Chapter - 7 Trading

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Chapter - 7 Trading

Abu Dhabi Securities Exchange (ADX)

Which of the following is a requirement for a brokerage firm to offer E-Trading on ADX?

1 point

Registered with DFM

Approved by the Dubai Gold & Commodities Exchange

Approved by ADX and must appoint a compliance officer

Must offer margin trading to all clients

Clear selection

Which of the following must be included in the E-Trading agreement?

1 point

Client's bank statements

Penalty clauses for early trading

Clear statement of rights and responsibilities of both parties

A fixed investment plan

Clear selection

Which of the following is not a valid reason for ADX to suspend E-Trading services?

1 point

Investor violating legislation

Technical failure in the brokerage system

High trading volume

Broker requests cancellation

Clear selection

Big Block Deals on ADX require all the following except:

1 point

Minimum trade size of 1% of issuer's capital

Maximum price variance of ±25% from previous close

At least 20 participants on each side

Prior approval from the ADX

Clear selection

Which price is shown on ADX E-Trading systems for debt instruments?

1 point

Accrued interest price

Clean price

Dirty price

Maturity value

Clear selection

Dubai Financial Market (DFM)

Who must handle client funds for trades executed on DFM?

1 point

The broker

The Authority

The clearing member

The market maker

Clear selection

If a client on DFM fails to settle the amount post-trade, the broker must sell the securities within:

1 point

Same day

One business day post-settlement

Within 3 business days

Within a week

Clear selection

Which of the following is true about brokerage firms' commission on DFM?

1 point

They can set any amount with client consent

It must be approved by the client only

It must not exceed the limits set by the Authority

It can be taken in cash or crypto

Clear selection

Which of the following is a requirement for DFM order placement?

1 point

Verbal instructions only

Written format (email, fax, etc.)

Physical presence of the client

No documentation required

Clear selection

Who can legally enter orders into DFM's trading system?

1 point

Only retail clients

Registered representatives

Clearing members only

Board members of listed companies

Clear selection

Clearing, Settlement and Depository (CSD)

Who must settle trades through a clearing member?

1 point

Market makers only

Only investors

Non-clearing brokers

Institutional investors

Clear selection

Which of the following forms of collateral is not accepted by CSD for settlement?

1 point

Bank guarantees

Eligible securities

Real estate

Cash

Clear selection

What happens to bonus share fractions in the CSD system?

1 point

They are discarded

Credited to investor accounts

Sold in the market by the issuing company

Converted to bonds

Clear selection

What is the minimum record retention period for trade data by the CSD?

1 point

2 years

5 years

10 years

15 years

Clear selection

When must securities be transferred to the CSD deposit account for trading eligibility?

1 point

Before issuance

After settlement

Before trading

After dividend distribution

Clear selection

Commodities Clearing (CCP)

What is the minimum capital required for a CCP license in the UAE?

1 point

AED 20 million

AED 100 million

AED 50 million

AED 10 million

Clear selection

What must a CCP maintain to cover defaults by its two largest members?

1 point

Liquidity reserve

Risk management policy

Default fund

Exchange guarantee

Clear selection

Which of the following is not an acceptable form of margin collection by a CCP?

1 point

Cash

Securities

Bank guarantees

Treasury bills

Clear selection

Which risk type is not typically managed by the commodities CCP?

1 point

Legal risk

Operational risk

Cultural risk

Market risk

Clear selection

How often must stress tests on default funds be conducted?

1 point

Weekly

Annually

Daily

Monthly

Clear selection

Abu Dhabi Securities Exchange (ADX)

Which of the following is true regarding short selling on ADX?

1 point

It is freely permitted for all clients

It requires client ownership of securities before selling, unless specifically allowed

Brokers can lend shares to clients for short selling

It is mandatory for institutional investors

Clear selection

Under ADX rules, brokerage firms must:

1 point

Prioritize their own orders before client orders

Omit conflict of interest disclosures if licensed

Always act in the best interest of the client

Submit daily margin reports to clients

Clear selection

What is the primary reason for ADX requiring safeguards for E-Trading?

1 point

To reduce broker commissions

To allow 24/7 access to the system

To ensure security and technical integrity

To comply with international taxation

Clear selection

Big Block Deals exceeding ±25% of previous close are:

1 point

Permitted after ADX approval

Automatically accepted

Subject to client notification only

Banned outright

Clear selection

Which of the following best describes the responsibility of a broker on ADX?

1 point

To maximize trade frequency

To provide investment guarantees

To disclose all conflicts of interest

To act as a portfolio manager

Clear selection

Dubai Financial Market (DFM)

When must DFM brokers submit records of client orders?

