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39 Cards in this Set
- Front
- Back
Primary market
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new issues sold for the first time
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First market [within secondary market]
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Trading of exchange listed securities
Ex: NYSE, AMEX, NASDAQ |
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In the first market, who provides quotes for exchange-listed securities?
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CQS - conosolidated Quotations Service
Network A Tape = reports NYSE listed issues regarless of the market center where the trade takes place Network B Tape = reports AMEX listed issues regardless of the market center where the trade takes place Network C Tape = reports NASDAQ listed issues regardless of the market center where the traes take place |
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Second Market
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OTC trading of UNLISTED securites
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What is the OTCBB? and what is its purpose?
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OTC Bulletin Board
a display facility run by FINRA for Publicly traded companies that cannot meet exchange listing standards. - it is not an exchange |
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What TRADES OTC?
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-Publicly traded companies taht do not meet FINRA requirements to be traded on exchanges
-most corporate bonds -commercial paper -U.S. Govts agencies -Munies |
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What is SOLD OTC
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New issues
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What is the THRID MARKET? and what trades there?
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The OTC trading of EXCHANGE LISTED securites
-open 24 hours -will vie to trade at slightly better prices than exchanges in order to have the order directed to them |
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What is the FOURTH MARKET? and Who trades there?
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is ECNs [electronic communications networks] /ATSs - direct trading os securities between institutions OTC (these companies bypass brokers and large commissions)
-ECNs - a computer network that match customer orders to buy and sell 24 hours a day on an agency basis - must register with FINRA as a Broker/dealer, for -ATS - alternate trading system |
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Describe Regulation ATS
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ATS - Alternate Trading System
-b/c of the growth of ECNs -rules: the types of orders that can be palced. can not discipline its users other than restricting access to their systems |
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What is the ADF and why was it created
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Alternate Display Facility
was created to display ECN quotes if the ECN wasn';t going ot post its quote in an exchange order book. i.e. the ADF allows for these quotes to be seen by all market participants |
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Regulation NMS
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SEC regulation NMS (national Market system) - to foster competition btw market centers in trading
-consists of rules 600-612 with impact market participants 3 major rules: -1. all market centers must enforce policies to prevent 'trade-throughs' -2. when providing access to their markets, market centers cannot favor one firms over another - equal pricing -3. all prices must be in Penny increments if it listed at $1.00 or more |
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What does rule 602 state
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"Exchanges must collect diplay bids and offers"
-requires each exchange collect bids, offers and quotations sizes from broker-dealers and for disseminated and changing this for data "quotation vendors" |
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What is Rule 604
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"Limit Order Display Rule"
-Requires exchanges and market makers to display customer limit orders publicly so can be access by all -if market maker receives a customer limit order that is better priced than its own quote, must display. (so best price is always shown) ----customer can opt out of this if they specifically request the order not be shown |
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What is Rule 605
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"Market Center Order Execution Report" - by market center, monthly
-Market centers must prepare and make available monthly reports Summarizing executions including: ---effective bid-ask spreads ---how market orders of various sizes were executed ---the speed of execution ---fill rates ---price improvements or dis-improvements **OTCBB and PINK SHEET executions are excluded |
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What is Rule 606
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"Reports to customers on Order Routing and Payment for Order Flow" - by firm, quarterly
(the firm pays a small amount to the retail member that directs the order to the market maker via. rebating some of its profit for executing the trade) -detail disclosure of this order flow on the CUSTOMER CONFIRMATION ---upon customer request: firm must disclose identity of market to which the customers orders were routed int he previous 6 months and the time of execution -Must also provide Quarterly reports on the percentage of customer orders that ere "non-directed" ---identity of 10 largest markets/market makers these non-directed orders were routed ---any other venue revieving 5% or more of the orders ---member firms relationship with that market maker ---arrangement/if any for payment for order flow or profit sharing |
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What is Rule 607
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"Customer notice of payment for order flow"
- each B/D must NOTIFY each NEW customer @ ACCOUNT OPENING AND ANNUALLY THEREAFTER of: ---Order flow payment policies and details of compensation received ---the firm's policies for determining the routing of each customer order subjecting it to payment for order flow |
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What is Rule 611
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"Trade-Through Rule"
-all markets that quote NYSE, AMEX, & NASDAQ stocks must be electronically linked [all national securities exchanges, NASDAQ market, ECNs, OTC market makers, block positioners & any other B/D that executes trades internally] --*any executable order Must be executed within 1 SECOND at best posted price |
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What is Rule 610
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"Market Access"
1.There must be multiple trading platforms for equities -----ex. NYSE stocks trade on NYSE, regional exchanges, Third Market and via ECNs -----ex. NASDAQ stocks trade via Single Book, unlinked ECNs (quoted in ADF), and regional exchanges on a UTP basis 2.Quoting market centers and participants must offer automatic execution of order (no discrimination btw members and non-members" 3. Rules est. to prevent locked &/or crossed markets |
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What is Rule 612
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"Sub-Penny Quoting"
-no more sub-peny on NMS (NYSE, AMEX, NASDAQ) stocks at $1 or more -stocks trading BELOW $1, min = $.0001 **This rule does not apply to NON-NMS stocks (ie. OTCBB or PINK Sheets) |
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What do dealers do & how do they profit?
