Series 7 and 6
Series 7 function 4: orders, settlement and margin
Practice questions on the life of a trade, corrected one by one. The notes follow an order from the quote to settlement, then the complaints and margin rules that close the function.
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Practice questions written by Radif Partners from the official outline topics. They are not questions from the real exam. Progress is kept in this browser only (local storage) and never sent.
Function 4 of the Series 7 follows a trade from the moment a customer asks for a price to the day cash and securities change hands. FINRA gives it 14 of the 125 scored items, about 11% of the exam, which makes it the second largest function after investments and recommendations (Series 7 outline). It has four parts. Quotes and orders: firm and subject quotations, the order types a customer can give, short sale requirements and best execution. Processing: the order ticket, the role of market makers, trade reporting systems, good delivery and settlement. Since May 28, 2024, regular-way trades in most securities settle 1 business day after the trade date (SEC adoption of T+1), and bond buyers pay the seller the interest accrued since the last coupon. Problems: errors, cancellations, customer complaints, arbitration and mediation, and the Form U4 reporting they can trigger. Margin: Regulation T deposits of 50%, maintenance levels of 25% on long and 30% on short positions under FINRA Rule 4210, and the calculations that go with them.
Accrued interest on a corporate or muni bond
Accrued interest per $1,000
$17.33
| Settlement (T+1) | October 15, 2026 |
| Days, 30/360 | 104 |
| Paid by | the buyer, to the seller |
Interest accrues from the last coupon date up to the day before settlement; weekends and holidays are not removed from the settlement date here.
Questions, formats and fees by Radif Partners · Editorial policy · Method
From quote to order
A firm quote is a price at which the dealer is bound to trade at least the size shown; a subject quote is an indication that needs confirmation before any trade. Exam items like to ask which one a customer can rely on, and the answer is only the firm quote. Once the customer decides, the order type tells the firm how to work it.
| Order | What the customer asks |
|---|---|
| Market | execution right away at the best available price |
| Limit | execution at the stated price or better, or not at all |
| Stop | becomes a market order once the stop price is reached |
| All-or-none | the whole quantity or nothing, with no need for immediate execution |
| Fill-or-kill | the whole quantity at once, or the order is cancelled |
| Immediate-or-cancel | whatever can be filled at once, the rest cancelled |
| Not held | the representative chooses the time and the price |
| Market-on-close | execution at or as close as possible to the closing price |
Short sales carry their own rules: the order is marked short, a locate is needed before it is accepted, and the strategy can serve speculation, hedging or arbitrage. Best execution obliges the firm to seek the most favorable terms reasonably available for the customer, which covers more than price alone.
Processing and settlement
The order ticket and the market
A ticket records the essentials: account, security, side, quantity, price instructions and whether the firm acts as agent, charging a commission, or as principal, charging a markup or markdown. Trades are then reported to the systems the outline names, such as TRACE for corporate bonds and the MSRB's real-time reporting for municipal trades, published on EMMA.
Settlement and delivery
Regular-way settlement moved to T+1 on May 28, 2024. One practical consequence that questions test: for most stocks the ex-dividend date now falls on the record date, since a buyer on that day no longer settles in time to be on the books. Good delivery covers the form of the securities: endorsed certificates or stock powers, units of trading, and book entry through the Direct Registration System.
Accrued interest in practice
Take a bond with a 6% coupon paid on July 1, 2026 and January 1, sold on October 14, 2026. Settlement falls on October 15, 2026. Counting on a 30/360 basis from the last coupon up to the day before settlement gives 104 days, so the buyer owes $17.33 of accrued interest per $1,000 bond on top of the price. The calculator under the citable block repeats the computation with your own dates.
Errors, disputes and complaints
When a trade is reported wrong, the firm cancels and rebills it; a customer cannot be held to an execution that never happened. Written complaints must be passed to a supervisor, recorded and answered under the firm's procedures, and some must be disclosed on the representative's Form U4. Disputes between customers and firms usually go to FINRA arbitration, whose award is binding, while mediation is a voluntary negotiation with a neutral mediator and binds only if the parties sign a settlement.
Margin calculations
The outline closes the function with margin. A long purchase needs a deposit of 50% under Regulation T, and the account must keep equity of at least 25% of the market value; a short position needs 30% under FINRA Rule 4210. Firms may set higher house requirements. The margin math page computes deposits, equity and call levels. With 14 items, function 4 repays a few evenings of drill, and its rules return in the account opening function when margin and options agreements are signed.