General Securities Sales Supervisor (Series10) Practice Exam

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What is the requirement of Rule 605 under Regulation NMS?

Prepare monthly reports on execution quality
Submit quarterly reports on routing non-directed orders
Display customer limit orders at better prices
Execute orders at the NBBO regardless of quotes

The correct answer is: Prepare monthly reports on execution quality

Rule 605 under Regulation NMS mandates that certain market centers prepare and disseminate monthly reports that provide detailed information about the execution quality of market orders in securities. Specifically, these reports must outline various metrics related to order execution that help investors evaluate the execution quality of orders placed through different venues. This requirement is aimed at enhancing market transparency and informing investors about how well their trade orders are being executed. By making this information publicly available, investors can assess the performance of different market centers in terms of speed, price improvement, and execution price relative to the national best bid and offer (NBBO). The data helps to maintain integrity in the market and ensures that broker-dealers are held accountable for the execution quality they provide to clients. The other choices relate to different aspects of trading regulations or practices but do not accurately reflect the specific requirements of Rule 605. Therefore, the obligation to prepare monthly reports on execution quality is the correct context for Rule 605.