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112 Cards in this Set
- Front
- Back
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What is to OTC market or second market
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A negotiated decentralized market without a central physical location where market participants trade with one another through various communication such as telephone, email and proprietary electronic trading systems. Dealers act as market makers. OTC markets also trade OTCQX and OTCC Pink. It is an interdealer market in which unlisted securities (non NYSE) are traded. It is divided into NASDAQ and non NASDAQ.
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What is the third market
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The third market is an OTC venue in which brokers and institutional investors trade securities listed on a registered Stock Exchange. Unlike most exchange trading, buyers and sellers in the third markets trade with each other for the benefit of their own portfolios rather than in an agency capacity on a client's behalf. Securities can be purchased at lower prices because of the absence of broker commissions
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What is the fourth market
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The trading of large blocks of exchange listed securities between institutions including hedge funds, mutual funds and pension funds unassisted by broker dealers -no commission.
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What are dark pools of liquidity
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Trading volume that occurs for liquidity that is unavailable to the public. The bulk of this volume represent block trades by institutional traders and trading desks away from the exchange market
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What is trade reporting facility, TRF
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The FINRA trade reporting facility is an electronic system that facilitates the reporting of data or transactions that occur in NASDAQ listed stocks or in exchange listed stocks when they are occur off of the exchange trading floor. It is used for transactions that are negotiated between brokers therefore acting as a dealer, rather than an agent.
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What Is the role of a broker
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Act as an agent transacting orders on the client's behalf, charges a commission, is not a market maker, and must disclose role to the client and commission
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What is role of a dealer
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Acts as principal dealing in securities for its own account, charges a markup or markdown, may make markets and take positions in securities, must disclose role to the client and the marked up or mark down
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What is the listing requirements of the New York Stock Exchange
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Generally a corporation that wants its securities list it must have a minimum number of publicly held chairs and a minimum number of shareholders each holding 100 shares or more. Only companies of significant size and public ownership qualifies for listing on the New York Stock Exchange
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What is a floor broker or a commission House broker
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CHB, commission house broker, execute orders for clients and for their firms accounts.
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What is a two dollar broker
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When Commission brokers are too busy to execute all of their firms orders, they call on $2 brokers to execute orders for them. $2 brokers charge commission for their services
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What is a registered trader
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Registered trader are members of the exchange who trade primarily for their own accounts.
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What is a specialist or designated market maker
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Specialist facilitate trading in specifics stocks, and their chief function is to maintain a fair and orderly market in those stocks. They act as both brokers and dealers . They also act as auctioneers. DMMs receive a rebate on fees charged by the exchange whenever there quotes result in trades. They also minimize price disparities that may occur at the opening of daily trading by buying or selling stock from their inventory
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What is the order that the specialist market maker awards trades
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First is first order in. Second is Precedents- largest order of those submit it. Third is parity -random
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What is the circuit breaker or trading halt rule
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If there is a market decline of 10%, in 1 hour halt is imposed. A market decline of 20% result in a two hour halt, & a 30 percent decline result in a halt for the remainder of the day
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What is a supplemental liquidty provider SLP
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Under the multi tiered market maker system employed by NYSE Euronext, a supplemental liquidity provider, SLP, may compete with the on-floor specialist, designated market maker, and receive rebates of exchange transaction fees. Unlike a designated market maker, the SLP makes market from an off floor location: and is permitted to make a one-sided market
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How is a buy stop order entered
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Above the market price
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How are buy stop orders used
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To protect against loss in a short stock position, protect a gain from a short stock position, and establish a long position when a break out occurs above the line of the resistance
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How is a sell stop limit order entered and executed
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Sell stop limit are placed below the market price. They will be elected when the stock trades at or through lower than the stock price. Once elected, the order becomes a limit order to sell at the limit price or higher
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How are sell stop orders used
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To protect against loss in a long. Position, protect a gain from a long stock position, and is stablished a short position when a break out occurs below the line of support
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What orders are placed below the market price and are reduced or cash dividend distribution
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BLISS. buy limits and sell stops
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What is a not held order, NH
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Executed by the floor broker, who is given authority by customer to select time and price for day order placed
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What is a do not ship DNS order
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A limit order to buy or sale that is to be quoted and or executed in whole or in part by the New York Stock Exchange only
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What is regulation SHO
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Some regulation that ended the uptake road for short sales. Firms must locate the securities for borrowing to ensure that delivery will be made on settlement date
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What is the super display book SDBK
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A computerized trading and execution system used by b/d through which nearly 75 percent of the orders the New York Stock Exchange received each day our process. The order display book is for orders that are away from the current market, such as stop and limit orders .
