Chapter 1- Overview of Market Participants and Market Structure

Question 1

____ used by corporations
* Represents ownership

Answer 1

Equity

Question 2

_____ (i.e., notes and bonds)
* Represents an issuer’s promise to pay

Answer 2

Debt

Question 3

A
B
C

Answer 3

Agency
Broker
Commission

Question 4

P
D
M

Answer 4

Principal
Dealer
Markup/markdown

Question 5

___ represents a client’s selling (liquidation) price
- This is the price at which the MM will buy

Answer 5

Bid

Question 6

____ or offer represents a client’s purchase price
- This is the price at which the MM will sell

Answer 6

Ask

Question 7

• Listed securities traded OTC
• Trades included in NYSE volume totals

Answer 7

Third Market

Question 8

• Provides liquidity for large institutional investors and high-frequency traders
• Quotes are not disseminated to the public
• Limits impact on the market

Answer 8

Dark Pools

Question 9

To be considered an accredited investor, an individual must have a net worth of _________________ or annual
income of $_______________.

Answer 9

$1,000,000; $200,000

Question 10

A qualified institutional buyer cannot be a ______________________ and must own and invest a minimum of
___________________.

Answer 10

natural person; $100 million

Question 11

An issuer may hire an _________________ to assist in selling its securities publicly to raise capital.

Answer 11

underwriter

Question 12

The _______________ market is where issuers raise money by selling securities to the public.

Answer 12

primary

Question 13

5. The _________________ market is where the trading of existing securities between investors occurs.

Answer 13

secondary

Question 14

6. ________________ is considered a registered exchange with an unlimited number of market makers.

Answer 14

NASDAQ

Question 15

7. ______________________ stand ready to buy or sell securities at their quoted prices, while _______________execute trades for the firm or the firm’s clients.

Answer 15

market makers; traders

Question 16

8. A transaction executed directly between two institutions is considered a _______________ market trade.

Answer 16

fourth

Question 17

The ___ ___ must maintain all client information for a fully disclosed account

Answer 17

clearing firm

Question 18

The ____ ___ ___ only works with broker-dealers

Answer 18

Options Clearing Corporation

Question 19

THE BUYER FOR ALL SELLERS AND
THE SELLER FOR ALL BUYERS

Answer 19

OCC

Question 20

TRADES FROM MULTIPLE FIRMS CLEAR AND SETTLE THROUGH ONE FIRM

Answer 20

prime broker

Question 21

CLEARING FIRM IS RESPONSIBLE
FOR INDIVIDUAL CLIENT INFORMATION

Answer 21

fully disclosed account

Question 22

INTRODUCING FIRM IS RESPONSIBLE FOR
INDIVIDUAL CLIENT INFORMATION

Answer 22

omnibus account