• 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

Card Range To Study



Play button


Play button




Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

114 Cards in this Set

  • Front
  • Back
Name the 8 types of orders that an investor has to choose from when entering an order to buy or sell a security on a common stock, preferred stock, bond, or option?
1.market order
2. limit order
3. stop order
4. stop limit order
5. fill or kill order (FOK)
6. immediate or cancel (IOC)
7. All or none (AON)
8. Alternative Order
What is an order to buy or sell a security at the best price available?
Market order
What type of order is always entered at the opening on an exchange and always has priority over limit orders?
market order
Limit orders can either be two options:
Good for the Day (Day)

Good til canceled (GTC)
When are good til cancelled orders renewed?
April & October
What is the type of order that must be bought or sold at a specific price or better?
limit order
A Good for the Day limit order may be partially filled but the remainder of the order will be canceled at the end of the day.(T/F)
If a Good for the day limit order is changed to a Good til Canceled order it can maintain its current position in the Designated Market Makers box. (T/F)
False. If a day order is changed to a GTC then it must go to the end of the line
What type of order is used to protect a profit or limit losses on an existing position but CANNOT assure a specific price of execution?
stop order
A stop order can be used to protect a long position by?
using a sell stop order

^ sell limits & Buy stops (Short position)
|_______ market px ____________________
| BUy limits & sell stops (long position)
What kind of stop order would you use on a short position and why?
if you had a short position you would buy a stop because you technically do not have the stock and do not want to risk the increase in price and have to cover your short so therefor if you think the price is going to increase and you don't want to pay more than lets say $2 then you put in a buy STOP for $2 and if the stock rises to $2 then it is executed if it never does then the order never executes or to take advantage of the opportunity to buy the stock before it rises even higher
Rally in finance term means what?
up. "the stock price rallies sharply" aka the stock price goes up
In a stop limit order what is the order always considered at first?
first it is a STOP then instead of becoming a market order it becomes a limit order
What is the type of order that must be executed at once in its entirety or it will be canceled?
FIll or KILL - FOK
What type of order is not accepted on the floor of NYSE?
If an order is partially filled and the remaining is immediately canceled what kind of order would this best represent?
immediate or cancel - IOC
What happens to an order to buy or sell at the opening if the order does not reach the trading post on the exchange floor by the opening of trading
If a client wishes the RR to cover their short position at close then the RR must guarantee the execution. (T/F)
False. If a client requests a last trade then nothing can be guaranteed
What are GTC orders also called?
open orders
Are GTC orders permitted to be order on which of the following?
good for the week
good for the month
odd lots
round lots
all are good
What is an order for a round lot?
What is an order for less 100 shares called?
Odd lot
What is the biggest difference between a limit order and a stop order?
A stop order becomes a market order as soon as it hits the price
What are stop position used to do?
They are used to hedge a previous position.
What do limit orders allow clients/investors to do?
Limit orders allow investors to put in a price you feel comfortable at to take advantage of selling or buying at a specific price of execution
What is the low level and the high level in which a stock usually is priced at depending on the market referred to as?
low level, demand - bullish called SUPPORT level

high level, supply - bearish called RESISTANCE level
What do we expect the market price of the stock to do when it drops down to the support level?
This is a bullish indicator because it bring buyers into the market and create a demand for the stop
When a stop price hits its resistance level what usually happens?
usually investors know that this is the resistance level and will there for sell the stock knowing that is will drop back down creating a bearish market for the stock
what type of order should you enter if you want to take a break in the resistance level?
if the stop breaks through the resistance level you would want to be a buyer and there for would put a buy stop order in
What is on a Cancel Form Order (CFO) ?
Both instructions to buy and cancel are sent to the floor on the same ticket
What happens in an Alternative order when one of the orders are partially filled?
The two orders are then adjusted for the remaining amount
Do ALL orders have indicate whether they are long or short?
What must the RR do before entering a SELL LONG order?
must identify the physical location of the securities being sold and make sure the customer does in fact hold that long position
What is the correct order in which the brokerage firm operations are performed:

