General Securities Sales Supervisor (Series10) Practice Exam

Under what conditions may a Specialist make a market in a security assigned to another Specialist?

1. During the exchange's hours, any Specialist may make a market in any security

2. Only when acting as a relief Specialist for the assigned market-maker

3. Only when the market is "FAST"

4. Under no circumstances

The correct answer is: Only when acting as a relief Specialist for the assigned market-maker

A Specialist, also known as a market maker, has the primary responsibility for maintaining a fair and orderly market in the securities assigned to them. However, there are scenarios where a Specialist can make a market in a security that is not assigned to them. This typically occurs when they are acting in a relief capacity for another Specialist who is absent or unable to fulfill their duties. This provision ensures that liquidity in the market is maintained, even during periods when a designated Specialist may not be available. The action is not arbitrary and is bound by the need to ensure continuous market operation and fair pricing for investors. Relief Specialists step in to uphold market integrity when the primary Specialist cannot do so, which is critical for maintaining trust in the market. In contrast, the other options do not accurately describe the rules governing Specialists. Market activity by any Specialist at any time would lead to disorder and confusion, while saying that it can only happen when the market is "FAST" suggests a misunderstanding of what "FAST" entails, as this term relates more to certain market protocols than to the actions of Specialists. Finally, indicating that no circumstances permit a Specialist to take such action dismisses the structured and necessary role of relief duties in market making.