Sfc Electronic Trading Regulation Test
Thank you for attending the training online. To be entitled to certificate of completion, please take this assessment test. The test contains 10 questions that you will need to answer 5 questions correctly in order to be entitled to certificate of completion. There will only be 2 attempts of this assessment test and no refund will be made for any failure of the test and certificate of completion will not be issued. Let's take the test!
- 1.
Direct Market Access (DMA) most likely refers to:
- A.
The user having a fixed seat in the trading floor of the Stock Exchange of Hong Kong Limited (SEHK) and acting as an exchange participant
- B.
The user having access to the market provided by a licensed / registered person through which the user can transmit orders, directly or indirectly, to the market’s trade matching system for execution
- C.
The user using computerized programs and algorithms to place trade orders
Correct Answer
B. The user having access to the market provided by a licensed / registered person through which the user can transmit orders, directly or indirectly, to the market’s trade matching system for executionExplanation
DMA provides users with access to a market provided to a client by a licensed or registered person through which the client transmits orders, directly or indirectly, to the market’s trade matching system for execution under the licensed or registered person’s identifier other than those initiated by way of internet trading. DMA does not offer exchange participantship at the SEHK. Using computerized programs and algorithms to place trade orders is considered as algorithmic trading.Rate this question:
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- 2.
Which of the following activity is least likely considered as electronic trading?
- A.
Conducting computerized trades based on algorithmic programs
- B.
Analysing stock performance on an electronic spreadsheet
- C.
Placing an order through the internet trading system provided by a broker
Correct Answer
B. Analysing stock performance on an electronic spreadsheetExplanation
Analysing stock performance on an electronic spreadsheet does not constitute electronic trading activities.Rate this question:
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- 3.
Fund managers, who are users of third party electronic trading system, are least expected to:
- A.
Ensure due diligence is performed on such system
- B.
Perform annual assessment on the service provider of the trading system
- C.
Provide technical courses on quantitative algorithm and programming to their employees
Correct Answer
C. Provide technical courses on quantitative algorithm and programming to their employeesExplanation
Users of third party electronic trading system are expected to comply with the requirements of ensuring due diligence is performed on such system and performing annual assessment on the service provider of the trading system, amongst other requirements. Providing programming skills and computer education is not one of the requirements for system users.Rate this question:
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- 4.
Under the SFC Code of Conduct, the ultimate responsibility of management and supervision of electronic trading system is most likely to lie with :
- A.
At least one of the responsible / executive officers
- B.
The IT department head
- C.
The Lead Trader who aggregates a firm’s trades
Correct Answer
A. At least one of the responsible / executive officersExplanation
The ultimate responsibility of management and supervision is lies with at least one of the responsible officers / executive officers.Rate this question:
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- 5.
To fulfil the record keeping requirement, provider of electronic trading system is required to maintain:
- A.
Design, development, deployment and operation of the electronic trading system
- B.
An error log summarizing all incidents in relation to the system
- C.
Documents related to the annual review on the system
- D.
All of the above.
Correct Answer
D. All of the above.Explanation
Error logs and system annual review documents are both required to be properly maintained, along with the records of design, development, deployment and operation of the system and other relevant documents.Rate this question:
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- 6.
Which of the following party is most likely to be a provider of electronic trading system?
- A.
IT staff of a public fund house
- B.
Private fund managers
- C.
Brokerage firms
Correct Answer
C. Brokerage firmsExplanation
The sell-side, e.g. brokerage firm, are usually the providers of electronic trading systems and should comply with the specific requirements for system providers as set out in the SFC Code of Conduct.Rate this question:
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- 7.
In terms of the management and supervision of electronic trading systems, which of the following is a recommended practice?
- A.
Clearly identify the reporting lines in relation to the supervisory responsibilities
- B.
Managerial and supervisory controls are in place to manage the risks associated with the use of the electronic trading system by itself or by its clients.
- C.
Establish a formalized governance process
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
Clearly identifying the reporting lines in relation to the supervisory responsibilities and establishing a formalized governance process are both requirements in relation to the management and supervision of electronic trading systems as set out in Paragraph 18.4 of the SFC Code of Conduct. System pre- and post-trade controls are requirements for risk management.Rate this question:
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- 8.
Which of the following is least likely considered as a suitable ​back up policy?
- A.
Using an off-site server mirroring solution
- B.
Setting up daily cloud back-up via a secured connection
- C.
Copying company files as a back up to a personal flash drive on a monthly basis
Correct Answer
C. Copying company files as a back up to a personal flash drive on a monthly basisExplanation
Using an off-site server mirroring solution and setting up daily cloud back-up via a secured connection are both suitable backup solutions. On the other hand, backing up using personal devices on an infrequent basis is not an appropriate back up policy.Rate this question:
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- 9.
As set out in Paragraph 18.5 in the SFC Code of Conduct, electronic trading system users should have a written contingency plan to cope with emergencies and disruptions, including a BCP. A “BCP” refers to:
- A.
Bi-annual Critique Process
- B.
Business Continuity Plan
- C.
Basic Computer Programming
Correct Answer
B. Business Continuity PlanExplanation
A BCP refers to a Business Continuity Plan.Rate this question:
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- 10.
An adequate electronic trading system should:
- A.
Have no pre-trade controls so that traders can capture all opportunities to generate profit
- B.
Fix the capacity level with an expectation that 85% of clients would place orders
- C.
Include techniques to protect the confidentiality and integrity of stored information
Correct Answer
C. Include techniques to protect the confidentiality and integrity of stored informationExplanation
Having no pre- or post-trade system controls undermines the adequacy of an electronic trading system. The system capacity should be well planned and allow buffering in case of increase of clientele. Including techniques to protect the confidentiality and integrity of stored information is one of the desirable features of an adequate electronic trading system.Rate this question:
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Current Version
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Feb 03, 2023Quiz Edited by
ProProfs Editorial Team -
Nov 27, 2016Quiz Created by
Catherine Halcomb
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