Wire room order, Cashiers Department, Purchase and sale Department, Margin Department
Backwards alphabetically or think WPMC radio

Wire room
Purchase and sale department
What department in a brokerage firm is responsible for broker and bank deliveries, customer acct transfers, and bank loans?
Cashiers department
What department in the brokerage firm is responsible for the transmittal of orders for execution?
Wire room
What department in the brokerage firm handles exchanges of one security for another?
REORGanization department
What does Mark to market do to a portfolio? What type of account is this important for and why?
Mark to market is adjusting the price of a security or a portfolio to reflect current market values. This is especially important for margin accounts so they are in compliance with margin maintenance requirements.
What does Reg SHO order protection rules require for trading centers?
-access to quotes must be immediate and automatic
- the execution of trades take place at a price that is at or better than the national best bid or offer (BBO)
What does BBO stand for?
Best Bid Offer
What is the primary purpose for a sell stop?
To protect a profit or limit a loss on a security that was already bought at a higher price
What is the primary purpose for a buy stop?
To protect a profit or limit a loss on a short sale
A brokerage firm is a broker dealer and when they act as a broker they are an agent because they do what and in return receive a what?
an agent brings together buyers and sellers of securities on the floor of the EXCHANGE listed market and receives a commission
What is a dealer also known as and what role do they take on in equity security trading and in return they receive what kind of payment?
A dealer is also known as a Principal where they buy or sell securities from their firms own inventory and charge a mark up or mark down
What is interpositioning?
this is where customer is charged both a commission and a mark up or excess commission which is a violation of FINRA rules and no one can be charged both
What is the listed market and what is the person called who deals with this type of security trading?
listed market is traded on the floor of a stick exchange by an agency
What is the unlisted market called ?
This is the Over THE Counter Market and there are more securities rated from all other exchanges combined
What is a market maker?
firms they have OTC because they provide their own market since they trade from their own inventory at markup at "net"
How do you know the difference between listed securities and unlisted securities by looking at the symbol?
listed - 1 to 3 symbols
unlisted/OTC - 4 letters
What does a short seller generally expect the market price of the stock to do?
When is arbitrage used?
Arbitrage is used to take advantage of a security that has a price disparity in different markets. There for they buy the on at the lower price and sell short the higher price because it take 3 days to get the stock.
If a customer is long stock in their account but sell the same security short then what are they? What are the reasons for doing this?
Short against the box. Reasons for taking on this position is for arbitrage or to hedge an anticipated decline in their stock
what does tender offer mean?
take over
What can a designated market maker also known as?
What is the designated market maker required to do and what can they act as?
key individual on an exchange trading floor. they are required to maintain fair and orderly market and can act as a broker - execute order for other members and receive a commission or a dealer - buy and sell for or from their own account
When does stopping stock occur and who is it done for?
this is when the designated market maker guarantees a floor broker a specific price for a limited period of time done for NYSE members only but the spread of the quote has to be at least 2 cents
What contains a record of limit orders that have been received from customers to be executed when the market reaches the limit order price or better?
Designated Market Maker Order Display Book
How can you determine the bid price of a listed stock trading on the floor?
when looking at the BL\SS chart you use the highest buy limit below the current market value
How can you determine the ask price of a listed stock trading on the floor?
when looking at the BL\SS chart you use the lowest sell limit above the current market value
How can you determine the size of the market on a listed stock trading on the floor?
it is the bid number of shares by the ask number of shares
Auction procedures determine what orders have priority over others. What are the deciding factors?
1. Priority - large orders have higher priority
MARKET order ALWAYS have priority over LIMIT order at the market open

2. Parity - Orders with matching sizes
3. Precedence - Orders that were received first
What happens to all buy limits and sell stops orders on the book on the Ex-date before the market opens?
All orders are marked down by the full amount of the dividend since the market value of the stock will open down by the full amount of the dividend
Who is allowed to trade on the floor at the NYSE?
Designated Market Maker
$2 Broker aka Floor Broker
Competitive Trader
What will not appear on the ticket sent to the floor of the NYSE stock exchange and what must be on the ticket?
Commissions will not be on the ticket.
Type of order
Time of entry
Designation of customers account
What is DOT & Super DOT?
DOT - designated order turnaround system which automatically executes market orders

