CMFAS RES 2B Derivatives-Specific Conduct Rules & OTC Market Infrastructure question: approved trader receives simultaneous buy and sell orders from different (2)

CMFAS RES 2BDerivatives-Specific Conduct Rules & OTC Market Infrastructure

NK225 futures: existing bid 11710, existing offer 11740, last traded 11740. An approved trader receives simultaneous buy and sell orders from different customers at 11740. Which order should he expose to the market first?

A The sell order, because it is at the last traded price and so is more likely to be filled
B Either order, because both prices are inside the spread between the bid and the offer
C Neither; the orders must be crossed off market and reported to the exchange afterwards
D The buy order, because it can lift the existing offer at 11740, making it more attractive

Show the answer and explanation

Answer: D. The buy order, because it can lift the existing offer at 11740, making it more attractive

In the guide's Example 2, the buy order at 11740 is the more attractive order because there is already an offer at 11740 that the buy can lift. Exposing the more attractive order first gives the market the chance to interact with it before the cross is completed, consistent with reg 47D and exchange rules.

Common mistake

Expose the order that can trade against an existing quote first.

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Related CMFAS RES 2B questions

Match the practice to the description. Which pairing is CORRECT?NK225 futures: no existing bid, no existing offer, last traded 11740. An approved trader receives simultaneous buy and sell orders at 11715. Which order should he expose first, and why?Ms Foo manages a discretionary account for a retired customer with a balance of S$200,000. Over one month she executes 63 round turns in index futures, producing S$18,000 of commission for her firm and no net gain for the customer. The account never exceeded a position limit set by the exchange, the clearing house or her firm, and the customer's mandate permits discretionary trading. Which act of misconduct is this?

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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.