# Series 7 - Progress 3

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### Which of the following are characteristics of REITs? Formed as a limited partnership Provide limited liability for shareholders Invest in mortgage-related activities Distribute a minimum percentage of income I and III I, II, and IV II, III, and IV I, III, and IV

C.
REITs manage a portfolio of real estate. They can have an equity position in real estate (own the buildings) or be involved in mortgage activities (lend money). They must distribute 90% of their income in order to qualify for preferential tax treatment. They are not limited partnerships; they do not have a flow through of losses. An investor's risk is limited to his or her investment.

### A customer shorts 100 shares of ABC at 16 in a new margin account. How much must he deposit? \$2.50 per share \$800.00 \$1,600.00 \$2,000.00

D.
The minimum equity requirement for a short account is \$2,000. Since this is a new account, the customer must deposit \$2,000.

### A customer buys 10 ABC January 50 Calls paying a \$3 premium and 10 ABC January 50 Puts also paying a \$3 premium when the market price of the stock is \$49 per share. The buyer's breakeven points will be: \$44 \$47 \$53 \$56 I and III only I and IV only II and III only II and IV only

B.
The customer has the right to call the stock at \$50. The customer paid a \$600 premium per straddle. The breakeven point on the call is determined by adding the \$50 strike price to the premium of \$6. This equals a breakeven of \$56. The customer also has the right to sell the stock to the writer at \$50, but has paid a \$600 premium. The breakeven point on the put would be six points below the strike price of \$50, which equals \$44. The buyer's breakeven points will therefore be \$44 and \$56.

### A fundamental analyst, evaluating the common stock of a corporation, would examine all of the following, EXCEPT the: a. Sales of the corporation b. Management of the corporation c. Current amount of earnings paid out as dividends to the shareholders d. Current amount of short interest positions for the stock

D.
A fundamental analyst would examine all of the factors listed relating to a common stock except the current amount of short interest positions for the stock. Short interest is a statistic examined by a technical analyst. It represents the total amount of shares sold short that will be covered in the future.

### If ABC Corporation pays a \$0.25 dividend to its shareholders, all of the following would result, EXCEPT: a. Retained earnings remains the same b. Working capital is decreased c. Current assets are decreased d. Current liabilities are decreased

B.
When a cash dividend is paid, current assets (cash) and current liabilities (dividends payable) are decreased. Since both are reduced proportionately, working capital (current assets minus current liabilities) remains the same.

### An insurance company has a portfolio of long-term government securities. The portfolio manager anticipates that interest rates will rise and would like to hedge the portfolio. He should sell: T-bill calls T-bond calls T-bill puts T-bond puts

B.
If interest rates rise, bond prices will fall, so that the manager should sell calls (or buy puts). Since the portfolio is made up of long-term government securities, selling T-bond calls is the best answer.

### Mr. Jones, a client of XYZ brokerage firm, buys \$12,000 of ABC stock and, on the same day, sells short \$10,000 of DEF stock. Regulation T margin requirement is 50%. The member firm will issue a margin call for: \$2,000 \$6,000 \$7,200 \$11,000

The client made two separate transactions that would each require a margin deposit. At a 50% margin requirement, the long purchase of \$12,000 would require a cash deposit of \$6,000 (50% of \$12,000 = \$6,000). The short sale of \$10,000 would require a cash deposit of \$5,000 (50% of \$10,000 = \$5,000). A total margin call of \$11,000 must be met (\$6,000 + \$5,000 = \$11,000). It is important to note that in this example there are two separate transactions. A margin call for each is necessary. This differs from other margin questions where there is a same-day substitution in a restricted margin account and offsetting transactions are made.

### Referring to the previous question, what would the minimum NYSE maintenance requirement be in this account? \$500 \$5,500 \$6,000 \$6,600

C.
The NYSE minimum maintenance requirement is \$6,000. For a long account, the equity must equal at least 25% of the market value to satisfy the NYSE minimum maintenance requirement. This equals \$3,000 (25% of \$12,000 = \$3,000). For the short account, the equity must equal at least 30% of the market value to satisfy the NYSE minimum maintenance requirement. This equals \$3,000 (30% of \$10,000 = \$3,000). A total of \$6,000 (\$3,000 for the long account + \$3,000 for the short account = \$6,000) is required.

