Tracking Equity Securities – Series 7 Exam
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
📈 Tracking Equity Securities – Series 7 Exam
On the Series 7 exam, understanding how equity securities are tracked, quoted, and traded is essential. This includes knowing the different marketplaces, quoting systems, and the role of reporting services that ensure transparency and liquidity in the stock market.
Here’s everything you need to know about tracking equity securities for the Series 7 exam.
🧾 What Are Equity Securities?
Equity securities represent ownership in a corporation and include:
- Common stock – Voting rights, variable dividends
- Preferred stock – Fixed dividends, no voting rights
- ADRs (American Depositary Receipts) – Foreign equity traded in the U.S.
- Rights and Warrants – Short- and long-term instruments linked to equity
🏛️ Where Are Equity Securities Traded?
Equity securities are traded in both organized exchanges and over-the-counter (OTC) markets.
📍 Primary Trading Venues:
| Market Type | Example Platforms | Features |
|---|---|---|
| Exchange Market | NYSE, Nasdaq | Centralized, listed securities, auction-style |
| OTC Market | OTCBB, Pink Sheets | Decentralized, unlisted or thinly traded |
🖥️ Quotation & Reporting Systems
To track equity securities, investors and firms rely on quotation systems and reporting services regulated by the SEC and FINRA.
📊 Key Tracking Tools:
| System / Service | Purpose |
|---|---|
| Consolidated Tape (CT) | Reports real-time trades of listed securities |
| Network A / B | Network A = NYSE-listed, B = other exchanges (e.g. AMEX) |
| Network C | Covers Nasdaq securities |
| NASDAQ Level I | Inside quotes: highest bid / lowest ask |
| NASDAQ Level II | Shows market makers and depth of book |
| OTC Pink / OTCBB | Quotes for non-Nasdaq OTC securities |
| FINRA’s TRACE | Primarily for debt, but Series 7 may reference it for context on transparency |
💡 Bid/Ask Spread and Quote Interpretation
Series 7 expects you to interpret real-world quotes such as:
XYZ 50.25 – 50.75, 10 x 15
- Bid = 50.25 (what buyers will pay)
- Ask = 50.75 (what sellers want)
- 10 x 15 = 1,000 shares bid vs. 1,500 shares offered
This is critical for understanding liquidity, spreads, and market behavior.
📦 Trade Reporting and Trade Confirmation
- Trades must be reported promptly after execution
- FINRA rules require trade confirmations be sent no later than T+1
- Brokers and clients receive confirmation with trade price, time, and commission (if any)
🧠 Exam Tips for Series 7
- Understand the difference between exchange-listed and OTC equity trading
- Be able to read and interpret equity quotes
- Know how market makers, ECNs, and order flow operate
- Understand the role of consolidated quote systems in price transparency
🚀 Master Series 7 with Confidence
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