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-Dealers make markets in, and maintains inventories of securities
-The difference in the Bid and Ask (the spread) is the Deals gross profit margin *DEALER EARNS A MARK UP* -sells stock to person @ ASK, buys it @ BID |
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What are Specialists/DMM?
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(Designated market Makers)
-Dealers on NYSE Floor -only 1 DMM per NYSE stock -wholesalers of securites -doNOT deal with Public -Deal only with Retail members of NYSE (goldman sach, merrill..) |
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What/Who are Market Makers?
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-OTC dealers who register with FINRA
-expected to maintain a market in an issue -NASDAQ uses a system of competing market makers (mult. market makers for each NASDAQ stock) -OTC allowed to act as a Broker OR Dealer, not both |
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What is the non-NASDAQ market?
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-NOT electronically linked, ex. "display facilities" only
-EX: OTCBB, Pink OTC -to trade, must "negotiate" with market maker that posted the quote via telephone or through internet-based trade negotiation application -there are competing market makers, but the level of competion is small |
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Brokers earn ______ & Dealers earn ________
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Brokers earn a COMMISSION & Dealers earn a MARK UP
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How many types of Duration of Orders are there and what are they?
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1. DAY ORDER - canceled at the end of the day if order is not filled
2. GTC - Good till canceled 3. GTW - Good thru week 4. GTM - Good through Month (3&4 are entered at GTC and is the firms responsibility to cancel order if it can't be filled in allotted time) |
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AON
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All or None
-SEVERAL ATTEMPTS CAN BE MADE to try to fill entire order, other wise its filled in entirety or not at all |
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FOK
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Fill or Kill
-ONLY ONE ATTEMPT can be made to fill, otherwise its cancelled |
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IOC
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Immediately or cancel
- try to fill as much of order in ONE attempt, the unfilled portion is cancelled |
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Either/Or
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2 possible trades.
-one side is filled, other is cancelled -if partially filled, remaining ammount applies to both remaining orders |
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Not Held
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Up to Trader (order is "not held" to immediate execution)
Trader will "hold back" if he thinks order (perhaps a FOK) can be better executed at another time |
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Discretionary
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customer hasn't specified security and size of order
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DNR
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Do not Reduce
normally, on ex date, orders are reduced to reflect the loss of dividend; if DNR is specified, order is not reduced |
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At the Opening/ At the Close
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To be filled at the Opening or Closing price, otherwise it is canceled
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Market Order
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there is no specified price, order is filled at prevailing market price
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Limit order
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Either LIMIT TO BUY or LIMIT TO SELL
-LIMIT TO BUY: order filled at specified price or better (lower) -LIMIT TO SELL: order filled at specified price or better (higher) |
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Stop Order
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to "STOP A LOSS"
Either STOP ORDER TO BUY or STOP ORDER TO SELL -STOP ORDER TO BUY: orders the stop of filling an order if the market price rises to the specified price or higher (if market rises) -STOP ORDER TO SELL: order the stop of selling of a order if the market falls to a specified price or lower (if market falls) |
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Can you change/amend a order Ticket?
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NO.
[unless the Manager approves of this; and deatails the reasons for the change in WRITING] ----This written record is called a "cancel and Re-Bill" record |
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How many general types of Orders are there and what are they?
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SIX
1. Market Order 2. Limit Order 3. Stop Order 4. Stop-Limit Order 5. OSLOBS [Open Sell Limits - Open Buy Stops] 6. OBLOSS [Open Buy Limit - Open Sell Stops] |