### A major difference between an open-end and closed-end investment company is: The composition of their portfolios The types of securities that each may issue The method of calculating Net Asset Value That a closed-end investment company is exempt from new issue registration requirements

B.
A major difference between open-end and closed-end investment companies is their capitalization, the types of securities they issue to raise money. Open-end companies may only issue common stock. Closed-end companies may issue common stock, preferred stock, or bonds.

### Your client owns a convertible bond which has been called at 104. The bond is convertible at 40 and is selling in the market at 107. The common stock is selling in the market at 41. Which would be the least attractive alternative to the client? a. Allow the bond to be called b. Sell the bond c. Convert to common stock and sell the common stock d. All of the alternatives are equally attractive

C.
To find the conversion ratio, divide the par value of the bond by the conversion price (\$1,000 divided by 40 = 25). The common stock is selling at \$41. Converting the bond to common stock and selling the stock would give the client \$1,025 (25 shares x \$41 = \$1,025). Since this is less than the client would receive by selling the bond (\$1,070) or allowing the bond to be called (\$1,040), it represents the least attractive alternative.

### A customer purchases a municipal bond with 25 years remaining to maturity. The bond has been pre-refunded to its first call date. The issue is callable in 7 years at 108, declining to par in 14 years. It also has a sinking fund call provision which begins in 17 years at par. For confirmation purposes, the bond should be priced to the: First par call First call date Sinking fund date Final maturity date

B.
When a bond is pre-refunded, the only applicable date is the first call feature. Therefore, the bond must be priced to the first call date.

### Which of the following would qualify for a sales breakpoint on large purchases of mutual fund shares? A partnership formed to buy the securities A husband and wife who are joint tenants with rights of survivorship A joint account formed between two unrelated individuals An investment club coordinated by a registered representative

B.
Quantity discounts are only allowed for individuals and individual entities such as corporations. Partnerships and investment clubs are not entitled to a quantity discount. Joint accounts normally do not qualify for breakpoints except in cases where there is a dependency relationship in the account (e.g., husband and wife).

### An investor purchases Swiss francs in the spot market at 61. As a hedge, the investor buys a Swiss franc June 60 put at 0.50. This strategy will be profitable if: The U.S. dollar weakens The U.S. dollar strengthens The spot price for the Swiss Franc is 61.75 The spot price for the Swiss Franc is 59.25 I and III only I and IV only II and III only II and IV only

A.
Since the investor purchased Swiss francs, the investor is predicting that the price of the Swiss franc will rise. The investor also bought a put for protection in case the value declined. This strategy will be profitable if the U.S. dollar weakens and the spot price of the Swiss franc rises above 61.50 (cost of the Swiss francs plus the premium for the put).

### An investor purchases \$10,000 face value of an 8-year municipal bond at a price of 108 and holds the bond to maturity. The investor would report: No loss or gain \$800 capital loss \$800 capital gain \$800 accreted interest

A.
The premium paid on a municipal bond must be amortized over the life of the bond. If held to maturity, the cost basis is reduced to par value and there is no loss.

### A client buys 100 shares of Miramar at \$42/share. One week later she buys 1 Miramar Nov 40 put and pays a premium of \$300. In November the stock is at \$48/share and the put expires worthless. The tax consequences of these trades are: Miramar stock has a basis of 42 Miramar stock has a basis of 45 There is a capital loss of \$300 on the put No loss is reported on the put until the stock is sold II only I and III only I and IV only II and III only

B.
Because the transactions took place on different days, each component is treated separately. The client owns stock at a cost basis of 42. When the put expires, the client has realized a \$300 capital loss. If the trades were done on the same day, the strategy is referred to as a married put and the cost basis of the stock is 45. With the married put, no loss would be taken if the put expired worthless.

### MSRB rules require that a municipal securities principal must approve all of the following, EXCEPT: All municipal transactions Municipal advertising Finalized bid forms Correspondence sent to customers

C.
A municipal securities principal does not have to approve a bid form. A bid form is submitted by a municipal syndicate in relation to a competitive bid.

