CMFAS RES 2B Derivatives-Specific Conduct Rules & OTC Market Infrastructure question: electronic futures trading system or in accordance with the business rules and practices

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

Which of the following are CORRECT? (a) Under SFR(LCB) reg 47(1) a holder or representative must not withhold or withdraw a customer's order, or part of it, from an organised market for its own benefit or that of another person. (b) Under reg 47C(1) a holder may knowingly buy from or sell to its customer a futures contract for its own account only with the customer's prior consent and in accordance with the business rules and practices of an approved exchange or recognised market operator. (c) Under reg 47D a holder may fill a customer's order by offsetting it against another person's order only through the electronic futures trading system or in accordance with the business rules and practices of an approved exchange or recognised market operator. (d) Under reg 44 a representative may deal ahead of a customer's unexecuted order in the same class of products if the customer is an accredited investor.

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

Show the answer and explanation

Answer: A. (a), (b) and (c) only

Regulations 47(1), 47C(1) and 47D of the SFR(LCB) are stated correctly. Regulation 44 gives priority to the orders of a customer who is not associated with or connected to the holder or representative, whatever the customer's investor classification, so front running an accredited investor's order is still prohibited.

Common mistake

Investor classification changes disclosure and documentation duties, not the priority of an unexecuted customer order.

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Which combination correctly matches the offence to its core feature?Mr Sim, a representative at Arc Futures, receives an order from a fund to buy 400 lots of a crude oil futures contract. Before entering it he buys 20 lots for his own account. He then telephones a dealer at another firm and the two agree to trade 200 lots at 78.40 before either side reaches the market. For the remaining 200 lots he tells the fund the order was filled at 78.45, when in truth nothing was sent to the exchange and Arc booked the other side internally at 78.35. How are the three acts classified, in order?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?

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