Series 7 Exam Question 363: Answer and Explanation

Question: 363

A Designated Market Maker is responsible for doing all of the following EXCEPT

• A. maintaining a fair and orderly market
• B. competing with public orders to keep trading as active as possible
• C. trading for their own account
• D. trading for customer accounts

Correct Answer: B

Explanation:

B. Designated Market Makers (DMMs) should keep trading as active as possible but cannot compete with public orders. To keep trading as active as possible, a DMM may place an order in-between the current bid and ask price to narrow the spread but cannot place an order for their own inventory at the same price as a customer's order.