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What is the consolidated system CTS, aka consolidated tape
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CTS receives, validates, and sequence is the last sale price and size of all equity transactions in listed securities from all of us stock exchanges and FINRA. Prices reported to the consolidated tape system do not include the amount of commission, mark up or mark down.
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How does CTS work
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Network A report transactions in New York Stock Exchange listed securities. Network B represents last sale for securities that are listed on the New York Stock Exchange AMEX but traded solely by regional exchanges, local issues, and bond
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What does SLD on a tape indicate
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Sale delayed. SLD indicates that the exchange did not report a sale on time
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In terms of issues which is the largest securities market
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OTC
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What are some of the diferences between OTC and New York Stock Exchange
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OTC security's prices are determined through negotiation. OTC market makers must register with both SEC and FINRA. NYSE security price is determined through auction bidding. NYSE designated market makers must be registered with the SEC and must be exchange members . NYSE is traded only on the NYSE floor
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What is the order audit trail system oats
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The source of the most complete information regarding the handling of an order and its execution, including a time all relevant entry and execution events automated computer system. It was created to track orders from time of order entry until execution or cancellation and in so doing provides an accurate audit trail
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What is a firm quotation
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The price at which a market makers stands ready to buy or sale at least one Trading unit, 100 shares of stock or 5 bonds at the quoted price with other member firms
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Backing away is a violation of trading rules. What is it
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When a market maker refuses to do business at the price quoted
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What is a subject quote
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One in which The Price is tentative, subject to reconfirmation by the market maker for OTC trader that provided it
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What is a work out quotes
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An approximate figure used to provide the buyer or seller with an indication of price, not a firm quote
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What is the three contact rule and when does it apply
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It applies for Securities quoted on either the OTC pink or the OTC Bulletin Board. Unless there are at least two priced quotations available electronically, broker dealers receiving orders to buy or sell non NASDAQ securities must contact a minimum of 3 dealers to determine the prevailing price
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When are mark ups and downs charged
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Only when a market maker is acting as a principal, dealing from inventory with financial risk
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What does 11-11.50 3 X 5 mean
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300 shares at bid of 11 and 500 shares at asked of 12.50. Firm quotes are good for round lot only unless otherwise stated
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What is the 5 percent markup policy
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It was adopted to ensure the investing public receives fair treatment and pave reasonable rates for brokerage services. It is a guide only and not a firm rules for my cups and mark downs. A firm charging a customer more or less than 5 percent markup may or may not be in violation of fair and equitable trade practices
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When does the 5 percent markup policy not apply
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Mutual funds, variable annuity contracts, or securities sold in public offerings, all of which are sold by a prospectus. It also does not apply to municipal securities
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What is a risk less and simultaneous transactions
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An order to buy or sell stock in which the firm receiving the order is not a Market Maker. The dealer has two options for filling the order. 1) as agent charging a commission subject to the 5% policies; 2) it could buy or sell for its riskless principal account, then buy or sell to the customer as a principal charging a mark up or mark down subject to the 5% policies
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What factors are considered in assessing the fairness of a broker dealers Commission and mark up practices
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Type of security, and actively traded stocks, selling price of security ( Commission and marked up Rachel to decrease as a stock price increases) , dollar amount of transaction, nature of broker dealers business, pattern of markup, markup on inactive.