1 point

At the end of the fiscal year

Within 24 hours of execution

Immediately upon request by the Authority

Once a quarter

Clear selection

If a DFM broker is not a clearing member, they must:

1 point

Handle cash themselves

Refuse non-institutional clients

Contract with a licensed clearing member

Clear selection

Which of the following is permitted as an order instruction on DFM?

1 point

Voice message

Verbal phone call without confirmation

Email with all required order details

Chat app (WhatsApp) only

Clear selection

In case of settlement failure by a DFM client, the broker must:

1 point

Fund the purchase themselves

Wait 3 business days

Sell the securities within 1 business day

Notify the exchange to cancel the trade

Clear selection

DFM brokers may charge commission only:

1 point

Based on competitive rates

If approved by client and the market

Within the limits set by the Authority

If the trade size is over AED 1 million

Clear selection

Clearing, Settlement, and Depository (CSD)

All trades executed in the UAE must be settled through:

1 point

Brokers’ internal systems

The Securities & Commodities Authority (SCA)

A licensed CSD system

The company’s registrar

Clear selection

Bonus shares are handled in the CSD system by:

1 point

Mailing share certificates to clients

Crediting them automatically

Withholding them for 30 days

Requiring manual investor action

Clear selection

Settlement collateral must include all EXCEPT:

1 point

Cash

Bank guarantees

Company-issued commercial paper

Eligible securities

Clear selection

When must the ownership of securities be recorded in CSD before trading?

1 point

After trade execution

On the trade date (T+0)

Before the securities are listed

Prior to execution of the first trade

Clear selection

How are fractional bonus shares treated in CSD?

1 point

Distributed to nearest shareholder

Converted into bonds

Sold by the issuing company

Donated to SCA

Clear selection

Commodities Market (CCP)

What is the minimum capital requirement to establish a licensed CCP?

1 point

AED 25 million

AED 100 million

AED 50 million

AED 10 million

Clear selection

A key requirement of a CCP under UAE rules includes:

1 point

Publishing shareholder names monthly

Maintaining a default fund covering two largest members’ default

Guaranteeing broker profits

Merging with ADX

Clear selection

Which of the following is NOT a duty of the CCP?

1 point

Conduct regular risk testing

Maintain disaster recovery plans

Provide margin lending to clients

Ensure transparency in clearing

Clear selection

Which of the following must be part of a CCP’s risk oversight?

1 point

Technical risk

Market risk

Marketing risk

Investor sentiment

Clear selection

A CCP must ensure the clear separation of:

1 point

Client orders and stop-loss triggers

Regulatory reports and customer complaints

Member funds and CCP’s own funds

Front office and HR departments

Clear selection

Abu Dhabi Securities Exchange (ADX)

What is required for a broker to resume E-Trading services after a suspension by ADX?

1 point

Written consent from client

Settlement of margin debts

Approval from the ADX

Paying a daily reactivation fee

Clear selection

What should an ADX broker do when a conflict of interest arises in a client transaction?

1 point

Proceed with execution

Inform SCA directly

Cancel the trade

Disclose the conflict and act in the client’s best interest

Clear selection

When trading debt instruments, ADX mandates that the pricing shown must reflect:

1 point

Clean price excluding accrued interest

Gross yield

Net present value

Dirty price

Clear selection

What is the primary condition for a Big Block Deal to qualify on ADX?

1 point

Must involve more than 100,000 shares

Deal value must exceed 5% of annual turnover

Trade size must be at least 1% of the issuer’s capital

Executed during pre-open session

Clear selection

For ADX, price limits for Big Block Deals must fall within:

1 point

±10% of opening price

±25% of the previous day’s closing price

±5% of daily average

±15% of market bid

Clear selection

Dubai Financial Market (DFM)

Client orders on DFM must include all the following details EXCEPT:

1 point

Client’s name

Nationality

Quantity and price

Order type (buy/sell)

Clear selection

Which DFM participant is responsible for handling investor funds?

1 point

The issuer

Broker

DFM directly

Clearing member

Clear selection

On DFM, which statement about registered representatives is TRUE?

1 point

They must be employed by the regulator

They are authorized to place orders into the system

They can trade for themselves only

They must sign all client contracts

Clear selection

Which of the following actions is NOT compliant with DFM rules for brokers?

1 point

Charging commission within Authority limits

Prioritizing client orders over proprietary orders

Accepting physical cash from clients

Receiving written instructions for trades

Clear selection

If a client fails to pay by settlement date, how soon must the securities be liquidated on DFM?

