General Securities Sales Supervisor (Series10) Practice Exam

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Which consideration does NOT apply to agency trades when determining fair pricing for municipal securities?

A Price of the transaction
B Availability of the security
C Execution expenses
D Amount of other compensation received

The correct answer is: B Availability of the security

The determination of fair pricing for municipal securities in an agency trade primarily involves several key considerations, including the price of the transaction, execution expenses, and the amount of other compensation received. The price of the transaction is essential because it reflects the actual cost at which the securities are bought or sold. Execution expenses are also a critical factor; these are the costs associated with executing a trade, such as commissions and fees, which can influence the net return to the client. The amount of other compensation received pertains to any additional payments or incentives that might affect the transaction, providing insights into how the price might be influenced by other financial arrangements. In contrast, the availability of the security does not play a direct role in the fair pricing of municipal securities in an agency context. While availability is certainly relevant to the overall market dynamics and can affect liquidity, it does not directly impact how the specific price of a transaction is deemed fair. Therefore, when evaluating fair pricing specifically, the consideration of availability does not apply.