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83 Cards in this Set
- Front
- Back
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Secondary Market
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The market in which securities are bought and sold
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Exchange market also known as auction market
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composed of the NYSE and other exchanges on which listed securities are traded
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Listed security
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refers to any security listed for trading on an exchange
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OTC market or second market
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an inter-dealer market in which unlisted securities trade
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Unlisted securities
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securities not listed on any exchange
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Third Market or Nasdaq Intermarket
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trading market in which exchange listed securities are traded in the OTC market
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market makers
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Broker/dealers registered as OTC of these in listed securities can effect third market transactions
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Consolidated Tape
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All securities listed on the NYSE and most securities listed on the regional exchange are eligible for OTC trading as long as the trades are reported to where within 90 seconds of execution
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fourth market
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a market for institutional investors in which large blocks of stock both listed and unlisted trade in transactions unassisted by broker/dealers
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ECNS electronic communications networks
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Where fourth market transactions take place
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9:30 am through 4:00 pm ET
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what are the NYSE trade hours?
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Location and pricing system
Must have central market place and trading floor facilities |
What factors come into play for company to reach criteria for being on the listed market
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double auction markets
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What listed markets operate as competing among themselves to execute trades at prices most favorable to the public
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No central marketplace facilitates, usually over the phone/computer
WOrk through an interdealer network |
What are the location and pricing system required for an OTC market requirement?
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Interdealer network
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registered market makers compete among themselves to post the best bid and ask prices. Negotiated market
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Spread
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the difference between bid and ask prices
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broker/dealers
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firms engaged in buing and selling securities for the public must register as
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Brokers
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agents that arrane trades for clients and charge commissions, do not effect trades as principals but arrange trades between buyers and sellers
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Dealers or principals
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buy and sell securities for their own accounts often called position trading, normally charge markups
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Markup
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the difference between the current interdealer offering price and the actual price charged to the client
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Net price
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When a price to a client includes a dealer's markup it is called this
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NYSE often called the Big Board
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the most widely known stock exchange
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listed securities
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securities traded on the NYSE, they must satisfy the exchange's listing requiremenst
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floor brokers or CHBs commission house brokers
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execute orders for clients and for their firms' accounts
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two-dollar brokers
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When commission brokers are too busy to execute all of their firms' orders, they call on these to execute orders for them
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Registered traders
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members of the Exchange who trade primarily for their own accounts
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Specialists (DMMs)
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facilitate trading in specific stocks, chief function is to maintain a fair and orderly market in those stocks, act as brokers and dealers
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Auction market
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Exchange securities are bought and sold in the?
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Double auction markets
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What exchange markets are sometimes referred to because both buyers and sellers call out their best bids and offers in an attempt to transact business at the best possible price
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Priotirty - first order in
Precedence - largest order of those submitted Parity - Random drawing |
When more than one broker enters the same bid or offer the DMM awards the trade in what order
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Arbitrage
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a trading strategy that specialized traders use to profit from temporary price differences between markets or securities
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8.4
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8.4
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Must maintain fair and orderly market
stand ready to buy and sell for his own acct to maintain a fair and ordely market expected to transact business for his own account in such a way as to maintain price continuity and minimize temporary price disparities attributable to supply and demand differences must avoid transacting business for his own account at the opening or reopening of trading in a stock if this would upset the public balance of supply and demand must file the reports and keep the books and records the exchange requires may trade for his own account in between the current bid and ask quotes in his book |
What are the responsibilities of the designated market maker
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Market Order
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sent immediately to the floor for execution at market price
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limit order
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limits the amount paid or received for securities
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Stop order or stop loss order
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becomes a market order if the stock reaches or goes through the stop (trigger or election) price
designed to protect a profit or prevent a loss if stock begins to move in wrong direction |
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Trigger
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the transaction at or through the stop price activates the stop order trade
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Execution
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when the stop order becomes a market order and is executed at the next price completing the trade
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buy stop order
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protects a profit or lmits a loss in a short stock position
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Sell stop order
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protects a profit or limits a loss in a long stock position and is entered a price below current market
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stop limit order
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stop order that once triggered becomes a limit order instead of a market order
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Think of BLISS
Buy Limits and Sell Stops |
How to remember reference chart for limits and stops?
