Automated Quotation Systems – Series 7 Exam

Automated Quotation Systems – Series 7 Exam Prep 💻📈

Understanding automated quotation systems is essential for the Series 7 Exam, especially when it comes to secondary markets and trading mechanisms. These systems allow market participants to view real-time bid and ask prices, place orders, and execute trades electronically — enhancing transparency and speed.

💡 What Is an Automated Quotation System?

An automated quotation system is an electronic platform that provides up-to-date price quotations for securities. It allows market makers and dealers to post bids and offers, facilitating efficient trade execution.

These systems are commonly used for:

• Over-the-counter (OTC) securities
• Nasdaq-listed stocks
• Electronic communication networks (ECNs)

🔑 Key Automated Quotation Systems to Know

📊 NASDAQ (National Association of Securities Dealers Automated Quotations)

• First electronic stock market
• Trades thousands of stocks electronically
• Features market makers, ECNs, and order routing
• Supports Level I (best bid/ask) and Level II (depth of market) quotes

📉 OTC Markets Group (Formerly Pink Sheets and OTC Bulletin Board)

• Includes OTCQX, OTCQB, and Pink Market
• Not an exchange — quotes are submitted by broker-dealers
• Less transparency and regulation compared to listed markets

🌐 ECNs (Electronic Communication Networks)

• Match buy and sell orders electronically, often anonymously
• Operate outside traditional exchanges
• Examples: Instinet (INET), ARCA, BATS
• Used heavily by institutional traders for speed and efficiency

📝 What You Need to Know for the Series 7 Exam

✅ NASDAQ is an automated quotation system, not a physical exchange
✅ Know the difference between Level I and Level II NASDAQ quotes
✅ Understand that OTC securities are quoted via systems like OTC Markets or formerly the OTCBB
✅ ECNs facilitate automated, anonymous, after-hours trading
✅ These systems support efficient price discovery and improve market transparency

📚 Example Series 7 Exam Question:

Which of the following is NOT an automated quotation system?

A. NASDAQ
B. Instinet
C. NYSE
D. ARCA

✅ Correct Answer: C. NYSE
The NYSE is a physical exchange with a trading floor, not primarily an automated quotation system.

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