Welcome to Disseminating Quotes and Trade Advertisements: the rules that decide when a quotation may be published, when the firm that published it must honor it, and what a trading halt takes off the screen.
Exam Weight: about 4 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:
- Dissemination of and Access to Quotations: who counts as the responsible broker or dealer, which securities a venue must publish quotations for, the firm quote duty and the two ways it is reduced or lifted, and the caps on what a trading center may charge for access
- Character of Quotations on the Alternative Display Facility: the two-sided obligation, the designated percentage and defined limit bands, minimum increments, and the firm quote duty as it applies to a facility trading center
- Market-Wide Circuit Breakers: the three decline levels, the fifteen-minute halt and its cutoff, the Level 3 remainder-of-day halt, the annual testing attestation, and the parallel halt in OTC equity securities
- OTC Equity Halts and Quotation Suspension: the three halt bases, the ten-business-day ceiling and its extensions, what a member may not do during the halt, and FINRA's power to suspend a firm's quoting or reporting access
- Halt and Imbalance Crosses: the order imbalance indicator, the price ladder that picks the cross price, and the display-only periods and collars that reopen a security after a circuit breaker halt
- Trade Volume Advertising: the bona fide standard for a published transaction report, the separate three-limb standard for a published quotation, and the breadth of the word quotation
- Publishing Indications of Interest During Trading Halts: when FINRA halts off-exchange trading, and the five things a member or an associated person may not do in a halted security: effect a transaction, or publish any of four kinds of quotation, bid, offer or indication of interest
- Volatility Trading Pauses: the price bands, the tier parameters, the limit state, the fifteen-second clock, and the conditions for resuming off-exchange trading
- Offers at Stated Prices: the duty to be prepared to trade at a stated price and under the stated conditions, and what backing away looks like
Why This Matters
Quoting is what a securities trader does all day, and almost every duty in this unit attaches to a quotation you have already published.
A published quotation is a commitment: the member must believe it bona fide when publishing it, it must be honored, for any order other than an odd-lot order from another broker or dealer or anyone in a category the firm customarily deals with, up to its published quotation size, and it must come off the screen when a halt starts, except as the Limit Up-Limit Down Plan permits.
The unit moves from the everyday quotation rules to the exceptional ones:
- What a venue collects and publishes, and what a member owes the market once its quotation is displayed
- What a halt, a pause, or a circuit breaker removes from the market
- How a halted security gets reopened at a single price
- What a firm may say in an advertisement about its own trading volume
Let's start with the framework that puts a quotation on the screen in the first place.