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Who is each level quoting of NASDAQ for
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Level 1= public with highest and lowest bid and ask. Subject quotes
Level 2=OTC traders seeing all ask. firm quotes good for 100 shares Level 3=register market makers to change bid and ask and size. firm quotes bid for 100 shares |
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When must a market maker transaction be reported
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Within 30 seconds after a trade execution
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When are volume reports due
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Registered market makers must make daily reports to message back of their total daily volume in all securities for which they are registered market makers
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What is the inside market
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The inside market is the best bid (highest price) at which a stock can be sold in the interdealer market and the best ask (lowest price) at which the same stock can be bought
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An analyst expects a stock to fall through support is anticipating about the stock will decline. He could take advantage of this trend by establishing a short position at what price level and with what order type
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He will establish a short position at the top of the Decline and enter a sell stop order just below the Support price
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What type of equity issues are included on OTC BB
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OTC BB include equity issues not listed on NASDAQ or any other US exchange us exchange
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What kind of orders are not turned over to that specialist, designated market maker
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Designated market makers cannot accept not held orders or good for a month orders. A time qualified order must be for day or GTC. NH. A not held order is a market order in which the investor has given the authority to choose the price and time to the floor broker to achieve the best possible execution.
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What are some uses of stop order
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They can limit a loss in at climbing stuff. They can accelerate the advance or decline of a stock price if executed. They become market orders when there is a trade at or the market passes through a specific price
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What is an immediate or cancel order, IOC
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Like FOK orders accepts that a partial execution is acceptable. The portion not filled is cancelled
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A firm one sided quote is permitted for
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OTC BB. Any quote that is place over the OTC BB is acceptable as long as it is properly identified. For NASDAQ stocks, market makers must maintain firm 2 sided quote
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What is an all-or-none order , AON
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It must be executed in its entirety or none at all. It may be executed after several attempts
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What is the most common risk or takeover arbitrage strategy
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Purchase the shares of the carpet company and shorts the shares of the aggressor believing that the potential acquisition will raise the Target Company's share price and decrease the share price of the aggressor
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A customer is long 300 shares and simultaneously short 200 shares. The order ticket must be written how
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The customers net long position is 100 shares of the same stock. The order ticket must be marked 100 long, 200 short. In other words the customer is long only to the extent of his net long position
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Your client has entered a limit order to buy 600 shares of DMF at $50 per share.. DMF declares a 10% stock dividend. How would this order be adjusted on the X date
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600 shares at $45.45. In this example of just only the share price. The number of shares in the order is not adjusted unless the shared can be increased by a full round lot of 100 shares.
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When is a buy stop Order triggered
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When the underlying stock trade at or above the stop price. BLISS= below
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What are Nasdaq's 3 market tiers
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Nasdaq Global Select market, global market, and capital market
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How is a buy stop order executed
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Once a stock trades at or through the stop price (the order is elected), a stop order is executed at the first opportunity. A stop order becomes a market order once elected, there is no guarantee that the stop price will be realized
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When must all open orders be concerned to the order book
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the last business day of April and then last business day of October
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Which orders would be executed in a rising market
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Bliss.sell limit and buy stops are entered above the current market and would be executed if the markets were rising. If the market is rising, only those orders on the order book about the current market will be executed. Buy stops may cause a bull market to accelerate
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What type of orders would be executed when the market is falling
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Bliss. Buy limits and sell stocks are entered below the current market and would be executed if the market were falling
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What is the time period for a not held order
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Good for the day only
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When a NASDAQ market maker buys 1000 shares of stock from a customer at its bid to satisfy a customer order, the market maker is acting in what capacity
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Principal . When a broker dealer or market maker makes a market, he acts as a principal. A dealer acts as a principal when it owns the securities it trades. When the broker dealer is not acting for its own account, it acts as a broker or an agent
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The NYSE halts trading. What must the over-the-counter market do in response
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The over-the-counter market is not bound by actions of the NYSE or other exchanges, and third party Trading may continue in the stock.
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Which orders are reduced on the ex date for a cash dividend
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All orders placed below the market price are reduced for cash dividend on the order book. BLISS are entered the below the market price
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In what situation may a broker-dealer enter an order for a customer to sell a stock long
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The broker dealer has reason to believe that the customer owns the stock and will deliver it promptly. The security is carried in the customer's account at the broker dealer. The customer owns a bond convertible into the stock and has issued conversion instructions. The customer owns a call option on stock and has exercised the call.
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Trading is halted on a listed security on the New York Stock Exchange because a large volume of orders created an order imbalance. When will a report of this problem appear on the cconsolidated tape system, cts
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As it occurs. A trading halt on one exchange does not mean that trading must halt on other exchanges.