### Broker-dealers are permitted to: I. Tell investors to buy mutual funds shortly before a dividend or capital gain distribution is to be paid II. Arrange for a customer to obtain credit to buy open-end investment company (mutual fund) shares III. Assign loan value to mutual fund shares owned by a customer for more than 30 days IV. Continue to compensate a retired registered representatives for contractual plan sales if a contract is signed with the registered representative who has retired a. I and IV only b. II and III only c. III and IV only d. II, III, and IV only

C.
Under industry rules, broker-dealers are permitted to continue to compensate retired registered representatives for contractual plan sales if a contract is signed with the registered representative who has retired. These commissions are known as "continuing commissions" or "trails." To induce an investor to buy mutual fund shares shortly before a dividend or capital gain distribution is to be paid is a violation of the Conduct Rules and is called "selling dividends." There is no benefit to the customer because the value of the mutual fund will decline when the fund sells ex- (without the) dividend or when there is a capital gain distribution. The customer can wait and receive the same value in shares. Although broker-dealers cannot obtain credit for a customer to buy open-end shares, loan value can be assigned to fully-paid shares which the customer has owned for more than 30 days.

### Under MSRB rules, a broker or dealer participating in the distribution of a new issue of municipal securities must disclose which of the following to customers? I. The nature of any control relationship with the issuer II. Fees received by the managing underwriter III. The amount of any financial advisory fee received from the issuer in connection with the issue IV. The fact that no final official statement will be prepared by the issuer a. I and IV only b. II and III only c. I, III, and IV only d. I, II, III, and IV

A.
The nature of any control relationship and the fact that no official statement will be prepared must be disclosed to customers. Fees would not normally be disclosed.

### For tax purposes, corporations may exclude a portion of the dividends received from: Corporate bonds Municipal bonds Preferred stocks Common stocks I only I and III only II only III and IV only

D.
Corporations may exclude a portion of the dividends received from investments in the common and preferred stocks of other corporations.

### A 65-year-old individual receives money from a qualified variable annuity. This payment would be: Subject to a 10% penalty Fully taxable at the investor's tax bracket Treated as a capital gain for tax purposes Partially taxable at the investor's tax bracket a II only IV only I and III only I and IV only

A.
Since a qualified variable annuity is funded with pretax dollars, payments from a qualified annuity are fully taxable as ordinary income. Withdrawals made before age 59 1/2 are subject to a 10% penalty tax.

### Which of the following persons may purchase a new issue from a member firm according to the New Issue Rule? The brother-in-law of a person associated with a member firm The uncle of a person associated with a member firm A buy-side trader employed by a mutual fund The owner of a broker-dealer firm

B.
Restricted persons are not permitted to purchase shares of a new issue under the New Issue Rule. Immediate family members of a person associated with a member firm, portfolio managers and owners of a broker-dealer would be considered restricted persons. Aunts, uncles, and cousins are not defined under the rule as immediate family members and are therefore not considered restricted persons. A buy-side trader would have the ability to make trading decisions and would be defined as a portfolio manager, who are individuals considered restricted persons under the rule.

### Which TWO of the following statements are TRUE regarding Eurodollar bonds? They are denominated in U.S. dollars only. They are denominated in foreign currencies only. They are only traded outside of the U.S. They are traded in the U.S. and international markets. I and III I and IV II and III II and IV

B.
Eurodollar bonds are dollar denominated bonds issued and sold outside the U.S. They may trade in the U.S. after a period of at least three months after issuance.

### In May a customer sells a STC July 40 listed Call for a \$6 premium and buys a STC July 30 listed Call for \$10. The customer has created a: Bullish spread Bearish spread Debit spread Credit spread I and III II and III I and IV II and IV

A.
The investor bought the more expensive call; therefore, this is a debit spread. A call debit spread is a bullish strategy.

### In May a customer sells a STC July 40 listed Call for a \$6 premium and buys a STC July 30 listed Call for \$10. Near expiration, STC is selling at \$39. The 40 Call expires and the customer closes out the 30 Call at its intrinsic value. The net result is: \$100 loss \$100 profit \$500 profit \$500 loss

C.
When the market price of STC is at \$39, the July 30 call has intrinsic value of 9 points. Since the investor paid a debit of \$400, this will result in a profit of \$500 (\$900 intrinsic value - \$400 debit).

