Question

In what is commonly known as a proceeds transaction, one of your clients is using the proceeds from the liquidation of one stock to purchase another stock. In compliance with the 5% markup policy for these transactions, the markup will be computed based on A) the compensation to the dealer for each side of the transaction separately. B) the markup or compensation to the dealer on the buy side of the transaction. C) a combination of both the buy side and the sell side compensation to the dealer.

Answer 1

C) a combination of both the buy side and the sell side compensation to the dealer

Step-by-step explanation:

Given that in a situation whereby an individual is involved in transacting one position then use the money received to purchase another, the 5% markup is calculated by making a plus of the compensation gotten by the dealer on the sale side to that gotten by the dealer on the buy-side and estimating the total to the inside market on the buy-side.

Hence, in this case, the correct answer is option C