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Over-the-Counter Securities Trading

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Questions and Answers

What is the primary role of a DMM in the NYSE?

To regulate the market and impose restrictions
To facilitate short selling
To manage the auction process only during trading halts
To act as a dealer and provide liquidity (correct)

What is the goal of short selling as an investment strategy?

To profit from a stable stock price
To profit from an anticipated decrease in the stock's price (correct)
To profit from an increase in the stock's price
To reduce market volatility

What is the first step in the short selling process?

Re-purchasing shares at a lower price
Returning the borrowed shares
Selling shares in the open market
Borrowing shares of a stock (correct)

What is the purpose of short sale restrictions?

To limit the ability of investors to short sell stocks (D) Signup and view all the answers

During what times does the NYSE function as an auction market?

During the opening and closing of trading, and during trading halts (A) Signup and view all the answers

What is the outcome of a successful short selling strategy?

A profit equal to the difference between the selling price and the repurchase price (B) Signup and view all the answers

What is the primary concern of regulators regarding short selling?

All of the above (D) Signup and view all the answers

What is the role of DMMs in managing the auction process?

To determine the single price that maximizes the number of shares traded (B) Signup and view all the answers

What happens to the borrowed shares at the end of a short selling process?

They are returned to the brokerage or the original owner (B) Signup and view all the answers

What is the effect of short selling on the market according to regulators?

It can exacerbate downward price movements and increase market volatility (A) Signup and view all the answers

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