Philippine Stock Exchange Trading Rules
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Questions and Answers

What is defined as the highest buying price and the lowest selling price in trading operations?

  • Board Lot
  • Best Bid and Offer (BBO) (correct)
  • Reference Price
  • Trading Threshold

What does the term 'Static Threshold' refer to in trading?

  • The permitted price update between trades
  • The volume of shares traded in an odd lot
  • The allowable price limits for a security in a trading day (correct)
  • The highest price a stock can reach in a trading day

What can trigger a cooling-off period in trading?

  • A stock reaching its Static Threshold
  • The last traded price exceeding the Dynamic Threshold (correct)
  • Achieving the trading volume of the board lot
  • A stock closing at its Reference Price

What is the accepted increment for price movement if the tick size is $0.01?

<p>$0.01 (D)</p> Signup and view all the answers

Which scenario would constitute a Trading Day?

<p>A regular weekday not declared as a non-Trading Day (A)</p> Signup and view all the answers

What is the maximum quantity of shares that can be disclosed at any given time if the total order quantity is 10,000 shares?

<p>1,000 shares (A)</p> Signup and view all the answers

Which account type is defined as orders for various clients that are grouped together, such as funds?

<p>Aggregate (C)</p> Signup and view all the answers

What happens if a foreign investor attempts to place an order that exceeds the foreign ownership limit?

<p>The order will be rejected. (B)</p> Signup and view all the answers

Which statement regarding account code amendments is correct?

<p>Local account codes can only be amended to another local or error account. (C)</p> Signup and view all the answers

What is the fee charged for amending account codes?

<p>₱100.00 (C)</p> Signup and view all the answers

Which type of order is defined as having a volume less than the board lot or minimum shares requirement?

<p>Oddlot (D)</p> Signup and view all the answers

What characterizes a related party account type in trading?

<p>Orders for owners, directors, or employees associated with the Corporate Trading Participant. (C)</p> Signup and view all the answers

What is the Dynamic Threshold (DT) percentage for securities that have traded more than 500 times in the past six months?

<p>10% (D)</p> Signup and view all the answers

Which type of trading involves transactions agreed upon between parties for larger lots?

<p>Block Sales (D)</p> Signup and view all the answers

In cross transactions, which of the following conditions must be met regarding pricing?

<p>Shall observe the limitations set out in the Implementing Guidelines in the absence of BBO (B)</p> Signup and view all the answers

What type of trading is characterized by trading shares less than the defined board lot?

<p>Oddlot Trading (C)</p> Signup and view all the answers

What is the latest time Level 1 Circuit Breaker (CB) can be triggered?

<p>2:25 PM (D)</p> Signup and view all the answers

During the PRE-CLOSE period at 2:45 PM, which of the following is true?

<p>Orders can be accepted but no matching occurs. (C)</p> Signup and view all the answers

During which period can cross transactions not be entered?

<p>Pre-Open/Pre-Close Period (C)</p> Signup and view all the answers

What activity is restricted during the PRE-CLOSE at 2:48 PM?

<p>Order cancellation (B)</p> Signup and view all the answers

For a security that traded 20 times or less in the past six months, what is its corresponding Dynamic Threshold percentage?

<p>20% (C)</p> Signup and view all the answers

What is the main feature of the Normal Market?

<p>Continuous matching based on Price-Time-Broker Priority (D)</p> Signup and view all the answers

What happens during the CLOSING RUN-OFF?

<p>Cross transactions only at closing prices. (B)</p> Signup and view all the answers

What is a key objective of the Risk Based Capital Adequacy Ratio (RBCA) rules?

<p>Align capital with business risk. (B)</p> Signup and view all the answers

What occurs during an Automatic Cross?

<p>A counterpart order is posted at the same or better price (A)</p> Signup and view all the answers

Which option is NOT a characteristic of Block Sales?

<p>Continuous trading conditions apply (C)</p> Signup and view all the answers

Which of the following best describes the Minimum level of capital required for Trading Participants (TP)?

<p>It should reflect the size and complexity of operations. (A)</p> Signup and view all the answers

At what time does the market officially close?

<p>3:00 PM (A)</p> Signup and view all the answers

What is NOT allowed during the PRE-CLOSE period at 2:48 PM?

<p>Order modification (B)</p> Signup and view all the answers

Which of the following describes the Automated Cross feature?

<p>It is limited to specific periods only. (A)</p> Signup and view all the answers

Flashcards

Best Bid and Offer (BBO)

The highest buying price (bid) and the lowest selling price (offer) for a security.

Trading Threshold

The permitted price range for a security on a given trading day.

Static Threshold (Trading Band)

The upper and lower price limits (ceiling and floor) for a security on a trading day.

Board Lot

The standard number of shares required to buy or sell a security.

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Price Fluctuation (Tick Size)

The smallest allowed price change for a security.

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Disclosed Quantity

The portion of a total order quantity that is visible in the order book at any given time.

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Total Order Quantity

The total number of shares an investor wants to buy or sell.

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Oddlot Order

An order for less than the minimum number of shares required for a standard trade (board lot).

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Account Code

A unique identifier assigned to each investor in the PSE trading system.

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Principal Account

An account used for trades made by a Broker-Dealer for their own account.

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Related Party Account

An account used for trades made by individuals associated with the Corporate Trading Participant (e.g., owner, director, employee).