### Choose from the items below, the one that is best described by the following. Depreciation Depletion Recapture Tax credit The largest deduction generated by a DPP in real estate. Depreciation Depletion Recapture Tax credit

A.
The largest deduction in a real estate program is generally depreciation.

### A customer wishes to establish a tax loss and sells 100 shares of XYZ Corporation. The loss would not be allowed if the customer, within 30 days: Bought an XYZ Corporation put Sold an XYZ Corporation put Bought an XYZ Corporation call Sold an XYZ Corporation call

C.
The loss would not be allowed if the customer purchased the same or substantially identical security within 30 days. Purchasing a call is considered substantially identical since it gives the investor the right to buy 100 shares of XYZ stock.

### All of the following should be taken into consideration by an over-the-counter dealer when determining the commission to charge in an agency transaction, EXCEPT the: Costs involved in executing the trade Dollar value of the security Cost price of the securities held in inventory by the dealer Availability of the security

C.
All of the choices given should be taken into consideration by an over-the-counter dealer when determining the commission to charge in an agency transaction except the purchase price of securities held in inventory by the dealer. The commission charged should be based on the current market price, not the cost of the inventory position.

### The market price of which of the following types of stock is most affected by swings in the interest rate cycle? Tobacco Utilities Clothing Soft drink

A.
Utilities are usually highly leveraged (a high percentage of capital is borrowed) and are therefore most affected by interest-rate swings.

### Which of the following Moody's ratings is the most speculative? Aa A Baa Ba

D.
Of the choices given, Ba is the most speculative. The highest Moody's rating is Aaa.

### An investor owns 280 shares of XYZ Corporation. XYZ Corporation pays a 15 cents quarterly dividend. XYZ Corporation announces a 5 for 4 split with a corresponding decrease in the per share dividend. How much will the investor receive in dividends each quarter after the split? \$40.00 \$42.00 \$52.50 \$80.00

B.
To find the new number of shares, multiply the shares owned by the ratio of the split (280 x 5/4 = 350). To find the new dividend per share, multiply the dividend by the reciprocal of the split (\$.15 x 4/5 = \$.12). The investor would receive a 12 cent dividend on 350 shares for a total of \$42.00. Note that the stock split did not alter the total dividend received.

### A customer sells short 100 shares of XYZ at 34. The customer wishes to protect herself against a loss. Which of the following would prevent a loss on the short position? Buy stop at 34 Purchase of an XYZ 30 call at 5 Buy limit at 32 The customer will be exposed to the possibility of loss no matter which of these additional positions or orders is used

D.
None of the choices listed would guarantee that there would be no loss on the position. A buy stop becomes a market order once triggered and does not guarantee a specific price. A buy limit does not guarantee execution. The purchase of the call would not totally prevent a loss since it would reduce the investor's sale proceeds to \$29 and the strike price of the call only guarantees a purchase price of \$30 (resulting in a one point loss if exercised).

### A brokerage firm's research department has issued a buy recommendation on XYZ Corporation common stock. The report must contain all of the following information, EXCEPT: The firm was the managing underwriter in a recent public offering of the stock The number of shares the firm owns of the stock Partners of the firm hold options to purchase the stock The firm makes a trading market in the stock

B.
The report must contain all of the items listed except the number of shares the firms owns of the stock. The firm does need to disclose that it owns shares of the stock, but not the actual number.

### The major provisions of ERISA provide protection for: Investors in limited partnerships Employers against fraud by their employees Government employees against improper investments by their employer Private sector employees against improper investments by their employer in pension plans

D.
ERISA gave the government jurisdiction over private pension plans and protects employees from improper investments by their employers. It does not apply to government employer plans.

### All of the following are TRUE about "stopping stock" on the NYSE, EXCEPT that it: Is permitted only for public orders Requires permission of an exchange official Is done by the specialist Will guarantee a price for the order

B.
Stopping stock is done by the specialist to guarantee a price for a public order. The specialist does not need the permission of an exchange official to do so.

### (#70) The following dividend information for New York Stock Exchange listed common stocks is reported in The Wall Street Journal: Quarterly Dividend Record Date Payable Date Cummings Corporation 50 cents 4/10 5/15 Federal Corporation 85 cents 4/13 5/25 General Electric Corp. 95 cents 4/8 5/21 Based on the information stated above, a buyer of Cummings Corporation on May 10th: Would be entitled to receive the 50 cents quarterly dividend Would not be entitled to receive the 50 cents quarterly dividend Would be entitled to receive the 50 cents quarterly dividend if the trade was made for "cash" None of the above

A buyer of Cummings Corporation would not be entitled to receive the 50-cent quarterly dividend because the purchase was made on May 10th. This was after the stock had sold ex-dividend (without the dividend). The ex-dividend date is not given but the record date is April 10th. Stocks sell ex-dividend on the 2nd business day preceding the record date. This would be two business days prior to April 10th, which is more than one month before the customer bought the stock. Even if the purchase was made "for cash" which requires a same-day payment, it would still be one month too late for the buyer to receive the dividend.

