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SIE > Ch. 1: Overview of Market Participants and Market Structure > Flashcards

Ch. 1: Overview of Market Participants and Market Structure Flashcards

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SIE Exam flashcards
1
Q

A _____ is any person that executes _____ transactions in securities for its own account.

A

Dealer; principal

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2
Q

Is NASDAQ a securities exchange registered with the SEC?

A

Yes

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3
Q

Which department of a broker dealer executes securities transactions?

A

Trading

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4
Q

Where can you find quotes for stocks not listed on an exchange or NASDAQ?

A

OTCBB / Pink Sheets

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5
Q

Explain the concept of holding securities in street name.

A

Client securities are held by and registered in the name of the broker dealer

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6
Q

Explain a prime brokerage arrangement.

A

A situation in which multiple broker dealers execute a client’s trade and report them to one broker dealer for settlement

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7
Q

List the two main types of secondary markets.

A

Exchange markets (NASDAQ, NYSE); electronic, non-exchange markets (Pink Sheets or OTCBB)

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8
Q

Define a prime broker.

A

A broker dealer that clears and settles trades effected by one or more executing brokers at the direction of the customer

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9
Q

A registered representative’s (RR) employer is referred

to as a _____

A

Broker Dealer

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10
Q

What is a dark pool?

A

A place for large institutional investors and high frequency traders to trade with one another

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11
Q

What are the two types of arrangements that an introducing firm can have with a carrying firm?

A

Fully disclosed and omnibus

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12
Q

In an _____ arrangement, a clearing firm doesn’t have information on each individual customer of an introducing firm.

A

Omnibus

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13
Q

What services does the Depository Trust and Clearing Corporation (DTCC) provide to its members?

A

Clearing, settlement and information services

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14
Q

Define an introducing broker-dealer.

A

A broker dealer using another broker dealer to handle cash and securities, trade execution, reporting, clearing and confirmation

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15
Q

T/F: An individual with $100m in assets is a Qualified Institutional Buyer (QIB).

A

False (individuals are not considered QIBs)

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16
Q

What is a clearing firm?

A

A firm that is responsible for the confirmation, settlement and delivery of securities transactions

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17
Q

What does it mean to clear a trade?

A

It is the end-of-day process of matching trades executed by a BD to determine what is owed

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18
Q

The new issue market is also known as the _____ market.

A

Primary

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19
Q

Explain the primary market.

A

The market in which NEW securities are offered

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20
Q

What is the role of a BD’s operations department?

A

Process paperwork, handle funds and securities transfers and settle/confirm trades

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21
Q

The third market is the term used to describe _____ and ____ listed securities trading _____

A

NYSE and AMEX listed securities trading over-the-counter

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22
Q

The ______ is where trades of NYSE or AMEX exchange-listed securities occur in the over-the-counter market

A

Third Market

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23
Q

Who can charge a client for buying and selling securities?

A

Only registered BD’s; investment advisors can’t (only can charge fees for advice)

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24
Q

T/F: Unlike equities, bonds do not have organized exchanges

A

True, bonds do NOT have organized exchanges

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25
Q

T/F: Both stocks and bonds represent ownership in a corporation.

A

False, only stocks represent ownership

26
Q

Define the term broker.

A

Effecting securities transactions for the accounts of others

27
Q

What is the federal law that governs investment advisors?

A

Investment Advisors Act of 1940

28
Q

A NASDAQ listed stock trades on the _____ market.

A

Secondary

29
Q

Who guarantees and issues all exchange-listed options contracts?

A

Options Clearing Corporation

30
Q

Which department of a BD handles the underwriting and issuance of securities for clients?

A

Investment Banking

31
Q

In general, what are the two types of securities markets?

A

Primary and secondary

32
Q

What are the Pink Sheets?

A

Real-time electronic quotation system for OTC equities

33
Q

A _____ _____ is a type of advisor that provides advice to either a state, county or city.

A

Municipal advisor

34
Q

What is the general definition of a Qualified Institutional Buyer (QIB)?

A

Entity that owns and invests on a discretionary basis at least $100m of securities of unaffiliated issuers

35
Q

Who can charge a client for securities related advice?

A

Investment Advisors

36
Q

Identify the acronym RR.

A

Registered Representative

37
Q

List some responsibilities of a transfer agent.

A

Issue and cancel securities; pay dividends and interest; mail shareholder reports;

38
Q

T/F: A hedge fund is an example of a client that may benefit from a prime-brokerage arrangement.

A

True

39
Q

A BD that does not hold a customer’s cash or securities is known as a _____.

A

Non-Carrying Firm

40
Q

To be considered an investment advisor, that are the 3 parts of the ABC test?

A

A: Provide ADVICE
B: As a BUSINESS
C: Must be COMPENSATED for advice

41
Q

What is the price at which a dealer is will to sell?

A

Ask / Offer price

42
Q

What is an ECN?

A

Electronic Communication Network; any one of several systems which permit the entry and dissemination of quotes

43
Q

In a ____ _____ account, information about each customer of the introducing firm is sent to the clearing firm

A

Fully disclosed

44
Q

Where may quotes for non-NASDAQ (OTC equity) stocks be found?

A

Pink Sheets or OTCBB

45
Q

Identify the acronym OTC

A

Over-the-Counter

46
Q

Define the term dealer.

A

A person engaged in the business of buying for or selling from securities in his own account

47
Q

QIB stands for:

A

Qualified Institutional Buyer

48
Q

For what types of securities is a trustee required?

A

Bonds

49
Q

The _____ market refers to direct institution-to-institution trading and doesn’t involve public exchanges.

A

Fourth Market

50
Q

Which market is the decentralized, negotiated market?

A

Over-the-counter market

51
Q

What is a market maker?

A

A person who enters quotes and stands ready to buy and sell securities for his own account on a regular basis

52
Q

What is the OTCBB?

A

Over-The-Counter Bulletin Board that is an exchange where OTC equities are traded

53
Q

Which department of a BD write reports about markets and securities for investors?

A

Research Department

54
Q

T/F: A market maker publishing a firm quote is obligated to honor the price and the number of shares quoted.

A

True- obligated to honor both price and size displayed

55
Q

What is the price at which a dealer is willing to buy?

A

Bid

56
Q

List of examples of issuers:

A

Corporations, US Treasury, Municipalities

57
Q

What does it mean for a client to use a prime brokerage account?

A

The client trade through multiple BDs but has its trade(s) settled by one BD

58
Q

BD employees who are involved in the investment banking and securities business are called _____

A

Registered Representatives

59
Q

T/F: The offer (ask) is the price at which a broker-dealer is willing to buy shares from a customer

A

False- bid price is price at which a BD is willing to buy from a customer; ask/offer is what they’re willing to sell at

60
Q

A _____ is any person that executes _____ transactions in securities for the account of others

A

Broker; agency

61
Q

Explain the secondary market.

A

Market on which existing securities are traded

SIE (20 decks)

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