1 point

Same day

Within one business day

Within five business days

On the next trading cycle

Clear selection

Clearing, Settlement and Depository (CSD)

Settlement of trades in the UAE is required to follow which model?

1 point

Free delivery

Rolling settlement

Delivery versus payment

Pay on order

Clear selection

Non-clearing brokers in the UAE must use:

1 point

An external clearing house

An Authority-designated custodian

A licensed clearing member

Their own bank accounts

Clear selection

Where must all securities be transferred before trading can take place?

1 point

Brokerage internal ledger

The investor’s bank

The company registrar

The CSD

Clear selection

Which of the following best defines “eligible securities” for settlement collateral?

1 point

Securities approved by the broker

Shares from the same sector as the trade

Securities approved by the Authority for settlement purposes

Only government bonds

Clear selection

How are bonus shares processed for existing investors in the CSD system?

1 point

Reflected as fractional shares

Deposited into cash accounts

Automatically credited to investor accounts

Issued in physical certificates

Clear selection

Commodities Market (CCP)

Which authority must approve CCP operating rules and risk procedures?

1 point

The Central Bank

SCA

DFM Board

The ADX

Clear selection

What is one of the key stress test scenarios required by a CCP?

1 point

Weekend volatility

Failure of the third-largest clearing member

Simultaneous default of two largest clearing members

Price collapse of gold futures

Clear selection

A CCP must ensure that risk assessments include all EXCEPT:

1 point

Counterparty risk

Operational risk

Inflation risk

Market risk

Clear selection

What type of internal control is mandatory for CCPs?

1 point

Price prediction model

Internal audit system

Insurance underwriting

Advertising review

Clear selection

Which of the following is a required component of a CCP’s governance structure?

1 point

A single-person risk committee

Outsourced settlement team

Independent board

Broker advisory panel

Clear selection

Abu Dhabi Securities Exchange (ADX)

Before allowing a client to place a sell order, ADX rules require that the broker must ensure:

1 point

The client has margin funding

The client owns the securities being sold

The client has an outstanding loan

The client is an accredited investor

Clear selection

Which of the following is an ADX-approved safeguard for E-Trading systems?

1 point

Trade suggestion bots

Use of unlicensed platforms

Dedicated servers for stock alerts

Qualified technical staff and internal controls

Clear selection

What condition applies to price limits for Big Block Deals on ADX?

1 point

No restrictions apply

Must fall within ±10% of issue price

Must fall within ±25% of the last traded price

Must match the average sector price

Clear selection

What happens if a broker violates disclosure requirements on ADX?

1 point

Client assumes liability

The trade is canceled

Broker may be sanctioned or suspended

The SCA intervenes with price setting

Clear selection

Which of the following is a key obligation under ADX conflict of interest rules?

1 point

Limit order sizes

Act in the client’s best interest

Transfer orders to another market

Apply pre-clearance for all trades

Clear selection

Dubai Financial Market (DFM)

Under DFM rules, which of the following formats qualifies as valid written order instruction?

1 point

Phone call without recording

SMS

Email with client signature and trade details

Verbal consent in-person

Clear selection

What is a broker prohibited from doing under DFM’s client fund rules?

1 point

Referring clients to custodians

Accepting client cash directly

Executing pre-market orders

Sending monthly reports

Clear selection

If a DFM broker violates trading procedures, who bears the financial loss from a failed client settlement?

1 point

The DFM

The Authority

The client

The clearing house

Clear selection

Registered representatives on DFM are primarily responsible for:

1 point

Auditing broker accounts

Depositing funds

Entering trades into the system

Monitoring stock performance

Clear selection

What does the DFM require brokers to prioritize?

1 point

Their own trades

The Authority’s instructions

Client orders over their own orders

Institutional clients over retail clients

Clear selection

Clearing, Settlement and Depository (CSD)

Why is it mandatory to record all securities ownership in CSD before trading?

1 point

To comply with AML regulations

For tax calculation

To ensure legal transferability

For valuation tracking

Clear selection

What happens to unclaimed fractional shares resulting from bonus issues?

1 point

Returned to broker

Allocated to SCA

Sold by the company in the market

Donated to the default fund

Clear selection

What does the term "eligible securities" refer to in CSD context?

1 point

Securities issued only by GCC companies

Assets that can serve as settlement collateral

Securities guaranteed by Central Bank

Government bonds only

Clear selection

CSD rules require trades to be settled through:

1 point

Public fund managers

Custodial nominees

A clearing member or directly through the CSD

Internal market system

Clear selection

If a security is not recorded in the CSD prior to trading:

1 point

The broker will be fined

The trade is null and void

The SCA will suspend the stock

The security is assigned to a default pool

Clear selection

Commodities Clearing (CCP)

A core risk category covered by CCP stress tests includes:

1 point

Demand forecasting risk

Regulatory policy risk

Liquidity risk

Seasonal trading risk

Clear selection

Which of the following must a CCP conduct regularly to manage its risk exposure?