### Which of the following are characteristics of GNMA pass-through certificates? Interest and principal payments are received monthly Timely payment of interest and principal is guaranteed by the U.S. government Interest is subject to federal tax but exempt from state and local tax Secured by commercial mortgages I and II only I, II, and IV only I, III, and IV only II, III, and IV only

A.
GNMA pass-through certificates are guaranteed by the U.S. government. Interest and principal payments are received monthly. The interest is subject to federal, state, and local taxes. GNMAs are secured by residential, not commercial mortgages.

### PASS-THROUGH SECURITIES

Securities that pool debt obligations and pass through the principal and interest payments made by debtors to the security holders. To create a mortgage pass-through, a group of mortgages are collected to form a pool. Interests in the pool are then sold to investors in the form of pass-through certificates. Each certificate represents an undivided interest in the pool.

### Which of the following statements is/are TRUE relating to the auction of T-bills? Three- and six-month T-bills are auctioned weekly. Noncompetitive tenders are awarded at the highest yield of the accepted competitive tenders. Three- and six-month T-bills are auctioned on a discount yield basis but one-month T-bills are auctioned on a coupon equivalent yield basis. I only I and II only II and III only I, II, and III

B.
Three- and six-month T-bills are auctioned weekly. All T-bills are auctioned on a discount yield basis with noncompetitive tenders awarded first and receiving the highest yield of the accepted competitive tenders.

### A client would like to invest \$250 a month and have broad exposure to the U.S. equity market. Which of the following recommendations would be the most suitable? An S&P 500 index mutual fund A managed closed-end fund An S&P 500 index Exchange Traded fund An DJIA Exchange Traded Fund

A.
Although all of these investments would be suitable for a client seeking broad exposure to the U.S. equity market, the mutual fund would be the most cost-effective method for an investor to accomplish this goal with \$250 per month. The closed end fund and ETFs are purchased on an exchange and the client pays the current market price plus a commission. Most index mutual funds do not charge the client a sales charge (no-load). If the investor were purchasing a large dollar amount at one time any of these funds may be appropriate.

### The Federal Reserve Board margin requirement is 50%. A customer, in his margin account, buys 100 shares of XYZ Corporation at \$80 per share and 1 call option on XYZ Corporation at 2. The customer will have to deposit: \$4,100 \$4,200 \$4,400 \$4,600

B.
The customer will have to deposit \$4,200. Margin on the \$8,000 stock purchase would be \$4,000. The premium of \$200 for the option has to be paid in full. Options cannot be purchased on margin, although they may be purchased in a margin account. The total deposit would be \$4,200 (\$4,000 margin purchase + \$200 option premium).

### A municipal bond pays interest on February 1st and August 1st. A customer purchasing the bond on Monday, April 30th would have to pay the seller the purchase price plus accrued interest for: 91 days 92 days 93 days 96 days

B.
The trade date is Monday, April 30th. The bond pays interest on February 1st and August 1st. Accrued interest is calculated from the last interest payment date, up to but not including the settlement date. The settlement date is Thursday, May 3rd. The following calculation illustrates the answer:

February 30 days
March 30 days
April 30 days
May 2 days
92 days

### A municipal bond which is issued at par, is purchased at a discount and later sold at par or above. This transaction would result in: A taxable gain A tax-deductible loss A tax-free gain No gain or loss

A.
If a municipal bond is purchased at a discount in the secondary market (not an original issue discount), there will be a taxable gain at maturity. A taxable gain would also result if the bond was sold prior to maturity, above the original cost.

### A member of a municipal syndicate is entitled to which of the following? Underwriting spread Additional takedown Manager's fee Concession I and III only II and III only II and IV only I, II, III, and IV

C.
The underwriting spread includes the manager's fee, the additional takedown, and the concession. The additional takedown plus the concession equals the total takedown. A member of the syndicate is entitled to the total takedown for bonds it sells. The manager's fee always goes to the managing member of the syndicate.

