mouse123

A simple logical participation strategy trades:

A) early in the day and attempts to minimize market impact.

B) with market flow and attempts to minimize market impact.

C) with market flow and attempts to minimize opportunity costs.

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Simple logical participation strategies seek to trade with market flow to minimize market impact.

mouse123

A trade’s volume is a small percentage of average daily trading volume. The trade has low spreads and is not urgent. Which of the following would be the best method of filling the trade?

A) The use of a simple logical participation strategy based on VWAP.

B) Placing the trade in a crossing system.

C) The use of an implementation shortfall strategy.

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Trades that are a small portion of average daily trading volume, with low spreads, and low urgency should be traded with a simple participation strategy. Simple logical participation strategies patiently trade throughout the day.

mouse123

A trade’s volume is a small percentage of average daily trading volume. The trade has low spreads and is urgent. Which of the following would be the best method of filling the trade?

A) The use of a simple logical participation strategy based on VWAP.

B) The use of an implementation shortfall strategy.

C) Placing the trade in a crossing system.

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Trades that are a small portion of average daily trading volume, with low spreads, and high urgency should be traded with an implementation shortfall strategy. These strategies trade early in the day and would accommodate an urgent trade.

mouse123

A trade’s volume is a large percentage of average daily trading volume and has high spreads. Which of the following would be the best method of filling the trade?

A) Placing the trade with a broker.

B) A simple logical participation strategy based on VWAP.

C) A simple logical participation percent-of-volume strategy.

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If a trade is of relatively large size and has a large spread, it should be traded through a skilled broker or through a crossing system to minimize the spread.

mouse123

Which of the following is least accurate regarding best execution?

A) Each party to a trade determines what best execution is.

B) Best execution can be measured for a single trade.

C) Best execution cannot be judged separately of the investment decision.

Although best execution can be measured ex post over time, it cannot be measured for a single trade. Best execution cannot be judged independently of the investment decision. Best execution cannot be known with certainty ex ante, it depends on the particular circumstances of the trade. Each party to a trade determines what best execution is.

mouse123

Which of the following is least accurate regarding best execution?

A) Best execution can determine a trader’s effectiveness over time.

B) Best execution prevents high cost trades from taking place.

C) Best execution can be measured after the fact for a series of trades.

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Some strategies might have high trading costs but that does not mean they should not be pursued if in net they enhance portfolio value. Best execution can be measured after the fact for a series of trades.

mouse123

Which of the following is least accurate regarding best execution? Best execution:

A) depends on relationships and practices.

B) is similar to the prudence concept.

C) should be judged independently of the investment decision.

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Best execution cannot be judged independently of the investment decision. Prudence and best execution both attempt to improve portfolio performance and meet fiduciary responsibilities. Relationships and practices are integral to best execution.

mouse123

Which of the following is least accurate regarding the CFA Institute’s Trade Management Guidelines? They state that investment management firms:

A) must disclose their conflicts of interest related to trading.

B) should strive for best execution.

C) must not disclose documentation concerning policies and procedures to outside parties.

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Documentation concerning policies and procedures to outside parties should be disclosed to outside regulators, not held within the firm. The CFA Institute’s Trade Management Guidelines state that in regard to record keeping, investment management firms should maintain the documentation supporting: 1) the firm’s compliance with its policies and procedures; and 2) disclosures made to its clients. In doing so, the firm provides evidence to regulators as to how the firm pursues best execution for its clients.

mouse123

Which of the following is least accurate regarding the CFA Institute’s Trade Management Guidelines? They state that investment management firms should:

A) provide general information on their trading techniques, markets, and brokers.

B) hire independent outside consultants to ensure best execution.

C) have policies and procedures that assist in best execution.

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The CFA Institute’s Trade Management Guidelines do not require that investment management firms hire independent outside consultants to ensure best execution.

mouse123

Which of the following is NOT one of the three components of the CFA Institute’s Trade Management Guidelines?

A) Measurement tools.

B) Disclosures.

C) Processes.

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The CFA Institute’s Trade Management Guidelines are split into three parts: processes, disclosures, and record keeping. These guidelines are meant to assist investment management firms in achieving best execution and maximum portfolio value for their clients.