Download IIROC `Tips for Traders` CSTA Whistler Friday, August 19 2016

IIROC ‘Tips for Traders’
CSTA Whistler
Friday, August 19 2016
Opening Remarks
Victoria Pinnington
Senior Vice-President, Market Regulation
IIROC Presenters
Mike Prior
Vice-President, Surveillance
Kevin McCoy
Vice-President, Market Regulation Policy
Topics
• Market Structure Issues Affecting Small-Cap Issuers
– Roundtable Recap
• Trader IQ – test your knowledge
Market Structure – Small-Cap Securities
• Differentiation between Large and Small Cap
Securities
• Reduced liquidity
• Capital Formation Challenges
• Short Selling – Tick Rules
• HFT and Volatility
• Education
TRADER IQ – Test your Knowledge
Question 1
At 10:00 am, a client requests a liability bid for
a block of illiquid ETFs. After checking the
depth of both the ETF and cash markets, a sell
side trader offers the client a complete fill at a
discount of 50 basis points to fair value, and the
client accepts. The trade can execute the cross at
the agreed upon price as a Basis Order, without
needing to displace interfering bids.
Order received at 10:00. May print as a
Basis Order without displacement
obligation.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 2
The NBBO is 15.50 – 15.60. A dealer receives
an order to sell a block of stock at $ $14.50 or
better. There are only a few small bids down to
that price. The dealer offers the client a
complete fill on his block at $14.50 and the
client accepts. The trader can use an inventory
bypass DAO sell order to sweep all visible bids
down to that price and immediately execute a
bypass cross at $14.50.
NBBO 15.50 – 15.60. Order to sell at
14.50. DAO to sweep and immediately
execute by-pass cross at 14.50
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 3
A dealer is part of a syndicate distributing a new
issue at a price of $10.00 per share, and the market
is currently $10.00 bid, offered at $10.05. Market
stabilization rules are in effect. The dealer receives
an unsolicited, institutional client order to sell a
block of free trading shares at $10. Rather than hit
the bid, the trader can contact a client that he thinks
may be interested, with the goal of arranging a
client/client cross at a price that is no higher than
$10 and does not create an uptick.
NBBO 10.00 – 10.05. Order to sell at
10.00. Stabilization bids entered at
10.00
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 4
It is after 4:00, and the closing price on the TSX
is $12.75 and the closing bid is $12.80. (The
trade occurred at 3:57 p.m., after which a bid of
$12.80 was entered). A trader has a closing
price order from a client and wishes to execute a
cross at the TSX closing price of 12.75.
TSX Close - $12.80 - $12.85 Last $12.75
Order to trade at closing price. Under OPR
the trader:
A. Must first displace the
$12.80 bid
B. Can displace the $12.80,
but is not required to
C. Is unable to displace the
$12.80 bid and can only
cross at $12.75
D. Must displace any
protected better priced
order prior to executing
the cross at $12.75
25%
A.
25%
25%
B.
C.
25%
D.
Currently, the Corporate Debt Information
Processor (IIROC) is publishing details about the
following corporate debt trades:
A. All trades by
Government Securities
Distributers (GSD)
B. All institutional trades
by GSDs
C. All institutional trades
and some retail trades
by GSDs
D. Some institutional trades
and all retail trades by
GSDs
25%
A.
25%
25%
B.
C.
25%
D.
Question 6
The NBBO for a stock is $0.85 - $0.90 and the
stock’s previous close price was $0.90. A trader
with a client order to buy 20,000 shares at
market has decided to fill the client out of
inventory. Due to the large size of the order, the
trader is permitted to execute a principal-client
cross at $0.90.
NBBO .85 - .90. Previous close .90
Client-Principal cross at .90 is
permitted.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 7
The NBBO for a stock is $0.85 to $0.90. An
order to sell 400 shares is sent to a dark market.
That market can execute the trade at $0.85,
without price improvement.
NBBO .85 - .90. Active order to sell 400
shares executable at .85 on a Dark Market
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Intentional (upstairs) crosses that are printed on a
marketplace do not have to be disclosed as such
on the public tape.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 9
A trader accepts a guaranteed VWAP order from
a client at 9:00 a.m. The VWAP will be
determined between 9:30 and 4:00. In
accordance with IIROC guidance, the trader is
required to notify IIROC prior to the start of the
calculation period, but fails to follow the
guidance. The trader is still permitted to execute
a VWAP trade after 4:00 p.m.
VWAP order received at 9:00 and IIROC not
notified. The trader is still permitted to execute a
VWAP trade after 4:00 p.m.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 10
A client that has previously executed a short sale
without being able to borrow shares, where the
trade remained unsettled for 10 days following
the original settlement date (T+13) cannot make
any further short sales in any listed security
without first arranging a pre-borrow.
Client who fails settlement on T+13 must
pre-borrow prior to any subsequent short
sales.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Question 11
A portfolio manager is responsible for a number
of investment funds that in aggregate own 12%
of the voting shares of a listed company. Any
orders for that listed company on behalf of that
money manager must be marked as insider by
the dealer upon entry.
Portfolio manager – aggregate holdings of
12% of a listed issuer. Trades must be
marked as insider
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
A dealer has a client who wishes to sell securities
that are subject to a statutory re-sale restriction.
The dealer can:
A. Sell the securities on a
marketplace as the
securities are considered
listed securities
B. Sell the securities on a
marketplace provided the
buyer is an accredited
investor
C. Sell the securities offexchange
D. Sell the securities offexchange after receiving
approval from IIROC
25%
A.
25%
25%
B.
C.
25%
D.
A client holds shares that are subject to a
statutory hold period expiring in 3 months. The
client may sell the freely trading shares and carry
the long/short position until the hold period
50%
50%
expires.
se
Fa
l
Tr
ue
A. True
B. False
When making decisions on where to route
orders, a dealer is only required to consider those
marketplaces that are “protected”.
50%
50%
se
Fa
l
Tr
ue
A. True
B. False
Questions?