Chapter 8: Trading & Settlement
This chapter covers 11% of the Series 7 exam (approximately 14 questions) and focuses on order execution, market structure, settlement mechanics, margin accounts, and dispute resolution.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 30 | Order Types and Execution | Market, limit, stop orders; Reg NMS, best execution, short selling, circuit breakers |
| 31 | Market Making and Quotations | Bid/ask, market makers, DMMs, Nasdaq levels, CAT (Consolidated Audit Trail), trade reporting |
| 32 | Settlement and Delivery | T+1 settlement, ex-dividend dates, good delivery, DVP/RVP, DK notices |
| 33 | Margin Accounts | Reg T, initial margin, maintenance margin, SMA, buying power, margin calls |
| 34 | Complaints and Dispute Resolution | Customer complaints, FINRA arbitration, mediation, sanctions, Form U4 reporting |
Why This Chapter Matters
Understanding how trades are executed, settled, and financed is essential for any securities professional. This chapter covers the operational side of the business, from placing orders through settlement, as well as the margin rules that allow customers to borrow and the dispute resolution process when things go wrong.
Exam Strategy
At 11% of the exam, focus on:
- Order types: Know when each order type triggers and the risks of each
- Margin calculations: Reg T 50% initial margin, 25% maintenance, SMA and buying power
- Settlement cycles: T+1 for most securities, ex-dividend date rules under T+1
- Short selling: Locate requirements, Reg SHO, short sale close-out rules
- Arbitration: Simplified ($50K), panel composition, predispute agreements, class action exceptions