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Foreign Ownership Limit

The maximum percentage of ownership in a company that foreign investors are allowed to hold.

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Order Queuing

The process of storing buy and sell orders in a queue until they can be matched with a corresponding order.

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Matching

The process of pairing buy and sell orders at a specific price.

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Odd Lots

Orders for shares that are less than a standard trading unit (usually 100 shares).

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Cross Transactions

Transactions where a buyer and seller agree on a price directly, bypassing the order book.

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Automatic Cross

A pre-programmed system that automatically matches buy and sell orders at a specific price.

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Block Sales

Large trades of a security, usually involving significant numbers of shares.

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Level 1 Circuit Breaker

A temporary halt in trading when the price of a security moves beyond a certain threshold, triggered until 2:25 PM.

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Level 2 Circuit Breaker

A temporary halt in trading when the price of a security moves beyond a certain threshold, triggered until 2:10 PM.

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Level 3 Circuit Breaker

A temporary halt in trading when the price of a security moves beyond a certain threshold, triggered until 1:40 PM.

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Dynamic Threshold

The maximum allowed price change between two consecutive trades. This limit applies only during continuous trading and varies based on the security's trading frequency.

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Trading Frequency Qualifier

A classification for securities based on how frequently they're traded over the past six months. Determines the Dynamic Threshold percentage.

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What are the three trading frequency categories and their corresponding Dynamic Thresholds?

Security A (Traded 20 times or less) - 20%, Security B (Traded over 20, under 500) - 15%, Security C (Traded over 500) - 10%

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Normal Market

A type of board where trades are executed continuously, with order priority based on price, time, and broker.

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Oddlot Trading

Trading of shares in amounts smaller than the standard board lot.

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What are the requirements for a Cross Transaction?

  1. Price should be within the Best Bid and Offer (BBO). 2. In the absence of BBO, prices must be within the implementing guidelines. 3. Cannot occur during pre-open or pre-close periods. 4. During the Run-off period, price must be the closing price. 5. Pre-arranged transactions must be executed through Block Sale Market.
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Study Notes

Philippine Stock Exchange (PSE) Trading Rules

  • Trading Operations: Trading operations follow specific rules and procedures
  • Definition of Terms: Concepts like Best Bid and Offer (BBO), Reference Price, Trading Thresholds (Static and Dynamic), Board Lot, Price Fluctuation (Tick Size), and Odd Lot are defined.
  • Trading Schedule: Trading days exclude Saturdays, Sundays, legal holidays and other declared non-trading days. Specific trading hours are defined (Pre-Open, Open, Continuous Trading, Market Recess, Pre-Close, Closing, Run-Off/Trading at Last).
  • Order Types: Different order types exist, including Limit Orders (specifying maximum buy/minimum sell price) and Minimum Quantity Orders (requiring a specific minimum quantity to be filled immediately).
  • Iceberg (Disclosed) Orders: This allows large orders to be entered into the Central Order Book gradually(dividing into smaller lots).
  • By Lot Size: Trading occurs in board lots or odd lots.
  • By Account Type: Account codes categorize investors (Principal, Retail, Institutional, Tax-exempt, Aggregate, Related Party, Error, Local, Foreign).
  • Foreign Ownership Limit: Limits on foreign ownership of certain securities exists in the trading system
  • Trade Amendment: Procedures exist for amending account codes, while specific restrictions apply to foreign and local account codes.
  • Aggregation of Client Orders: Rules cover aggregating client orders while ensuring compliance with specific rules.
  • Done-Through Transaction: Transactions are executed at a price outside the market spread by one TP using another TP
  • Trading Thresholds: Static and Dynamic Thresholds (trading band) limits the range in which a security can be traded
  • Block Sales: Large-volume transactions are negotiated separately.
  • Automatic Cross Transactions: Rules govern trades executed automatically when matching orders at similar prices occur, ensuring precedence.
  • Odd Lots: Trading of shares less than a board lot is allowed.
  • Order Modification: Modifications of orders after certain times are not permitted
  • Order Cancellation: Cancellations are not allowed during specific trading durations (Pre-Open, Pre-Close and Last 2 minutes before closing)
  • Circuit Breaker: Levels one, two and three of the circuit breaker are defined; when triggers are met, trading is halted for different durations.
  • Trade Cancellation: The Exchange may not cancel matched or executed orders. Exceptions may apply, primarily due to evidence of mistake or computer/system error
  • Block Sale Rules: Rules and forms exist for special large block sales in the stock market.
  • Trading Halt: Rules exist for events like trading halting of certain securities.

Risk-Based Capital Adequacy Ratio (RBCA)

  • Regulations ensure that companies are sufficiently capitalized to cover their financial obligations
  • RBCA Rules: Minimum capital is based on the size and complexity of operations, considering different business risks.
  • Reportorial Requirements: Specific reporting requirements(e.g., bi-monthly submission of RBCA reports, with dates for submission); are required in relation to covering periods.
  • RBCA Formula (NLC) calculations are important in assessing the solvency and financial strength of financial institutions.

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SEC Certification Exam Phase 2 (2) PDF

Description

Test your knowledge of the Philippine Stock Exchange trading rules with this quiz. Explore key concepts such as order types, trading schedules, and definitions of essential terms used in trading operations. Ideal for anyone looking to deepen their understanding of the PSE.

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