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19 Cards in this Set
- Front
- Back
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Primary Market |
New issues sold for the first time to the public, so the proceeds of the offering go to the issuer. |
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Secondary Market |
Trading of issued securities, so the proceeds of the sale go to a selling security holder. |
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First Market |
Trading of exchange listed securities on that exchange -New York Stock Exchange, American Stock Exchange (now renamed the "NYSE-MKT"), NASDAQ Stock Market, Chicago Board Options Exchange and regional stock exchanges |
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Second Market |
Trading of securities that are not exchange listed in the over-the-counter market. -Pink Sheets and OTBB "over-the-counter" (OTC) trading of securities that are not listed on a stock exchange |
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Third Market |
Trading of exchange listed securities in the over-the-counter market. |
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Fourth Market |
Trading of securities directly between institutions in the over-the-counter market via ECNs (Electronic Communications Networks) such as Instinet. -large blocks of securities "over-the-counter" by institutions via ECNs (Electronic Communications Networks) such as Instinet or Archipelago. |
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CQS |
Consolidated Quotations Service -NSYE & NYSE AMEX |
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Network A Tape |
reports trades of NYSE-listed issues, regardless of the market venue where the trade took place. |
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The Network B Tape |
reports trades of AMEX (NYSE-MKT) and regional exchange-listed issues, regardless of the market venue where the trade took place |
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The Network C Tape |
reports trades of NASDAQ-listed issues, regardless of the market venue where the trade took place. |
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ECNs |
-"electronic matching services" are generically called "ECNs" - Electronic Communications Networks. -accept orders from institutional customers and professional traders electronically on an agency basis only - and get a matching fee for each successful execution |
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Major ECNS |
INSTINET ISLAND ARCHIPELAGO |
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Efficient Market Characteristics |
-high volume -smaller the dealer spreads -smaller the transaction costs - |
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broker |
agent, or middleman in a transaction, earning a commission. |
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dealer |
a principal, or market maker in a transaction, earning a mark-up or mark-down. |
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"broker-dealer" |
OTC Firms - because the firm can act either as a broker in a transaction; or can act as a dealer. -OTC firms cannot be both an agent and a principal in the same transaction. |
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Payment for Order Flow |
Market makers are permitted under SEC rules to make payments to retail member firms in return for the retail firm routing its customer orders to that market maker. In essence, the market maker is rebating part of the spread that it earns on a trade to the retail firm. Because of this, the retail firm can charge a lower commission (if it so chooses). The SEC permits payment for order flow because it ultimately should lower costs to customers. Payments made for order flow must be disclosed to customers on trade confirmations. |
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Best Execution Rules |
The SEC requires that retail member firms route their orders to the market that is offering the best price at that moment. So if a stock is dual listed or trades in the Third Market, the retail member firm must send the order to the market posting the best price. If all the markets are posting the same price, the retail member can route the order as it chooses; and can consider any payments that the market maker gives for order flow in its decision. |
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