Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

30 Cards in this Set

  • Front
  • Back
What are seasoned new issues?
IBM issues new shares
What is a red herring?
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
What is a prospectus?
when red herring is approved
What is shelf registration?
allows firms to register securities and gradually sell them to the public for 2 years following the initital registration
What are private placements?
sell shares directly to a small group; cheaper because illiquid; corporations don't need to prepare costly registration required for public offerings
What are direct search markets?
like the market for a used fridge; buyers and sellers must seek eachother out
What are brokered markets?
real estate market; the primary market; brokers offer search services
What are dealer markets?
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
What are auction markets?
all traders converge at one place; i.e. NYSE
What are market orders?
buy or sell orders that are to be executed immediately at current market prices
What is a limit buy order?
instructs the broker to buy some number of shares when the price is at or below a stipulated price
What is a limit sell order?
instructs the broker to sell if and when the stock price rises above a specified limit
What are stop-loss orders?
stock is to be sold if its price falls below a stipulated level; to in fact stop a loss
What are stop-buy orders?
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
What are dealer markets?
trade on the OTC market; brokers and dealers trade; NASDAQ; dealer's profit from bid-ask spreads
What are electronic communication networks (ECNs)?
allow participants to post market and limit orders over computer networks; no bid-ask spread; fast
What are specialist markets?
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
How is the Nasdaq Stock Market divided?
1. Nasdaq National Market System
2. Nasdaq SmallCap Market
What are block houses?
facilitate block trades; match block investors with block sellers; alse can purchase a block and then divy it out to smaller investors
What is SuperDot?
enables NYSE to send orders directly to the specialist using computer lines; accounts for about 70% of NYSE share volume
What is a program trade?
coordinated purchase or sale of an entire portfolio of stocks
What is T + 3?
trade date plus 3 days; purchaser must deliver cash and seller must deliver the stock to the broker
What is the current initial margin requirement?
50% must be paid for in cash
What does margin equal?
equity in account/value of stock
What is a short sale?
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
What does the Securities Act of 1933 stipulate?
full disclosure of relevant information relating to the issue of new securities
What does the Securities Exchange Act of 1934 stipulate?
established SEC; requires further periodic disclosure of relevent financial information; register and regulate exchanges
What are CFAs?
Chartered Financial Analysts
What are the key provisions in the Sarbanes-Oxley Act of 2002?
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
What indications are there that insider trading still persists?
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