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SIE Exam 2024 > Chapter 2: Market Participants and Market Structure > Flashcards

Chapter 2: Market Participants and Market Structure Flashcards

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SIE Exam flashcards
1
Q

Venture Capitalist

A

Invests in start-ups and small businesses

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2
Q

Angel Capitalist

A

Provide capital to entrepreneurs and start-ups when the risk as high, i.e. the early stages

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3
Q

Institutional Investors

A

Organizations that invest other people’s money

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4
Q

Personal Investors

A

Invest own capital, seeking higher returns than traditional savings accounts or CD’s

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5
Q

Broker executes trades for…

A

Investors

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6
Q

Dealer executes trades for…

A

Itself

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7
Q

Investment Advisor

A

Group or person that makes investment recommendations or carries out securities analysis

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8
Q

Municipal Advisor

A

Financial expert who provides advice to municipal entities or individuals with financial obligations

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9
Q

Issuers

A

Companies, organizations, or governments that sell securities to raise capital

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10
Q

Underwriters

A

Assist issuers to mitigate business risks

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11
Q

Initial Public Offering (IPO)

A

When a privately owned company offers to sell it’s shares for the first time on a public stock exchange

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12
Q

Transfer Agent

A

Institution that a corporation designates to manage investor financial records and monitor account balances

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13
Q

Depository Trust and Clearing Corporation (DTCC)

A

Clearing and settlement services for financial markets

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14
Q

What is a security?

A

Financial instrument that is negotiable, interchangeable, and holds some form of monetary value

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15
Q

Equity Security

A

Financial instruments that represent ownership in an entity, such as a company, partnership, or trust

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16
Q

Collateralized Mortgage Obligations (CMO)

A

Pool of mortgages that are grouped together and sold as an investment

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17
Q

CMO’s are sold by financial institutions as…

A

Fixed income investments and offer regular payments

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18
Q

What factors can affect CMO’s?

A

Prepayments, credit risk, and fluctuating interest rates

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19
Q

Collateralized Debt Obligations (CDO)

A

Range of loans, such as car loans, credit cards, commercial loans, and even mortgages

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20
Q

CDO’s are packaged and rated by…

A

Credit rating agencies so Wall Street can sell them to investors

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21
Q

CDO’s are divided into…

A

Tranches, each of which reflects a different level of risk

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22
Q

Which tranches are paid of first and why?

A

Senior tranches due to lowest risk

23
Q

Debt Security

A

Financial instrument that represents borrowed funds

24
Q

What do dept securities typically provide for the holder?

A

Regular interest rates and repayment of the principal loan amount

25
Q

Broker

A

Acts as an intermediary between sellers and buyers in a transaction

26
Q

Dealer

A

Buys and sells securities from their inventory and earns a profit when the sale is higher than the purchase price

27
Q

Typical departments of a large securities firm

A

-Investment Banking (50%)
-Research (12.5%)
-Investment Management (12.5%)
-Sales and Trading (12.5%)
-Private Clients (12.5%)

28
Q

Investment Banking

A

-Issues new debt and equity securities for corporations
-Aids in selling securities and facilitates mergers, acquisitions, reorganizations, and broker trades for institutions and private investors

29
Q

Research

A

-Supports other departments by giving insight to data, salespeople, and underwriters
-Helps traders with pricing and selling securities

30
Q

Investment Management

A

-Handles financial assets and other investments
-Devises long- and short-term strategies for disposing of and acquiring portfolio holdings

31
Q

Sales and Trading

A

Focuses on trading stocks, bonds, and other financial instruments

32
Q

Private Clients

A

Individuals or families with significant financial portfolios

33
Q

Market Makers

A

Firms or individuals who quote two-sided markets in security, provide bids and offers

34
Q

Retail investors primarily invest in:

A

-Bonds
-Stocks
-Retirement Accounts
-Cryptocurrency

35
Q

Institutional investors primarily invest in:

A

-Mutual funds
-Hedge funds
-Real estate
-Stocks

36
Q

Qualified Institutional Buyers (QIB)

A

Sophisticated investors who do not require the same level of regulatory protection as less sophisticated investors

37
Q

The primary market is the source of what?

A

New securities

38
Q

What is the main characteristic of the primary market?

A

Securities are directly purchased from an issuer

39
Q

What happens in the secondary market?

A

Securities are traded among investors after they are created in the primary market

40
Q

Examples of Secondary Markets:

A

-NYSE American and NYSE MKT
-Boston Stock Exchange
-Chicago Stock Exchange (CHX)
-Pacific Stock Exchange (PCX)

41
Q

Dealer-to-Dealer Markets

A

Financial arena where multiple dealers buy or sell specific securities or instruments at different quoted prices

42
Q

Example of a dealer-dealer market

A

Nasdaq

43
Q

Non-Exchange Issues

A

Securities that are not part of any organized exchanges, which makes them extremely low priced and thinly traded

44
Q

Traders

A

People who purchase or sell assets in financial markets, either on their behalf or the behalf of others

45
Q

Third Markets

A

Trading by non-exchange brokers/dealers and institutional investors of exchange-listed stocks

46
Q

What does the third market allow for?

A

Greater liquidity and efficiency during trading

47
Q

Fourth Markets

A

Exclusive to institutional investors such as banks and hedge funds

48
Q

Dark Pools

A

Private exchanges for trading securities that are not accessible to public investment

49
Q

Clearing

A

Establishes the obligation of funds

50
Q

Settlement

A

Involves the final exchange of funds between banks

51
Q

Fully Disclosed Accounts

A

-Disclose the complete identity of the account holder
-Individually held
-Provide complete transparency and control to individual traders

52
Q

Omnibus Accounts

A

-Utilized by futures commission merchants
-Facilitates managed trading for multiple individuals
-Ensures anonymity

53
Q

Prime Brokerage Accounts

A

Comprehensive services that investment banks and other financial institutions provide to hedge funds and large investment clients

SIE Exam 2024 (20 decks)

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