General Securities Sales Supervisor (Series10) Practice Exam

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What is the required approval frequency for a market maker engaging in VWAP transactions with institutional clients?

Prior to each VWAP transaction
Monthly
Quarterly
Annually

The correct answer is: Annually

The required approval frequency for a market maker engaging in Volume Weighted Average Price (VWAP) transactions with institutional clients is annually. This reflects the regulatory framework that outlines how often firms must review and approve such trading activity. The annual approval ensures that market makers regularly assess compliance with their trading policies, as well as the suitability of the transactions for the involved clients. By requiring annual approval, regulators aim to maintain proper oversight and risk management practices in connection with trading strategies like VWAP. Such assessments help ensure that both the market makers and the institutional clients remain aligned on the execution strategies used and that these strategies continue to meet specified compliance standards and performance objectives. Other options imply a higher frequency of approval, which may not align with regulatory expectations or practical operational efficiencies in the context of VWAP transactions. Regularly conducting such assessments is crucial; however, mandating them only once a year strikes a balance between oversight and the practicalities of transaction management in a dynamic market environment.