crossing prohibition
- Review of Direct or Indirect Access Complaints: who may complain, what the reviewing officer can order, the twenty-four-hour appeal windows, and the appeal that does not stay the determination
- The Role of Alternative Trading Systems: the two-part test that makes a venue an alternative trading system (ATS), the exchange-function test underneath it, and how an ECN fits
- The Regulation ATS Definitions: subscriber, affiliate, control, and the instrument definitions the volume triggers depend on
- Requirements for Alternative Trading Systems: the five exclusions from the rule, the eleven requirements, and the notice and reporting deadlines
- Display, Fair Access and Systems Capacity Duties: the three volume-triggered duties, the execution access that accompanies a displayed order, and the three conditions that relieve two of them
- Recordkeeping and Record Preservation: the three record groups, the sixteen order fields, the two preservation periods, and what a service bureau can and cannot take on
Why This Matters
A securities trader chooses a venue before choosing a price. An order can go to an exchange, to a facility FINRA operates, or to a broker-dealer running a matching system, and each of those carries a different set of obligations.
The unit moves from the order itself outward to the venue that holds it:
- What a trader can send, when, and how the system ranks it
- How an options series comes out of the queue and into continuous trading
- What a firm displaying quotations away from an exchange owes other broker-dealers
- What a matching venue must file, disclose, record, and preserve
The access rules reward careful reading. Several of them look like flat bans and are not: one says a member must reasonably avoid a practice, another says a firm may be suspended rather than shall be, and a third puts a duty on an electronic communications network that does not reach every participant.
Let's start with the parameters that travel with an order the moment it is entered.