What does exercising discretion in trading typically involve?

• A. Making all trading decisions based solely on client input
• B. Choosing elements such as quantity and timing of trades without client consent
• C. Recording trades for client approval before execution
• D. Trading exclusively on predetermined strategies from the client

Answer: (B)

Exercising discretion in trading primarily involves making independent decisions regarding the details of trades, such as the quantity and timing, without needing to obtain approval from the client for each individual transaction. This discretionary authority allows the dealer representative to act swiftly and in the best interest of the client, especially in rapidly changing market conditions. It requires a high level of trust and responsibility, as the representative must make decisions based on their expertise and knowledge of the client's investment goals and risk tolerance.

In contrast, making all trading decisions solely based on client input suggests a lack of discretion, as it would mean the representative does not utilize their judgment or expertise. Similarly, requiring client approval before executing trades implies that discretion is not being used, as this would hinder the ability to act promptly in response to market changes. Trading exclusively on predetermined strategies from the client also does not encompass discretion, as it restricts the representative's ability to adapt trading strategies based on real-time market information or changing client circumstances.