An example of \"rogue\" trading where a trader uses knowledge of transaction to
ID: 2801011 • Letter: A
Question
An example of "rogue" trading where a trader uses knowledge of transaction to be and trades in his or her personal account ahead of the transaction in order to benefit from company the expected market movement is: a. Front Running b. Desking c. Wash Trades d. Physical Manipulation 7 Detective controls are: a. b. c. d. designed to discourage errors or irregularities from occurring designed to find errors or irregularities after they have occurred proactive All of the above 8. Preventative controls are: a. designed to discourage errors or irregularities from occurring b. designed to find errors or irregularities after they have occurred c. reactive d. All of the above h area of a trading firm would be in charge of the controls of position limit monitoring, nthly reconciliations of trade values with clearing brokers, and daily trade tie-out of exchange positions with clearing broker, and trader separation letters? A. Counterparty Authority B. Contract Confirmation C. Scheduling D. A and C only E. All of the above _-9, which 10 Which of the following is TRUE about "segregation of funds"? a. customer funds are to be segregated from the brokerage firm's operating capital to prevent a brokerage firm from diverting customer funds for its own use. b. Segregated funds for all customers may not be combined and held in a single account c. Customer funds may not be maintained in a sub-account d. All of the above are TRUEExplanation / Answer
6. The answer is option “a” – front running. Front running is a form of insider trading in which a dealer is already in the know and executes a transaction before the institution does in order to gain and then deposits that gain in his/her personal account.
7. The answer is option “b” – designed to find errors or irregularities after they have occurred. Detective controls are designed to locate problems after they have occurred.
8. The answer is option “a” – designed to discourage errors or irregularities from occurring. This is because preventive controls happen before the spending.
9. The answer is option “e” – all of the above. Counterparty authority is determined from trader separation letters, contract confirmation is done to ensure correct quantity and value and scheduling is done for the purpose of reconciliation.
10. The answer is option “a” – customer funds are to be segregated from the brokerage firm’s operating capital to prevent a brokerage firm from diverting customer funds for its own use. These funds are required by law to be fully from the company’s general investment funds as well.
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