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the ex dividend date or ex date
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all orders entered below the market are reduced when?
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BLISS
Buy limits and sell stocks |
Which buy or sell limit or stop orders would be reduced by the DMM on the ex dividend date?
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becomes sell 200 xyz at 25 stop
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if there is an open order to sell 100 xyz at 50 and there is a 2 for 1 split what would order become??
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becomes buy 600 xyz at 25
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there is an open order to buy 500 xyz at 30. if there is a 20% stock dividend order becomes
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Only round lots are allowed on order book only in 100s and NOT 120
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Why would an open order to buy 100 xyz at 30, if there is a 20% stock dividend remain at 100 xyz at 25
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NH Not held orders
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a market order indicating that the customer agrees not to hold the floor broker or broker/dealer to a particular time and price of execution
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AON All or nothing orders
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must be executed in entirity but not immediately
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Fill or Kill orders
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Execute immediately in its entirety or cancel
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Immediate or cancel
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execute as much as possible immediately, cancel the rest
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Regulation SHO
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suspending the tick rule and the bid test rule, also mandates a locate requirement
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Locate requirement
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before the short sale of any equity security, firms must locate the securities for borrowing to ensure that delivery will be made on settlement date
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Naked short selling
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Is not permitted, happens when a locate requirement is not fulfilled
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SDBK Super display book
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nearly 75% of the order the nYSE receives each day are processed through a computer trading and execution system called this
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Consolidated Tape System CTS
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receives validates and sequences the last sale price and size of all equity transactions in listed securities from all US stock exchanges and the financial industry regulatory authority
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Network A
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reports transactions in NYSE listed securities wherever they are traded
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Network B
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represents last sales for securities that are listed on the NYSE AMEX
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SLD
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appears on the Tape and indicates that the exchange did not report a sale on time, so it is out of sequence on the Tape
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OPD
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announces the initial transaction in a security for which the opening has been delayed
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HALT
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means that trading in a security has been halted
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SRO sefl regulatory organization
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regulates the OTC market
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NASDAQ National Association of Securities Dealers Automated Quotation
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the computerized information system that tracks OTC equities trading
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OATS Orde audit trail system
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an automated computer system created to record information relating to order, quotes, and other trade information from all equities that are traded on Nasdaq
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quote
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a dealer's current bid and offer on a security
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current bid
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the highest price at which the dealer will buy
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current offer
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the lowest price at which the dealer will sell
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spread
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the difference between the bid and ask
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The highest price the dealer will pay to buy is 63 and the lowest he will accept to sell is 63.07
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what does a quote expressed as bid 63, offered 63.07 mean?
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firm quotation
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the price at which a market maker stands ready to buy or sell at least one trading unit - 100 shares of stock of 5 bonds - at the quoted price with other member firms
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backing away
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violation of trading rules, a market maker that refuses to do business at the price quoted
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subject quote
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one in which the price is tentative, subject to reconfirmation by the market maker
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qualifiers
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allows the broker/dealer to back away if the market conditions change
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workout quote
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an aproximate figure used to provide the buyer or seller with an indication of price, not a firm quote
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nominal quote
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someone's assessment of where a stock might trade in an active market
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issue's size
issuer's financial condition amount of market activity in the issue market conditions |
what factors influence a spread size
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When a market maker is acting as a principal (dealing from inventory with financial risk)
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When are markups and markdowns charged in OTC?
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5% markup policy
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adopted to ensure that the investing public receives fair treatment and pays reasonable rates for brokerage services in both exchange and OTC markets
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mutual funds, variable annuity contracts, or securities sold in public offerings
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Where does the 5% markup not apply to?
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riskless and simultaneous transaction
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an order to buy or sell stock in which the firm receiving order is not a market maker
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type of security
inactively traded stocks selling price of security dollar amoun of transaction nature of the broker/dealer's business pattern of markups markups on inactive stocks (Contemporaneous Cost) |
what are the following factors for markup considerations
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applies to markups markdown and commissions and to principal and agency transactions
5% is not the limit |
The 5% markup policy is name for what 2 reasons
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inside market
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the best bid price at which stock can be sold in the interdealer market and the best ask which can be sold
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