CMFAS RES 2B Derivatives Dealing Practices & Skills question: executing a trading strategy under RES 2B 6.4.5

CMFAS RES 2BDerivatives Dealing Practices & Skills

Which statements about executing a trading strategy under RES 2B 6.4.5 are CORRECT? (a) Small, liquidity-oriented trades can be packaged and executed via direct market access and algorithmic trading. (b) Large, information-laden trades demand immediate skilled attention, with experienced representatives managing the trade-off between impact and delay costs. (c) For a large order the representative should release as much information into the market as possible so that the trade fills quickly. (d) The questions to consider include the size of the trades, their frequency and speed, the trading costs involved, and whether derivatives are being used to reduce or enhance the risks taken.

A (b), (c) and (d) only
B (a), (b), (c) and (d)
C (a), (b) and (d) only
D (a) and (c) only

Show the answer and explanation

Answer: C. (a), (b) and (d) only

RES 2B 6.4.5 sets out the execution questions on size, frequency and speed, trading costs and the role of derivatives, and the three factors of a good trading strategy: direct market access and algorithmic trading for small liquidity-oriented trades, custom handling for large trades, and awareness of client restrictions, cash balances and brokerage allocations. The guide requires the minimum information needed to get the trade done to be released, not the maximum.

Common mistake

Information leakage is the cost being managed on a large order. Releasing more of it is the opposite of the rule.

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Original study material mapped to the public CMFAS RES 2B syllabus. Unofficial, not endorsed by MAS or IBF. Verify figures and rules against current guidance before relying on them.