NASD Series 55 Text Book & Exam Prep Software Package
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• Series 55: Equity Trader Limited Representative
Qualifies an individual to trade equity and convertible debt securities on a principal or agency basis.
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Series 55 Text Book - Equity Trader Examination
Series 55 Exam Prep Software - Equity Trader Examination
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The NASDAQ Official Opening Price / NOOP
NASDAQ opens for regular hours trading at 9:30 AM EST. At that time the orders that
are held in the queue which have not been paired off are executed and reported to the
tape. The first trade that is reported to the tape creates the NASDAQ Official Opening
Price (NOOP). If at 9:30:15 no trades in the queue have been matched and reported to the
tape, the first, last sale trade that is reportable to the tape becomes the NOOP. NASDAQ
has created new types of orders as a result of the creation of the opening cross. The orders
are:
- Early regular hours, orders entered prior to 9:28 AM for the regular trading
- session
- Late regular hours, orders entered after 9:28 AM for the regular trading session
- OO On Open, market and limit orders that are entered to be executed at the
- opening price only
- IO, Imbalance Only, orders that are only to be executed against imbalances on the
- open that are away from the bid or offer at 9:30 AM
- X- Extended hours orders are entered before or after the market opens and can be day, GTC or IOC
The Closing Cross
NASDAQ has developed the closing cross to determine a uniform closing price for
securities at the end of the trading day. Customers and firms may enter on the close
orders at any point after the start of the normal trading day from 9:30 AM up until 3:50
PM. After 3:50 PM, on the close orders may not be entered or modified. On the close
orders that may be entered include both market and limit on close orders. Starting at 3:30
PM and up until the close of the market, firms may enter imbalance only orders.
Imbalance only orders must be priced and will not be executed prior to the close nor will
they be included in the market maker’s displayed quote prior to the close. Orders that are
entered to sell short on the close must be executed at least 1 cent above the closing bid
regardless of the direction of the closing bid. Sell orders entered to sell short may be
entered as market and limit on close orders as well as imbalance only orders.
Withdrawing Quotes
There are two ways that a market maker may withdraw their quotes for a security. A
market maker may withdraw their quotes on either a voluntary basis or on an excused
basis. If a market maker withdraws their quotes on a voluntary basis they simply remove
or “pull” their quote. A market maker who voluntarily withdraws their quote may not reregister
as a market maker in that security for 20 business days. If a market maker
removes their quote for any of the following reasons it would be considered a voluntary
withdraw:
- A sudden influx of orders
- Trading losses
- Lack of interest
A market maker may also withdraw their quotes on an excused basis by applying to the
NASDAQ for permission to withdraw their quotes. A market maker may request an
excused withdrawal under the following circumstances:
- The firm has 3 or fewer NASDAQ level III workstations and key personnel are going on vacation. The application must be made 1 business day prior to removing the quotes.
- A firm may be granted an excused withdrawal for up to 5 business days for circumstances beyond the market maker’s control such as illness or acts of God.
- The market maker is participating in a distribution or is acting as a passive market maker.
- The firm may be granted an excused withdrawal for up to 60 days for legal or regulatory reasons, i.e., the firm has inside information regarding the issuer of the security as a result of an investment banking relationship.
- The firm involuntarily fails to maintain a clearing relationship.
- An excused withdrawal may be granted for religious holidays provided that the application to NASDAQ is made 1 business day prior to the withdrawal.
Accidental Withdrawal of Quotes
If a market maker is attempting to withdraw its quote for a given security and
inadvertently types in the wrong symbol, resulting in the market maker’s quote being
withdrawn from the wrong security; the market maker may immediately have its quote
reinstated by NASDAQ. NASDAQ will reinstate the market maker’s quote so long as
the market maker contacts NASDAQ within one hour and it is apparent that the removal
of the quote was accidental in nature. Additionally NASDAQ will look at the market
maker’s accidental withdrawals over the course of the year. NASDAQ considers 2-6
accidental withdrawals acceptable depending on the number of securities the firm makes
markets in.
Handling and Displaying Customer Limit Orders
If a market maker accepts customer limit orders, it must handle the order in accordance
with The Limit Order Display Rule. If a market maker accepts a customer’s limit order
that would improve its quoted price, the market maker must update its quote to reflect the
customer’s limit order. A market maker is required to update its quote within 30 seconds
of receiving the customer’s order. The 30-second time frame only applies to normal
market conditions and does not include the opening or reopening of a security after a halt.
Example:
In the market for XYAD listed below the inside market is 15.00 bid and 15.05 offered.
The size of the bid is for 500 shares and there are 300 shares offered
XYAD
Bid Ask Size
15.00 15.05 5 X 3
MM 1 14.90 15.10 10 X 10
MM 2 15.00 15.20 5 X 5
MM 3 14.85 15.05 2 X 3
MM 4 14.95 15.15 15 X 15
MM 5 14.98 15.18 10 x 10
If market maker 2 who is the best bid received a customer’s limit order to buy 200 shares
at 15.02 the market maker would have to update its quote and the market would look as
follows:
XYAD
Bid Ask Size
15.02 15.05 2 X 3
MM 1 14.90 15.10 10 X 10
MM 2 15.02 15.20 5 X 5
MM 3 14.85 15.05 2 X 3
MM 4 14.95 15.15 15 X 15
MM 5 14.98 15.18 10 x 10
If market maker 2, who is the best bid, instead had received a customer’s limit order to
buy 1000 shares at 15.00, the market maker would have to update its quote by adding the
customer’s size to its current quote and the market would look as follows:
XYAD
Bid Ask Size
15.00 15.05 15 X 3
MM 1 14.90 15.10 10 X 10
MM 2 15.00 15.20 15 X 5
MM 3 14.85 15.05 2 X 3
MM 4 14.95 15.15 15 X 15
MM 5 14.98 15.18 10 x 10
If the customer’s limit order is equal in price to the firm’s displayed quote but is 10% or
less than its displayed size, the firm does not have to update the size of its quote to reflect
the customer’s order.
NASD Series 55 Text Book & Exam Prep Software Package Equity Trader Limited Representative
Series 55:
Equity Trader Examination
(Pub. 2007)
Copyright © 2007
The Securities Institute of America, Inc.
All Rights Reserved.
NASD Securities
Education & Training
SECURITIES AND FUTURES PREP
ONLINE AND HOMESTUDY COURSES
Exam Prep Software
Series 55 Exam Prep
Over 550 Questions!
Copyright © 2007
The Securities Institute of America, Inc.
All Rights Reserved.
Series 55 Text Book & Exam Prep Software Package Equity Trader Limited Representative
NASD Series 55 Text Book & Exam Prep Software Package Equity Trader Limited Representative