Super DOT executes limit orders
What kind of order is not reported on the ticker tape?
bonds, odd lots and options are not reported on the ticker tape
what 3 things are displayed on the ticker tape?
stock symbol latest price and volume of securities
What types of orders besides common stock are displayed on the ticker tape?
preferred stocks
Fill in the blank for what is shown on the ticker tape:
100 shares = _________________
200 - 900 shares = ______________
1,000 - 9,000 shares = _____________
10,000 shares or more = ________________
100 shares = symbol & price
200 - 900 shares = 2s 3s 4s 5s 6s 7s 8s 9s
1,000 - 9,000 shares = 10s 20s 30s 40s 50s
10,000 shares or more = full volume print
IF you see __.SLD on the ticker tape what does that mean?
SLD means slight delay
What does PR represent on the ticker tape? How can PR trade and how would you know?
PR means preferred stock; PR can sometimes trade in 10s instead of round lots of 100. If this were the case then you would see this an s over another s s/s
What does P represent on the ticker tape?
if see something like XYZ P then the P means that the last trade was on the pacific stock exchange
market maker, dealer, principal, unlisted are all involved in what market?
Over the Counter Market OTC
On the listed market a Designated market maker trades the securities. In the OTC market who trades the securities?
Market maker
Insurance companies and bank stocks trade trade mostly on what market?
How are prices determined on the OTC market?
prices are determined by buyers and sellers negotiating with a broker-dealer (market makers)
What are the two ways a market maker may quote their stock as?
Firm - they will trade at least 100 shares at their quoted price

Subject - provides information and is subject to change
if you see "it is ___" "We'll do it ___" "___firm" or just the price the market maker is making what type of quote?
What are the key words to know when a market maker is making a subject quote?
____ close
it is quoted _____
it is _____ work out
it is _____ small
What is subject quote that provides an estimated price range within which a dealer feels they can obtain a security within a reasonable period of time?
Workout market
What is the difference between the current bid and ask on the OTC market referred to as?
The Spread
What is the markup policy and what does it not apply to?
The markup policy is the 5% guideline of a markup or markdown a dealer (principal) applies on the total proceeds in one day.

Does not apply to anything delivered with a prospectus. Such as: New Issues, Registered Secondary Distributions, Open end investment company shares, Government Securities, Mutual Funds

DOES NOT apply to listed securities

Only applies to OTC market
What are Pink sheets always quoted as and what market are they found in?
INTERDEALER low price subject quote & only in the OTC market
What makes a security a penny stock aka designated security?
it is a pink sheet security with a market price of less than $5.00 per share aka NON-NASDAQ securities
What must the RR disclose before an investor buys a penny stock?
bid and offer price and the compensation paid to both the RR and firm for the trade

For a NEW customer:
-determine suitability
-send customer copy of suitability determination
-receive a signed copy of the suitability determination from the customer PRIOR to executing the order
Are low price stocks listed on the exchange as penny stocks?
NO. They are only on the OTC market
When is a client exempt from the Penny Stock disclosure rules?
-accredited investor
-customer owns 5% or more of company stock
- if an established customer requested the purchase ad signs a non-solicitation letter
What serves as a quotation service for the OTC market which displays real-time quotes, last sale prices, and volume information in low priced OTC securities and other thinly trade securities?
OTC Bulletin Board - OTCBB
Because of the volatility in pricing with Penny stock what rules and sales practices are they subject to follow?
What is the worlds largest electronic stock market and what are the three sectors?
-Capital - small cap
-Global - large cap
-Global Select - large cap which adhere to stringent listing standards in the world
What is considered real-time reporting?
30 seconds… used to be 90 of round lot trades. NO odd lots are reported
If a company trades on the exchange and OTC it must have voting rights.
FALSE. Exchange = voting rights; OTC = doesn't have to have voting rights
What are the requirements to be quoted on NASDAQ?
-at least 2 registered market makers
-min # of stockholders
-min # of shares outstanding
What level of NASDAQ quoting is used by the RR that is Subject and available to the public?
level I - gives inside quote (highest bid and lowest ask)
Who uses NASDAQ level II quotes and what kind of quote is it (subject/firm)?
Used by OTC traders and gives the quotes of each market makers for all authorized securities for a FIRM quote of 100 shares
Which level of quoting do NASDAQ registered market makers use for NASDAQ and what does it allow to happen?
Level III - allows market makers to CHANGE bid and ask quotations and sizes on the system for which they have been authorized to enter quotes

