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45 Cards in this Set

  • Front
  • Back
Primary Markets
Markets for new issues of securities
Secondary Markets
Markets for already issued securities
The first sale of stock by a formerly private firm
Seasoned Public Offering
An issue of stock by an already public firm
Purchase securities from the issuing company and resell them
A description of the firm and the security it is issuing
Shelf Registration
1982. Allow firms to register securities and sell them gradually sell them to the public up to two years after registration. The can be sold in mall amounts to reduce the float costs
Private Placement
Primary offering in which shares are sold directly to a small group of institutional or wealthy investors. Can issue without preparing costly registration paperwork. Reduced liquidity
The price at which an underwriter determines what price to offer an IPO depending on market response.
Firm Commitment
The investment bank agrees to purchase al of the stock and is responsible for any un-purchased shares. Buy stocks at a discount
Best Efforts
Less common than Firm Commitment. The bank acts as an intermediary and does not actually buy the security
Types of Markets: Direct Search Markets
The least organized market. Buyer and sellers seek each other out directly.
Types of Markets: Brokered Markets
A broker makes profits by offering services to buyers and sellers. Good example is the real estate market. Primary market.
Types of Markets: Dealer Markets
Markets in which traders specializing in particular assets buy and sell for their own accounts. OTC is an example.
Types of Markets: Auction Markets
A market where all traders meet at one place to buy or sell an asset.
Bid Price
The price a dealer is willing to buy a security
Ask Price
The price at which a dealer is willing to sell a security
Bid-ask spread
The difference between the bid and ask price. The source of profit.
Limit Orders
An order specifying a price at which an investor is willing to buy or sell a security
Stop Order
The trade is not to be executed unless the price hits the stop limit. Stop loss, stop buy
Over The Counter Markets
An informal network of brokers and dealers who negotiate sales of securities
ECN's: Electronic Communications Networks
Computer networks that allow direct trading without the need for market makers. Allow participants to post market and limit orders over computer networks. True trading systems, not merely price quotation devices. Eliminates the bid-ask spread.
Specialist Markers
Each security is managed by a specialist, A trader who makes a market in the shares of one or more firms and who maintains a "fair and orderly market" by dealing personally in the market. Provides liquidity.
Why are large bid-ask spreads not a viable option for specialists?
1) Their source of income is form frequent trades. A large spread would reduce the number of trades. 2) They are obligated to provide price continuity to the market.
What is the most important dealer market in the US?
What is the most important equity exchange in the US?
How many firms does the Nasdaq list?
About 3200
What are the two divisions of the Nasdaq?
National Market System and The SmallCao Market

Pink sheets
Name the levels of the Nasdaq subscribers and their attributes.
Level 3: Can enter bid and ask prices.
Level 2: Receive all bid ask prices but cannot enter their own.
Level 1: Just receive inside quotes
Who can trade in the NYSE?
Only members.
When do specialist trade from their own accounts?
When there is insufficient liquidity from public traders.
Block Transactions
Large transaction in which at least 10,000 shares of stock are bought or sold. 137m was the largest ever.
Program Trade
The coordinated sale or purchase of a portfolio of stocks
Allows NYSE members ti send orders directly to the specialists Display Book
T + 3
Trades must be settled within 3 working days.
Automated Bond System (ABS)
Allows trading firms to obtain market information, to enter and execute trades over a computer network, and to receive immediate confirmation of trades executed
Full Service Broker
Provide research, discretionary accounts, and all other services
Discount Brokers
Buy and sell services, hold them for safekeeping, margin loans, short sell.
Securities purchased with money borrowed in part from a broker. The margin is the net worth of the investors account.
Short Sale
The sale of a share not owned by the investor but borrowed through a broker and later purchased to replace the loan.
What is covering the short position?
When the short seller purchases shares that they have short sold
When can you short sell?
When the last recorded sale price was positive.
What are circuit breakers?
Trading Halts
Trading halt: If the DJ falls by more than 10% before 2pm, trading will be halted for one hour, between 2 and 2:30 it will be halted for 30 min, not at all if the drop occurs after 2:30. Falls by 20% 1: two hours, 1-2: 1 hour, after 2: all day. 30% All day
What are circuit breakers?
When the Dow moves more than 2% points in either direction from the previous trade it must pass the tick test. In falling market: Stock can only be sold on a plus tick or zero plus tick. The rule remains in effect all day or until it returns within 1% of the previous days close
What is the main purpose of the circuit breakers?
To mitigate informational problems