Free FINRA Series 7 (General Securities Representative) Processing Transactions Practice Questions
Trade execution and settlement on the FINRA Series 7 exam covers order types (market, limit, stop), trade reporting, T+1 settlement cycles, delivery requirements, corporate actions (dividends, splits), and regulatory compliance for securities transactions.
Sample Questions
Question 1
Easy
Under Regulation NMS, a crossed market occurs when:
Solution
Choice D is correct because a crossed market occurs when the national best bid on one exchange exceeds the national best offer (ask) on another exchange. This creates an anomaly where a buyer is willing to pay more than a seller is asking, indicating a breakdown in normal price discovery. Regulation NMS prohibits trade-throughs and requires market centers to prevent crossed and locked markets through their quotation practices.
Question 2
Medium
Which of the following best describes a principal transaction?
Solution
Choice C is correct because in a principal transaction, the broker-dealer acts as a dealer, buying from or selling to the customer from the firm's own inventory (proprietary account). The firm earns a markup or markdown rather than a commission.
Question 3
Hard
A customer deposits $30,000 and buys $60,000 of stock on margin. The stock appreciates to $80,000. What is the SMA, and what is the customer's buying power from that SMA?
Solution
Choice B is correct because SMA is the excess equity above the Reg T requirement. The debit balance is fixed at the original loan: $60,000 - $30,000 = $30,000. After appreciation: equity = LMV - DR = $80,000 - $30,000 = $50,000. Reg T requirement = 50% x $80,000 = $40,000. SMA = excess equity = $50,000 - $40,000 = $10,000. Buying power = SMA / Reg T rate = $10,000 / 0.50 = $10,000 x 2 = $20,000. The customer can purchase up to $20,000 in additional marginable securities.