Securities Trader Representative (Series 57) Practice Exam

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What is one of the principal features of Nasdaq Levels 3?

Available to all market participants
Allows for order entry and market-making
Limited to institutional investors
Can be used for algorithmic trading only

The correct answer is: Allows for order entry and market-making

The principal feature of Nasdaq Levels 3 is that it allows for order entry and market-making. This level of displayed data is primarily utilized by market makers and other professionals, enabling them to enter buy and sell orders directly into the Nasdaq system. Nasdaq Levels 3 provides comprehensive market data that includes real-time depth of book information, allowing market makers to quote securities, providing liquidity and managing their own trades effectively. This capability is essential for market participants who engage in buying and selling securities, as it offers the necessary tools to analyze market conditions and execute trades based on that analysis. In contrast, Levels 1 and 2 provide less functionality and are designed for different types of users. Understanding the unique features of each level helps in comprehending how they cater to various trading strategies and market roles.