Book - Chapter 6 ST Questions Flashcards
- What type of instrument is most likely to be traded on an OTC market?
Bonds are mainly traded on OTC markets; that is directly between counterparties rather than on an exchange.
A client has instructed their broker to buy 1,000 XYZ shares at the best price available. Market makers in this stock are quoting the following prices:
MM Bid Offer
A - 99 & 101.5
B - 98 & 100.5
C - 98.5 & 100
D - 99.5 & 102
Market maker C is providing the best price so the broker would execute the order with them to buy 1,000 shares at 100.
- What are execution factors?
These are the factors a firm must consider when ensuring it obtains best execution for its clients. They include price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of an order.
- What is the key difference between MTFs and dark pools?
Dark pools do not display order details publicly, thereby preserving anonymity of trading parties and minimising the degree to which their trading activity can impact the market.
An investor has placed a limit order to buy 1,000 shares at no more than 315.5. What would happen to the order if no one is selling at at or below 315.5?
The order cannot be immediately executed and so would be added to the buy queue.
- Client A places an order to buy 6,000 shares at a limit of no more than 315 at 9.15
a. m. and client B places an order to buy 4,000 shares at the same price at 9.16 a.m. If a broker then executed a client order to sell 8,0010 shares at best how would an automated order execution system handle the transaction?
It would give priority first by price then by time. So the order would execute fully against client A’s order and the balance against client B’s order.
- What factors determine the price of a bond quotation?
A bond’s price will be determined by the yield demanded by the investor which will be based on factors such as:
- Credit rating.
- Seniority and security of the bonid.
- Liquidity.
- Risk premium demanded over a comparable bond or benchmark.
- You have undertaken a trade in France to buy a French banking stock for one of your clients. In which exchange would it have been traded and where would the trade typically settle?
French stocks are traded on Euronext and settlement takes place through Euroclear France.
What would be the effect of a country being included as an emerging market index?
It would attract investment from the many emerging market funds that concentrate on this sector.
