Market Structure Quiz: NBBO, Order Flow and VWAP

Work through the mechanics behind your fills: how the NBBO is built, what order routing reports show, what Level 2 leaves out, and the sums for VWAP, float and the cost of a wide spread.

AI-assisted, reviewed by Beth Ruelos →

Questions: 10
Level: Advanced
Time: 5 min

Question 1 of 10

1Under the SEC's Regulation NMS, what is the national best bid and offer for a stock?

A The last trade price reported by the primary listing exchange B The best bid and offer on the exchange where the stock is listed C The average of every bid and offer posted across US venues D The highest displayed bid and lowest displayed offer across US exchanges

2The NBBO offer is 15.20 for 300 shares, with 500 more offered at 15.21 and 700 at 15.23. If nothing changes, what average price does a 1,000-share market buy pay?

A 15.200 B 15.211 C 15.213 D 15.221

3You want to see which venues your broker sent customer orders to and what payments it received from them. Which disclosure shows that?

A The broker's quarterly SEC Rule 606 routing report B The market center's SEC Rule 605 execution report C The consolidated quote published by the SIPs D The broker's year-end Form 1099-B

4You buy 800 shares when the NBBO offer is 42.50, and a wholesale market maker fills you at 42.497. How much price improvement did you receive on the order?

A 0.24 B 24.00 C 2.40 D 0.003

5A Level 2 ladder shows 200 shares offered at the best ask. Which of these can the screen not show you?

A The displayed size at each ask price B The venue or firm posting each quote C Displayed bids at prices below the best bid D Hidden or reserve size and off-exchange interest

6Three opening bars have typical prices of 10.00, 10.30 and 10.10 on volumes of 20,000, 10,000 and 30,000. What is VWAP at the end of the third bar?

A 10.133 B 10.100 C 10.300 D 10.150

7The same 10,000-share bar is added once early in a session and once late in the afternoon. Why does it move VWAP much less the second time?

A Cumulative volume is far larger late, so one bar carries less weight B Most platforms stop updating VWAP after the midday session C Late bars use the close instead of the typical price D VWAP resets at midday, so the late bar starts a new average

8A company has 60,000,000 shares outstanding. Insiders hold 9,000,000, a strategic holder 6,000,000, and 3,000,000 are restricted. What is the float?

A 60,000,000 B 51,000,000 C 42,000,000 D 18,000,000

9A stock quotes 6.20 bid, 6.30 ask. You plan 800 shares with a stop 0.40 below entry. What is the round-trip spread cost as a share of your planned risk?

A About 1.6% B 25% C 12.5% D 80%

10Stock X quotes 2.95 bid, 3.05 ask. Stock Y quotes 80.00 bid, 80.04 ask. As a percentage of each midpoint, how do the two spreads compare?

A X about 0.33%, Y about 0.5% B Both about 3% C X about 10%, Y about 4% D X about 3.3%, Y about 0.05%

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