Explain Payments for Market Making as a Series 57 trader would apply it in practice. What facts trigger the governing rule, what action should the trader or firm take, and what exception or common trap must be checked?
Strong Interview Answer
Rule 5250 bars a member or associated person from accepting direct or indirect payment or other consideration from an issuer, affiliate, or promoter for publishing a quotation, acting as a market maker, or submitting a related application. Permitted categories include payment for bona fide services (such as legitimate investment-banking services), reimbursement of specified SEC/state registration or SRO listing fees, and payments expressly permitted by effective national-securities-exchange rules. Applied decision: Identify the payor and purpose first; if the consideration is for quoting or market making and no express exception applies, reject it.
What to Listen For
- Rule 5250
- issuer/affiliate/promoter
- consideration
- bona fide services
- express exception
Caution
Do not reward an answer that relies on treating disclosure or a claimed liquidity benefit as a cure; require the candidate to state the operative rule and the action it requires.