Question

An OTC trader receives an order from a customer to "Buy 1,000 XYZ at the Market" and simultaneously receives an order from another customer to "Sell 1,000 XYZ at the Market." The trader crosses the orders at the current market price. Which statements are true?

Answer 1

Answer: I and III

Explanation:

The OTC trader is the agent for both the buyer and the seller so he charges commission from both the buyer and seller. On mentioning the charges to the customer the OTC trader should determine the price including the FINRA 5% as per the policy.

FINRA is the Financial Institution Regulatory Authority. According to the rules fixed by the FINRA the broker firms should not charge anything more or less than 5% on standard trades.