Securities Trader Representative (Series 57) Practice Exam

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What is required for a firm to act as a market maker in Nasdaq stocks?

Entry of a registration request
Approval from other market makers
Filing of a customer trading report
Completion of continuing education

The correct answer is: Entry of a registration request

To act as a market maker in Nasdaq stocks, a firm must submit a registration request to the appropriate regulatory authorities, such as the Financial Industry Regulatory Authority (FINRA). This request is a formal process that signifies the firm's intention to become a market maker, outlining their operational capabilities and compliance with relevant regulations. Market makers play a crucial role in facilitating liquidity and ensuring smooth trading for stocks on the Nasdaq exchange. The registration process is essential because it establishes the firm’s eligibility to provide quotes and maintain an orderly market for specific securities. While aspects like regulatory approvals and ongoing education could be part of a market maker's operational requirements, the foundational step of registering to become a market maker is paramount. It provides the necessary authorization to engage in that role, differentiating it from other obligations that may exist for trading firms in general.