1 point

Default simulations for minor members only

Margin call consolidation

Back-testing and stress testing

Broker competition analysis

Clear selection

What is the CCP required to do if one of its members defaults?

1 point

Call for immediate Authority intervention

Freeze all trading on the exchange

Use the default fund to cover obligations

Replace member with a foreign participant

Clear selection

A CCP must separate member funds from:

1 point

Client emails

Exchange trading volume

Its own operational funds

Margin risk data

Clear selection

One of the transparency obligations of a CCP includes:

1 point

Revealing trader identities

Publishing client net worth

Reporting positions and exposures

Listing corporate sponsors

Clear selection

Abu Dhabi Securities Exchange (ADX)

In ADX E-Trading, the investor’s identity and account number are required primarily for:

1 point

Regulatory reporting

Portfolio analysis

Tracking bonuses

Placing orders and matching trades

Clear selection

A client using ADX E-Trading who violates market rules may have their access:

1 point

Extended with approval

Suspended without notice

Reviewed annually

Upgraded to margin status

Clear selection

For a broker to initiate a Big Block Deal, ADX requires:

1 point

Investor to submit notarized documents

Broker to obtain prior approval from ADX

Trade to be executed off-market

Approval from DFM

Clear selection

In ADX, what is the consequence of selling securities that a client does not own (short selling) without authorization?

1 point

Penalty imposed on the market

SCA grants waiver

Violation of ADX rules

No issue if settlement is met

Clear selection

Which control is expected in an ADX-approved E-Trading system?

1 point

Ability to cancel other brokers’ trades

Auto-approval of block deals

Security firewall and internal monitoring

Shared account passwords

Clear selection

Dubai Financial Market (DFM)

Under DFM rules, what must be maintained for every client order?

1 point

Verbal agreement record

Full written instruction with client ID, order type, quantity, and price

Video confirmation

Audio conversation transcript

Clear selection

Failure to settle by a DFM client obliges the broker to act by:

1 point

Reporting to DFM within 5 days

Filing a lawsuit

Selling the securities on T+1

Referring the matter to SCA

Clear selection

Which of the following is NOT allowed under DFM rules for brokers?

1 point

Receiving payments through clearing member

Receiving instructions via email

Prioritizing client trades

Accepting direct cash from clients

Clear selection

Orders entered into the DFM trading system must be submitted by:

1 point

Any investor

Registered representatives

Custodians

Clearing house officials

Clear selection

Who is responsible for complying with commission caps in DFM?

1 point

The Authority

The clearing house

The client

The broker

Clear selection

Clearing, Settlement and Depository (CSD)

Which party is responsible for confirming the transfer of ownership prior to trading?

1 point

Market makers

The issuing company

The CSD

The SCA

Clear selection

Bonus share allocations by issuers are:

1 point

Sent by cheque

Delivered physically

Automatically credited in the CSD

Optional at the investor’s discretion

Clear selection

A trade recorded outside the CSD’s rules and registers is:

1 point

Backdated and accepted

Considered invalid

Re-evaluated by the broker

Handled by the client’s bank

Clear selection

Settlement of securities must occur:

1 point

T+5

Only on exchange holidays

As defined by the CSD’s settlement cycle

Monthly

Clear selection

Collateral for settlement purposes must be:

1 point

Guaranteed by the ADX

Approved by the issuer

In eligible form as per CSD rules

Backed by real estate

Clear selection

Commodities Market Clearing (CCP)

The main objective of a CCP’s disaster recovery plan is to:

1 point

Migrate trades to a different market

Ensure business continuity during disruptions

Eliminate need for risk tests

Reduce tax burden on trades

Clear selection

Back-testing by a CCP primarily evaluates:

1 point

Market rumors

Accuracy of margin models

Broker experience

Pricing feeds

Clear selection

The CCP’s internal audit system ensures:

1 point

Promotion of clearing members

Operational control and risk compliance

Marketing performance

Trading profits for members

Clear selection

Which of the following is a core responsibility of a licensed CCP?

1 point

Hosting public investor conferences

Arbitrating member disputes

Managing default scenarios and reporting

Issuing company shares

Clear selection

A CCP’s financial resources must be sufficient to:

1 point

Pay dividends to its members

Sustain operation losses indefinitely

Cover simultaneous default of its two largest members

Guarantee profits to clearing brokers

Clear selection

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