FIRM and for 100 shares
Out of all the NASDAQ level of quoting which levels are given firm?

Level II - FIRM
Level III - FIRM
Designated Securities are also known as what?
Penny stocks or Non-Nasdaq securities
What are low price stocks listed on the exchange called?
nothing just low price stocks.

only on the OTC market are they called Penny stocks/designated security/Non-NASDAQ security
If a stock corporation traded OTC issues non-voting common shares will it be suspended on NASDAQ market?
What are some circumstances that the stock of a corporation traded on NASDAQ may be suspended from trading on NASDAQ?
- Pending a big announcement
- Net Worth of the company declines below a certain amount
- At the request of he corporation
How long is the waiting period for a security to trade on NASDAQ once its registration becomes effective?
no waiting period
When exchange listed securities are traded OTC by market makers this is done in what market?
Third Market
This was the first and one of the largest ECNs that handles large block trades which can be anonymous.

What market is this done in and what is this called?
Fourth Market

Instinet - INET
What is a privately owned electronic order execution system that display match and execute orders on both listed and OTC securities?
Electronic Communication Networks (ECNs)
What must ECNs register with and how are they different then market makers?
ECNs register with SEC

Do not maintain inventory like market makers do
What market could a mutual fund buy corporate securities directly from a life insurance company?
Fourth Market
What market is the Consolidated Quotation Service used for and what does it do?
CQS is used on the LISTED market and provides a current and continuous best quote (bid/ask) and size available in all eligible listed securities in the system
What regulatory agencies look over the OTC market?
Which two of the following are correct regarding market orders to be executed on the exchange floor?

Buy orders are executed at the highest offering price.
Buy orders are executed at the lowest offering price.
Sell orders are executed at the highest Bid price.
Sell orders are executed at the lowest Bid price.
[A] I and III
[B] I and IV
[C] II and III
[D] II and IV
[C] Buyers pay the lowest offer available. Sellers receive the highest bid available.
A customer with a short position in ABC sees that the price of ABC has been declining. To protect his position, the order which should be entered by the customer is a

[A] sell stop
[B] buy limit
[C] buy stop
[D] sell limit
[C] Buy Stops protect short profit positions.
A market maker may:

I. Take a long or short position at any time. No up-tick
rule or Federal regulation applies.

II. Sell from his own inventory, which may be either
long or short.

III. Act as both agent and principal in the same

IV. Quote a work out market, a range within which the
dealer feels he can obtain the security within a
reasonable time period.
A market maker may perform all actions except III - market makers may act as broker OR as dealer on a transactions but never as both on the same transaction.
When a market maker is asked for a quote, prices quoted are assumed to be:

[A] firm for 1,000 shares.
[B] subject quotes.
[C] firm for 1 to 99 shares.
[D] firm for 100 shares.
D. When a market maker is asked for a quote, prices quoted are assumed to be firm for 100 shares.
If a security has just been quoted ex-dividend, which of the following open orders will be automatically reduced by the designated market maker?

Buy limit orders
Sell limit orders
Stop orders to buy
Stop orders to sell
[A] I and III
[B] II and IV
[C] I and IV
[D] II and III
C. The designated market maker would reduce Buy Limit and Sell Stop orders by the amount of the dividend on the morning of the ex-date.