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Early in the day you entered a customer order to buy 300 XYZ at 26.45 GTC. By late afternoon you notice that it's XYZ is trading at your customers limit price. At close of trading you contact the order desk and get a nothing done report. Why
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All limit orders stand in time priority
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A customer has placed an open order to buy 1600 shares of g. H. I. at $60. GHI declares a 25 percent stock dividend. On the ex date, this order is considered a buy limit order for
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2000 shares at $48. The number of shares increase to 2000 (1600 + 25 %). To get the adjusted price divide the total value of the original market order by the new number of shares.
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What happens if a halt closes the market for the remainder of the trading day
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Pending orders and new orders received during the halt should be treated as GTC and held for execution at reopening on the following day. Market on close orders pending at the time trading is halted should be cancelled. Market on close orders received after training is halted should be declined
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On what transactions does the 5 percent markup policy on markups and markdowns apply
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The 5% policy applies to all exchange and OTC transactions in non exempt securities. It does not apply to prospectus offering such as new issues and mutual funds. It does, however, apply to third Market trades
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What is a fill or kill order
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The instruction is to fill the entire order immediately at the limit or better. If this cannot be done, the order will be cancelled.
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What is the difference between a FOK, an Immediate or cancel and a all or none order need
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Partial execution is acceptable on the immediate or cancel. All or none order must be filled in its entirety. However it can be filled over time and does not require immediate execution. FOK must be filled in its entirety or cancelled
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Who is responsible for maintaining a fair and orderly market on the NYSE Trading floor
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The specialist, designated market maker. The specialist is responsible for setting the opening quotes for issue listed on the NYSC. The set code is based on orders in hand.
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What does the market wide circuit breaker (MWCB) rule use as a price reference point to measure market decline
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S&P 500 index recalculated daily
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Are US government securities included in NASDAQ.
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No. NASDAQ Is an equity market and includes common stock, preferred stock, ADRs, and convertible bonds.
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What transactions are not subject to a 5 percent markup policy
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Transactions in securities that are sold by prospectus, exempt securities and primary market transactions
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Last sale information is always available for for exchange traded securities and for all NASDAQ securities. When is the last sale information not always available
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Electronic OTC pink stocks
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Markups are based on which price
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Mark ups are always based on the inside offer which is the lowest asking price in a particular security. Markdown are base on the inside bid, which is the highest bid price for a particular security
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If a customer wishes to change a day order to gtc order in the middle of the day, the registered representative should do what
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Wait until the close of trading so as not to lose the time priority of the original order that day
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Who can initiate a trading halt all for listed stocks trading on the exchange
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Only the exchange or the SEC can initiate a trading halt for a listed stock trading on exchange floor
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If a municipal firm purchases a block of municipal bonds in anticipation of a price increase, the firm is engaged in
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Position trading. The dealer is buying for its inventory which is position trading
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How are quotes made on the OTC Pink
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Infrequently and never firm. Quotes on such systems are for informational purposes only
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Is the specialist designated market maker responsible for preventing the stock price from falling
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No. The specialist is responsible for providing liquidity, handling it. Market orders, and acting as a broker for orders placed on the book
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What is the Nasdaq OMX PHLX
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The OMX PHLX ( oldest in us) is a regional exchange where equity securities an option contracts are traded electronically and on floor
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What orders would accelerate a decline in a bear market
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All orders that are placed below the current market such as bliss
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Institutional investors can trade 24 hours per day via the
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ECN, electronics communications network
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Sales between investors are always considered which market
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Secondary
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What may not be considered in justifying a markup on a stock sold from a broker dealer inventory
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The dealers cost
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What is the name of the SEC regulations requiring that firms holding customer limit orders not trade through or ahead of those orders
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The order Protection rule, which comes under the broad sweeping regulation in NMS (national market system) mandates that firms holding customer limit orders do not trade through or ahead of those limits with other customer orders or with the firm's own proprietary orders
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Which of the following events may NOT cause FINRA to terminate quotation in small cap stocks: 1)Only two Broker dealers are making a market in the stock. 2)The issuer declares bankruptcy. 3)FINRA Deems termination to be in the public interest. 4)The issuer's independent auditor renders a disclaimer opinion.
