This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 7, Series 24, Series 55, and Series 62):
According to the Alternative Uptick Rule, if a stock declines by 10% or more from the previous day’s close, a short sale can only be made at a price:
Answers:
A. Above the best bid for the remainder of the trading day and the next trading day
B. At or below the best bid for the remainder of the trading day and the next trading day
C. Above the best ask for the remainder of the trading day and the next trading day
D. At or below the best ask for the remainder of the trading day and the next trading day
Correct Answer: A. Above the best bid for the remainder of the trading day and the next trading day
Rationale: According to the Alternative Uptick Rule, if a stock declines by 10% or more from the previous day’s close, a short sale can only be made at a price above the best bid for the remainder of the trading day and the next trading day. The alternative uptick rule can only be triggered during regular market hours, but the pricing restriction holds during regular and extended trading hours. The rule only applies to NMS securities traded on or off an exchange. The Alternative Uptick Rule is also referred to as the Rule 201 Circuit Breaker. Orders marked short exempt are exempt from this rule.
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