Clearly Erroneous Executions: Review Procedures and Appeal Deadlines
A market maker enters an electronic quotation error, resulting in an equity transaction executing at $12.00 per share when the prevailing National Best Bid and Offer (NBBO) is $120.00. What regulatory procedure governs breaking or adjusting this transaction under FINRA Rule 11892?
Under FINRA Rule 11892, a member firm must submit a Clearly Erroneous Transaction review request within 30 MINUTES of the trade execution to break or modify the price.
Complete Analysis & Legal Rationale
Under FINRA Rule 11892 (Clearly Erroneous Transactions), if an obvious clerical or mechanical error occurs where a transaction executes at a price substantially away from the prevailing market, a member firm may request an official regulatory review. The request must be submitted to FINRA Market Operations within 30 minutes of the execution time. FINRA officers have the legal authority to declare the transaction null and void (break the trade) or adjust the execution terms.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Under FINRA Rule 11892, a member firm must submit a Clearly Erroneous Transaction review request within 30 MINUTES of the trade execution to break or modify the price.
Fails to adhere to trade execution and settlement rules regarding B.
Fails to adhere to trade execution and settlement rules regarding C.
Fails to adhere to trade execution and settlement rules regarding D.
Official Standard: Under FINRA Rule 11892 (Clearly Erroneous Transactions), if an obvious clerical or mechanical error occurs where a transaction executes at a price sub