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30 Cards in this Set
- Front
- Back
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What are seasoned new issues?
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IBM issues new shares
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What is a red herring?
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preliminary registration statement filed with SEC- describes issue and the prospectus of the company- printed in red; company cannot sell security until registration is approved
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What is a prospectus?
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when red herring is approved
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What is shelf registration?
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allows firms to register securities and gradually sell them to the public for 2 years following the initital registration
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What are private placements?
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sell shares directly to a small group; cheaper because illiquid; corporations don't need to prepare costly registration required for public offerings
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What are direct search markets?
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like the market for a used fridge; buyers and sellers must seek eachother out
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What are brokered markets?
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real estate market; the primary market; brokers offer search services
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What are dealer markets?
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dealers specialize in various assets, purchase these assets for their own accounts, and later sell them for a profit from their inventory; i.e. OTC market- bid-ask spreads
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What are auction markets?
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all traders converge at one place; i.e. NYSE
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What are market orders?
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buy or sell orders that are to be executed immediately at current market prices
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What is a limit buy order?
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instructs the broker to buy some number of shares when the price is at or below a stipulated price
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What is a limit sell order?
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instructs the broker to sell if and when the stock price rises above a specified limit
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What are stop-loss orders?
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stock is to be sold if its price falls below a stipulated level; to in fact stop a loss
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What are stop-buy orders?
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stock is to be bought if its price rises above a limit; often accompany short sales, in order to limit potential losses from the short position
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What are dealer markets?
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trade on the OTC market; brokers and dealers trade; NASDAQ; dealer's profit from bid-ask spreads
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What are electronic communication networks (ECNs)?
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allow participants to post market and limit orders over computer networks; no bid-ask spread; fast
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What are specialist markets?
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NYSE; trades in each security is managed by a specialist; specialist can act as a broker or a dealer; must use highest purchase price with the lowest selling price; creates an auction market; must maintain a fair and orderly market
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How is the Nasdaq Stock Market divided?
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1. Nasdaq National Market System
2. Nasdaq SmallCap Market |
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What are block houses?
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facilitate block trades; match block investors with block sellers; alse can purchase a block and then divy it out to smaller investors
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What is SuperDot?
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enables NYSE to send orders directly to the specialist using computer lines; accounts for about 70% of NYSE share volume
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What is a program trade?
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coordinated purchase or sale of an entire portfolio of stocks
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What is T + 3?
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trade date plus 3 days; purchaser must deliver cash and seller must deliver the stock to the broker
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What is the current initial margin requirement?
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50% must be paid for in cash
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What does margin equal?
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equity in account/value of stock
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What is a short sale?
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allows investors to profit from a decline in a security's price; an investor borrows a share of stock from a broker and sells it; later the investor much purchasea share of the stock to replace what was borrowed; short sellers must also pay the lender any dividends
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What does the Securities Act of 1933 stipulate?
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full disclosure of relevant information relating to the issue of new securities
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What does the Securities Exchange Act of 1934 stipulate?
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established SEC; requires further periodic disclosure of relevent financial information; register and regulate exchanges
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What are CFAs?
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Chartered Financial Analysts
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What are the key provisions in the Sarbanes-Oxley Act of 2002?
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1. creation of a Public Company Accounting Oversight Board to oversee the auditing of public companies
2. requires independent financial experts to serve on auditing committees of a firm's board of directors 3. CEOs and CFOs personally certify financial reports; misleadings result in penalties 4. auditors cannot provide other services to clients |
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What indications are there that insider trading still persists?
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1. convictions of insiders
2. leakages, stock prices usually rise in advance of positive information 3. when insider purchases outweigh insider sales, stock rises; vice versa |