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Only two broker dealers are making a market in the stock. Although 3 market makers are required initially for an issue to be included on NASDAQ, only two market makers are needed to continue being quoted on the system. The other answers are sufficient reason for termination of quotations quotation
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The symbol OPD appearing on the consolidated tape system indicates
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opening point delayed. The OPD symbol appears on the consolidated tape system with first transactions of the day for securities that had delayed opening
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Stocks that are listed on NYSE can also be listed on
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The Chicago Stock Exchange and other US exchanges. Listed securities can also be traded on the OTC market and when they do, they are known to be trading in the third market. Nasdaq is for unlisted securities. CBOE trades listed options
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The locate requirement is applicable to all
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Short sales
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Is non convertible debt part of the Nasdaq Stock Market
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No. The Nasdaq stock market is an equity and equity equivalent market. Listed are common stock, preferred stock, warrants, limited partnerships, ADRs, and convertible bonds. Straight debt securities are not part of NASDAQ
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The secondary trading of securities takes place in four markets. What are they
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The first market is listed securities traded on the exchange floor. The second market deals with unlisted securities. The third market is where listed securities trade over the counter. The 4th market is where financial institutions trade directly with each other utilizing electronic communication networks, ECN
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Which transaction has a higher percentage markup Common stock or bond transactions of the same size
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Common stock
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Is a NASDAQ market maker is selling stock to a customer from inventory and the firm has held the shares to be sold for several months, what price should the dealer use as a basis for a markup
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Best offering price quoted in the inter dealer market. FINRA rules require that a dealers mark up to a customer be based on the current market rather than the dealers cost in an active competitive market. The dealers potential loss on inventory is considered to be a risk of making a market
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What is the level 1 Nasdaq quotation service
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Provides subscribers with the inside market for each Nasdaq security as well as the last sale and volume Information. Level 1 registered representative bid and ask prices currently quoted. Provides subscribers with the inside market i.e., highest bid price and lowest ask price
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What is the level 2 Nasdaq
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Provide subscribers the names and quotes of all registered market makers in each security, displays the inside market. Used by OTC trading room staff and institutional account.
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What is the level 3 Nasdaq quoting
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Level 3 register market makers quote monitoring and input. Full display of all market makers quote and size update change or delete quotes and size of quotes
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The order display book is for what type of orders
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Orders that are away from the current market such as stop and limit orders. Market orders are not placed on the specialist order display book
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What does he symbol 'ss' designate
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It is used to identify stocks treated in 10 share units
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The opening quote for issues list it on the NYSE is set by
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The specialist, designated market maker, is responsible for setting the opening quote for issues listed on the NYSE. The set is based on orders in hand
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In OTC trading, who is the market maker
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The market makers are broker-dealer firms that provide a source for stock that customers we can buy and a repository for stock that customers wish to sell
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The 5% policy applies to
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Commissions charged when executing agency transactions. Riskless and simultaneous transactions. Markups on stock sold from inventory. Markdowns in stocks bought for inventory
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How do you find the market price of the stock after the split,
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multiply the original market price by the reciprocal of the split. In a 5 for 4, the reciprocal of a 5 for 4 split is 4/5. The stock will now sell at 4/5 its original value. Therefore, it is selling for 1/5 less tfian its original value, which is a decrease of 20%. (4-8)
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If a player cannot pay for a trade within 5 business days from the trade date, the broker dealer may request an extension from a DEA. If the broker dealer is an introducing broker dealer, those not clearing their own trades, can a request an extension from their DEA be made
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No. Introducing broker dealers requests must be made by the clearing firm
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Although 3 market makers are required initially for an issue to be included on NASDAQ, how many market makers are needed to continue being quoted on the system
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2
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An officer of a public company buys 400 shares of the company registered star in the open market,
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Be subject to reporting and volume limitation under Rule 144 but no holding period
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Anyone who owns the stuff on the record date will
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Receive the dividend. In a regular way trade, the seller could still be owner of record on record date as the trade will settle after the record date. In a cash settlement the buyer will be owner on record date
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Which orders are reduced for cash dividends on the order book
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Orders placed below the market
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