### An individual may roll over a lump-sum distribution from a corporate pension plan to an IRA without tax consequences if it is done within: 10 days 30 days 60 days 90 days

C.
When a lump-sum withdrawal from a corporate pension plan, Keogh, or IRA is deposited into an IRA, it is referred to as a rollover. If the rollover is done within 60 days, the investor will avoid a taxable event. If the distribution is from a qualified plan other than an IRA, the distributing company must withhold 20% of the distribution for the IRS. Only one rollover is permitted each year.

### In periods of "easy money" when interest rates are declining, yield curves would tend to: Slope upward from the shorter to the longer maturities Slope downward from the shorter to the longer maturities Remain flat Do none of the above

A.
In periods of "easy money" when interest rates are declining, yields on shorter maturities would be less than those of longer maturities. Yield curves would tend to slope upward from the shorter to the longer maturities.

### EASY MONEY

A period during which there is an ample supply of money available for loan purposes.

### A customer gives his registered representative the following instructions. Buy 100 shares of General Motors "whenever you think the price is right." Under current regulations the order: Can be accepted Must be marked "discretionary" and approved by a branch manager Cannot be accepted Must be executed as soon as possible after it is received

A.
The order can be accepted and is not a discretionary order which requires written power of attorney. The customer told the registered representative which stock to buy (GM) and the amount (100 shares). The phrase "whenever you think the price is right" means the registered representative can use his or her judgement as to when the stock should be purchased. The order is not a market order and does not have to be executed as soon as possible after it is received. The order, however, should be executed sometime during the day it was received.

### DISCRETIONARY

An account in which the customer gives the broker or someone else authorization to buy and sell securities or commodities. Discretionary authority includes control over selection, timing, amount, and price to be paid or received.

### Which of the following cannot delegate power of attorney to a third party for the purpose of making securities transactions? A husband A wife A corporation A custodian

D.
Of the choices given, the only one that cannot delegate power of attorney to a third party for the purpose of making securities transactions is a custodian for a minor.

### All of the following are money-market instruments, EXCEPT: T-bills BAs ADRs CDs

C.
T-bills, BAs, and CDs are money-market instruments (short-term debt securities). ADRs represent a claim to foreign securities and are used to facilitate the trading of foreign stocks in the United States.

### Which of the following insure municipal bonds? FDIC SIPC MBIAC AMBAC I and II only II, III, and IV only III and IV only I, II, III, and IV

C.
The Municipal Bond Investors Assurance Corporation (MBIAC) and AMBAC Indemnity Corporation (AMBAC) are two insurance companies that insure new municipal issues. The insurance policy guarantees that should the issuer fail to pay interest or principal, the insurance company will meet all interest and principal payments when due. S&P and Moody's typically assign an AAA rating to any insured issue. Another insurer is Financial Guarantee Insurance Company (FGIC).

### State governments receive the least amount of revenues from: Sales taxes Gasoline taxes Excise taxes Property taxes

D.
State governments receive the least amount of revenues from property taxes. States raise money primarily from income taxes, sales taxes, excise taxes, and license fees. Local municipalities raise most of their funds from property taxes (real estate taxes).

### A stock index call option is exercised. The writer must: Deliver cash Deliver the underlying index Purchase the underlying index Close out his position

A.
When an index option is exercised, the writer must pay the buyer the in-the-money amount of the option in cash.

### A customer fails to deliver stock that has been sold. The brokerage firm has how many business days from the settlement date to buy in the customer? 3 5 10 15

C.
If a customer sells securities and then fails to deliver the securities, the broker-dealer must buy the securities in the market to satisfy delivery within 10 business days from the settlement date.

### To determine the yield on a municipal bond, all of the following are needed, EXCEPT: Coupon Dated date Maturity Settlement date

B.
The dated date is only used to calculate accrued interest on a new issue. When pricing a bond (determining the yield when price is known or determining the price when yield is known), the coupon, settlement date, and maturity are required.

### A specialist can accept all of the following orders, EXCEPT a: Not-held order Market order Good-until-cancelled (open) order Day order

A.
A specialist can accept all of the orders listed except a "not-held" order which allows a floor broker to use discretion in executing an order. Open (GTC) and day orders may be accepted by the specialist and placed in the specialist book. A specialist can accept a market order but must execute it immediately and cannot place it in the specialist book.

Example: