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Series 7 Rep Level > Chapter 3: Trading - Secondary Market > Flashcards

Chapter 3: Trading - Secondary Market Flashcards

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Series 7 Top-off Exam flashcards
1
Q

There are two types of positions that an investor can establish in a security: ______ and ______. The two positions reflect the investor’s opinion about the security’s future performance.

A
  1. Long

2. Short

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2
Q

Investors buy to establish a(n) ______ position, and are ______ when they own securities and have not sold them. Once the investor has sold the stock, the ______ position has been closed.

A

Long

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3
Q

An optimistic investor is called a(n) ______.

A

Bull

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4
Q

An investor with a(n) ______ stock position can theoretically lose the entire investment, but no more.

A

Long

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5
Q

A pessimistic investor is called a(n) ______. A(n) ______ does not buy the stock because he or she expects the stock price to fall.

A

Bear

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6
Q

A bull believes that the stock price will ______. A bullish market is in a(n) ______ trend.

A
  1. Rise

2. Upward

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7
Q

The ______ purchases the stock now to sell later at a higher price.

A

Bull

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8
Q

A(n) ______ will sell the stock when it is high, hoping to buy the stock later when it is low.

A

Bear

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9
Q

The bear has the same goal as a bull. Both hope to ______ higher than they ______. The difference is that the ______ sells first and buys second.

A
  1. Sell
  2. Buy
  3. Bear
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10
Q

The bear opens a(n) ______ position by selling, and later closes the ______ position by purchasing.

A
  1. Short

2. Open

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11
Q

A bear thinks the stock price will go ______.

A

Down

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12
Q

To establish a(n) ______ position, a bear first borrows the stock. The bear then ______ the borrowed stock. Someday the bear, or ______ seller, is obligated the replace the borrowed stock.

A
  1. Short
  2. Sells
  3. Short
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13
Q

The short seller will profit if the stock price goes ______. The bear buys the stock back (and returns the borrowed stock certificates) at a(n) ______ price.

A
  1. Down

2. Lower

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14
Q

An investor with a(n) ______ stock position has potentially unlimited risk. Someday, the ______ seller must buy shares of the stock that were borrowed and return them to the lender. There is theoretically no limit to how high the stock’s price can rise.

A

Short

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15
Q

In each trade that a broker/dealer executes, it is acting as either ______ or ______, but never ______.

A
  1. Broker
  2. Dealer
  3. Both
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16
Q

If the firm simply matches up a buyer and a seller, it is acting as ______. The firm is said to be acting in a(n) ______ capacity. For its service as a middleman, the firm charges a(n) ______. This involves no ______ to the broker/dealer.

A
  1. Broker
  2. Agent
  3. Commission
  4. Risk
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17
Q

When the firm acts as ______, it is using its inventory account, and is said to be acting in a(n) ______ capacity. When the firm sells from its inventory account, it charges a(n) ______. When the firm buys and places a security into its inventory, it charges a(n) ______. Using its inventory account always involves ______.

A
  1. Dealer
  2. Principal
  3. Markup
  4. Markdown
  5. Risk
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18
Q

The ______ (or ______) is the original record that documents the buy-or-sell transaction. Certain information is required on each, including:

  1. Name of security.
  2. Symbol
  3. Account number.
  4. Price.
  5. Quantity
  6. Whether the trade is solicited, unsolicited, or discretionary.
A
  1. Order Ticket

2. Trade Ticket

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19
Q

If the ticket is for a sell, the order ticket must be marked “______” or “______” to show whether the sell is closing a long position or opening a short position.

A
  1. Long

2. Short

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20
Q

If a broker/dealer and a client selling short fail to deliver on a demand for a shorted security, the broker/dealer, client, and clearing firm are ______ from transacting in that security until the securities that are sold short are delivered in ______.

A
  1. Restricted

2. Good Delivery Form

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21
Q

Short sales must abide by ______. Under ______, if the broker/dealer misses ______ consecutive settlement dates on a threshold security, the broker/dealer is required to perform a mandatory buy in.

A
  1. Regulation SHO
  2. Reg SHO
  3. 13
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22
Q

A(n) ______ is one with a large short position where the broker/dealer might be at risk of covering the short.

A

Threshold Security

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23
Q

Three time stamps are required on the trade ticket:

  1. When the order is ______.
  2. When the ticket hits the ______.
  3. When the order is ______.

This provides an audit trail for verification of ______ and to confirm that the broker/dealer did not ______ of the customer’s order.

A
  1. Received
  2. Trading Desk
  3. Executed
  4. Best Execution
  5. Trade Ahead
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24
Q

If there is a stock split or stock dividend, the ______ must be adjusted.

A

Trade Ticket or Order Ticket

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25
Q

Confirmations of trades must be sent to customers no later than the ______ or ______.

A
  1. Completion of the Transaction

2. Settlement of the Trade

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26
Q

______ occurs at the office of the buyer, and it is the point at which the money and the securities change hands.

A

Settlement

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27
Q

Required information on the customer trade confirmation includes:

  1. The broker/dealer ______ and ______, and for municipal securities only, also a(n) ______.
  2. Whether the trade was a(n) ______ or ______.
  3. Complete security ______.
  4. ______.
  5. ______ date and ______ date.
  6. Delivery and payment instructions.
  7. Capacity of the broker/dealer (______ or ______).
  8. Commission (if the firm acted as ______).
  9. Markup or markdown (if the firm acted as ______ in a NASDAQ or riskless trade).
A
  1. The broker/dealer NAME and ADDRESS, and for municipal securities only, also a(n) PHONE NUMBER.
  2. Whether the trade was a(n) PURCHASE or SALE.
  3. Complete security DESCRIPTION.
  4. QUANTITY.
  5. TRADE date and SETTLEMENT date.
  6. Delivery and payment instructions.
  7. Capacity of the broker/dealer (AGENT or PRINCIPAL).
  8. Commission (if the firm acted as AGENT).
  9. Markup or markdown (if the firm acted as PRINCIPAL in a NASDAQ or riskless trade).
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28
Q

When the firm is acting in a(n) ______ capacity, the ______ must also be disclosed on the confirmation, or the confirmation could include a statement that the ______ name will be provided upon request.

A
  1. Agency
  2. Contra Broker
  3. Contra Broker
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29
Q

Transaction-related information must be ______ to ______ for trades in corporate or agency debt securities. A member firm is required to ______ the amount of mark-up or mark-down it applies to trades with ______ in these securities if the member also executes an offsetting principal trade in the same security on the same trading day.

A
  1. Disclosed
  2. Retail Customers
  3. Disclose
  4. Retail Customers
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30
Q

When a municipal security is bought or sold, the broker/dealer or municipal securities dealer must also provide investors with a(n) ______ at or before the ______ of the transaction.

A
  1. Confirmation

2. Settlement

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31
Q

The confirmation for a municipal security transaction includes the following information:

  1. Name of ______.
  2. Name of ______ or ______ and the ______ in which it acted on behalf of the customer.
  3. Name of the ______.
  4. Whether the transaction is a(n) ______ or ______.
  5. ______ date and ______ date.
  6. ______.
  7. Total ______ of the transaction, accrued interest, principal amount, compensation, and other fees paid by the customer to the broker/dealer.
  8. ______ of the security (credit backing, features, status, tax information).
  9. ______ information.
A
  1. Name of CUSTOMER.
  2. Name of BROKER/DEALER or MUNICIPAL SECURITIES DEALER and the CAPACITY in which it acted on behalf of the customer.
  3. Name of the ISSUER.
  4. Whether the transaction is a(n) BUY or SELL.
  5. TRADE date and SETTLEMENT date.
  6. PRICE.
  7. Total DOLLAR AMOUNT of the transaction, accrued interest, principal amount, compensation, and other fees paid by the customer to the broker/dealer.
  8. DESCRIPTION of the security (credit backing, features, status, tax information).
  9. DELIVERY information.
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32
Q

If applicable, the municipal security transaction confirmation would also include:

  1. ______ rate.
  2. ______ value.
  3. ______ date.
  4. ______, unless sold at par.
  5. ______ number.

If there were a(n) ______, such as a control relationship, this would have to be disclosed on the confirmation.

A
  1. INTEREST rate.
  2. PAR value.
  3. MATURITY date.
  4. YIELD, unless sold at par.
  5. CUSIP number.
  6. Material Event
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33
Q

Member firms are required to send statements to customers at a minimum on a(n) ______ basis. Actively traded accounts must receive statements on a(n) ______ basis.

A
  1. Quarterly

2. Monthly

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34
Q

The account statements include a(n) ______ that provides the total account value at the end of the statement period, showing ______ and ______ as well as all ______ , meaning deposits, withdrawals, and purchases and sales of securities. ______ includes a list of individual securities, which may be summarized by asset class. Realized and unrealized gains are provided for each security.

A
  1. Account Statement
  2. Profits
  3. Losses
  4. Account Activity
  5. Portfolio Detail
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35
Q

When traders are asked at what price the shares of a company are trading in the market, two prices will be quoted: the ______ price (the price at which investors can sell shares) and the ______ (or “______”) price (the price at which investors can buy shares). The ______ is always lower than the ______, and the difference between them is the ______.

A
  1. Bid
  2. Offer / Ask
  3. Bid
  4. Offer / Ask
  5. Spread
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36
Q

The broker/dealer’s customer ______ at the bid and ______ at the ask.

A
  1. Sells

2. Buys

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37
Q

The ______ represents the highest price that a purchasing dealer is willing to pay for a security. The ______ is the lowest price that a selling dealer is willing to accept. The market for a security is always the highest ______ and the lowest ______. This is referred to as the ______, or the ______.

A
  1. Bid
  2. Ask / Offer
  3. Bid
  4. Ask
  5. Inside Market
  6. Spread
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38
Q

A(n) ______ spread between the bid and ask price indicates active trading in a security, whereas a(n) ______ spread would suggest sluggish or thin trading.

A
  1. Narrow

2. Wider

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39
Q

FINRA’s policy regarding commissions and markups/markdowns in the ______ is that they should always be fair and reasonable, generally not to exceed ______.

A
  1. Secondary Market

2. 5%

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40
Q

The ______ is a guideline (not a hard and fast rule) to determine whether a commission (acting as ______) or markup (acting as ______) is fair to the public.

A
  1. Five Percent Policy
  2. Agent
  3. Principal
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41
Q

FINRA’s Five Percent guideline applies to ______ (corporation) securities traded in the ______ secondary market, and securities listed on a(n) ______, such as the NYSE.

A
  1. Nonexempt
  2. OTC
  3. Exchange
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42
Q

The Five Percent Policy does NOT apply to ______ securities, such as Treasures & Municipals, nor to ______ offerings, for which FINRA has different rules.

A
  1. Exempt

2. Prospectus

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43
Q

The Five Percent Policy also applies to the ______, which is listed equities trading OTC.

A

Third Market

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44
Q

A(n) ______ is a physical location where broker/dealers execute investor orders to buy and sell securities.

A

Stock Exchange

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45
Q

The ______, formed in 1792, is the oldest and largest exchange market in the United States.

A

New York Stock Exchange (NYSE)

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46
Q

The ______ operates seven liquid markets, providing investors with access to stocks, bonds, ETFs, and options. This includes four separate equities exchanges, each created to meet the needs of corporate and ETF issues, and offer greater choice to investors in how they trade. It is the most active of the world’s stock exchanges, trading more than ______ shares average daily volume.

A
  1. New York Stock Exchange (NYSE)

2. 1 Billion

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47
Q

To be listed on the NYSE, companies must have at least ______ shares outstanding, market value of shares of at least ______, and aggregate pretax earnings over the last 3 years of ______.

A
  1. 1.1 million
  2. $140 million
  3. $10 million
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48
Q

To list a stock on the NYSE, an issuer may have not less than ______ in global market capitalization and ______ in revenues during the most recent ______.

A
  1. $500 million
  2. $100 million
  3. 12 Months
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49
Q

Additionally for NYSE listed stocks, the share price must be at least ______ at the time of listing. The majority Board of Directors must be ______ or ______.

A
  1. $4
  2. Independent
  3. Outside Directors
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50
Q

The NYSE exchange hours are ______ to ______.

A
  1. 9:30 AM

2. 4:00 PM

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51
Q

The NASDAQ opens as early as ______ and closes as late as ______.

A
  1. 8:00 AM

2. 6:30 PM

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52
Q

The trading of listed securities on an exchange is called the ______. It is a(n) ______.

A
  1. First Market

2. Auction Market

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53
Q

A(n) ______ is an individual who has a seat on the NYSE. Each firm that is an NYSE ______ must have an individual employee who owns a seat on the exchange.

A
  1. NYSE Member

2. Member Firm

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54
Q

Each NYSE listed security is assigned a(n) ______ where the security is bought and sold. Members who want to trade the security must do at this location. Only ______ are permitted to trade on the exchange.

A
  1. Trading Post

2. NYSE Members

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55
Q

NYSE members fall into one of the following 4 categories:

  1. The ______, or ______, executes orders for clients of the broker’s firm.
  2. The ______ executes orders for floor brokers when they are too busy to execute all of their form’s orders.
  3. ______ execute orders for their own accounts. They seldom work for clients, but if they have a client order, they must give it priority over their own orders.
  4. The ______ has the responsibility of maintaining a fair and orderly market. They must buy when no buyers exist and sell when no sellers exist and hold these orders in their own account.
A
  1. Commission House Broker
  2. Floor Broker
  3. Two Dollar Broker
  4. Registered Competitive Traders
  5. Designated Market Maker (DMM)
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56
Q

Two dollar brokers may execute orders for a number of ______. They charge each broker a(n) ______.

A
  1. Floor Brokers

2. Commission

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57
Q

A Designated Market Maker (DMM) may act as a(n) ______ for a floor broker.

A

Agent

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58
Q

The ______ is permitted to stop the stock for public orders. By stopping the stock, the trader guarantees an order fill at a specified price for a period of time.

A

Designated Market Maker (DMM)

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59
Q

Orders that are electronically sent directly to the exchange floor from a member firm’s office are known as ______. This system is called the NYSE ______. The trade goes directly into the ______’s book and back again electronically.

A
  1. Wire Orders
  2. Super Display Book (SDBK)
  3. Designated Market Maker (DMM)
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60
Q

______ act in a dual capacity. They can either trade in their own account as ______, designated to keep a fair and orderly market, or they can act in a(n) ______ capacity on behalf of other member firms.

A
  1. Designated Market Makers (DMMs)
  2. Principal
  3. Agency
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61
Q

As market makers, ______ are committed to making an orderly market and must ______ when sell orders are dominant and ______ when buy orders are dominant.

A
  1. Designated Market Makers (DMMs)
  2. Buy
  3. Sell
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62
Q

When DMMs buy for their own account, they must buy higher than the highest ______, and when they sell from their own account, they must sell lower than the lowest ______.

A
  1. Bid

2. Asked / Offered

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63
Q

DMMs must narrow the ______, bidding higher and offering lower than the ______, which is the highest bid and lowest offered.

A
  1. Spread

2. Inside Market

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64
Q

A(n) ______ is not expected to go into default by supporting a market in a security that is dropping so rapidly. They cannot be forced to make a market in a worthless security.

A

Designated Market Maker (DMM)

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65
Q

The size of the market is based on the ______, which is the highest bid and the lowest asked, where the ______ (dealer profit) is smallest or narrowest.

A
  1. Best Price

2. Spread

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66
Q

Financial reports on news networks have numbers scrolling along the bottom of the TV screen; those are ______. It provides the last trade information of securities that trade on the exchange.

A

Consolidated Tape

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67
Q

______: The unique character that is used to identify the company.
______: The volume of the trade being quoted expressed in round lots.
______: The price per share in a particular trade.
______: A symbol that indicates whether the price is higher or lower than the previous day’s closing price.
______: The difference in price from the previous day’s close.

A
  1. Symbol
  2. Shares Traded
  3. Price Traded
  4. Change Direction
  5. Change Amount
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68
Q

IBM – 5,000@ – 61.25 – Up/Down Arrow – 1.35

IBM = \_\_\_\_\_\_
5,000@ = \_\_\_\_\_\_
61.25 = \_\_\_\_\_\_
Up/Down Arrow = \_\_\_\_\_\_
1.35 = \_\_\_\_\_\_
A 
IBM = Ticker Symbol
5,000@ = Shares Traded
61.25 = Last Price
Up/Down Arrow = Change In Direction
1.35 = Change Amount
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69
Q

In a(n) ______ trade, the public cannot see the number of shares traded, nor can they see the price per share.

A

Dark Pool of Liquidity

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70
Q

Most ______ select trades to show based on volume, trading activity, price change, and how widely a stock is held.

A

Consolidated Tapes

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71
Q

______ occurs when an investor buys a security on one exchange and simultaneously sells the same security on another exchange. This enables the investor to take advantage of small price deviations between the exchanges.

A

Market Arbitrage

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72
Q

______ is used in a merger and acquisition scenario. The ______ buys the stock of the company that is being acquired and sells short the tock of the purchasing company that is doing the acquisition.

A
  1. Risk Arbitrage

2. Risk Arbitrageur

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73
Q

An arbitrageur could purchase the ______ bond or preferred stock and if market conditions were favorable, convert to common stock and sell on the open market at a(n) ______. This would happen when the common stock was trading above ______.

A
  1. Convertible
  2. Profit
  3. Parity
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74
Q

Let’s say that a convertible bond was purchased at $1,100 and the conversion ratio was 40:1. If the stock was trading in the market at $27.60, how much would the investor make on the sale of each share?

A

$0.10

Parity = $1,100 / 40 = $27.50
$27.60 (CMV) - $27.50 = $0.10

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75
Q

Orders begin and are generated by the ______ department. The ______ department then processes the orders. The ______ department reviews all orders and finally the order goes to the ______.

A
  1. Order or Wire
  2. Purchase and Sales
  3. Margin Department
  4. Cashier Cage

“Other People’s Money Counts” –>

  • Order department
  • Purchase and sale
  • Margin
  • Cashier
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76
Q

Order Flow: “Other People’s Money Counts” –>

______, ______, ______, ______

A
  1. Order/Wire Department
  2. Purchase and Sale
  3. Margin
  4. Cashier
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77
Q

The ______ is managed by a Series 24 general securities principal or series 9/10 branch manager, and is concerned with customer accounts and orders.

A

Front Office

The front office represents the customer-facing division of a firm. For example, customer service, sales, and industry experts who provide advisory services are considered part of a firm’s front office operations. The functions of the front office generally generate the majority of revenue for a firm.

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78
Q

The ______, existing only with clearing firms and larger retail houses, consists of operations. The principal responsible for the activities is the Series 27, financial operations principal (Fin-op).

A

Back Office

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79
Q

Operations are subdivided into receiving and delivering subdepartments, commonly referred to as the ______.

A

Cashier’s Cage

80
Q

The trade goes into the ______ department, historically called the ______; this is where the order will be sent for execution. Once the order is executed, it will go to the ______ department, where the confirmations will be created and sent out to the customer. Next, the trade will move through the ______ department where the account will be adjusted for any owed money. Finally, the transaction will go through to the ______, which is where the receipt and delivery of cash and securities occurs.

A
  1. Order
  2. Wire Room
  3. Purchase and Sale
  4. Margin
  5. Cashier’s Cage
81
Q

Prior to sending the confirmation to the customer, the ______ is responsible for comparing the confirmation to the execution report to ensure ______.

A
  1. Registered Representative

2. Accuracy

82
Q

If the customer owes the broker/dealer any money, the adjustment to the account will be made through the ______.

A

Margin Department

83
Q

The ______ handles receipt and delivery of securities and is responsible for rejection or reclamation.

A

Cashier’s Cage

84
Q

______ is a refusal from the transfer agent to accept the security. The process that is used to correct the issue is called a(n) ______.

A
  1. Rejection

2. Reclamation

85
Q

Neither ______ nor ______ cancels the trade; it simply requires the delivering broker/dealer to bring a good deliverable form of the security.

A
  1. Rejection

2. Reclamation

86
Q

If the transaction is not recognized by the contra party, they will send a(n) ______ notice form. This is used when the trade is not recognized, or the amount or price was not agreed upon when the trade occurred.

A

Don’t Know (DK)

87
Q

The executing broker/dealer will have ______ to respond to the Don’t Know (DK) notice.

A

4 Days

88
Q

An error in reporting a transaction does not negate the ______ obligation to honor the actual execution price. On the other hand, an error in execution is not the ______ obligation, and would be the responsibility of the ______.

A
  1. Customer’s
  2. Customer’s
  3. Broker/Dealer
89
Q

A general definition of a block trade is ______ or more shares (assuming it is not a penny stock) or ______ worth of bonds..

A
  1. 10,000

2. $200,000

90
Q

Under NYSE Rule 127, if a member firm has a block order of at least $200,000, it must explore the ______ of the market, including checking with the ______.

A
  1. Depth

2. Specialist

91
Q

After the member firm has exhausted all of its resources, it is allowed to announce a(n) ______ on the exchange floor, soliciting someone to buy the entire block at a(n) ______.

A
  1. Cleanup Sale

2. Discount

92
Q

______ or a(n) ______ occurs when an order to buy and an order to sell come in to the member firm from two different customers for the same stock.

A
  1. Crossing the Market

2. Cross Transaction

93
Q

The order must first be offered on the exchange floor for ______ higher than the current bid for at least ______ before the broker/dealer may cross the transaction within its own client base.

A
  1. $0.01

2. 16 seconds

94
Q

The ______, due to its tape system and up-to-date computer facilities, provides real-time prices, last sale information of interdealer net trades.

A

Exchange

95
Q

A(n) ______ is a security purchase or sale order where no price is specified. The order must be exercised immediately at the prevailing or current market price for that particular security.

A

Market Order

96
Q

If there are multiple market orders, the exchange will determine which orders will get filled first based on:

  1. ______ (time)
  2. ______ (size)
  3. ______ (coin toss)
A
  1. Priority
  2. Precedence
  3. Parity
97
Q

______ means that the trade that gets there first gets filled first. If the orders get there at the same time, the exchange will go to ______, meaning the larger order will get filled first. If the orders are entered at the same time and the orders are the same size, the exchange will toss a coin; this is called ______.

A
  1. Priority
  2. Precedence
  3. Parity
98
Q

A(n) ______ is an order to buy at or below a specified price, or to sell a stock at or above a specified price.

A

Limit Order

99
Q

______ can be executed only if the market reaches or betters that price. In order words, it is a conditional order designed to avoid the danger of adverse unexpected price changes.

A

Limit Orders

100
Q

Limit orders are not ______, however, and market orders have ______.

A
  1. Guaranteed

2. Priority

101
Q

Market orders can act as ______, which means they are filled first, and prevent the execution of a limit order.

A

Stock Ahead

102
Q

All orders are ______ unless entered as ______. If unexecuted during that day’s trading, ______ that are canceled must be re-entered.

A
  1. Day Orders
  2. GTC (Good-Til-Canceled)
  3. Day Orders
103
Q

Buy limits only make sense ______ the current market value. Sell limits only make sense ______ the current market value.

A
  1. Below

2. Above

104
Q

When a broker/dealer receives a(n) ______ from a customer to buy or sell, according to SEC order handling rules the B/D is required to represent the customer’s ______ as if it were their own. If the customer’s quote is ______ than that of the B/D, the B/D must adjust their quote to represent the customer’s.

A
  1. Limit Order
  2. Limit Order
  3. Better
105
Q

______ and ______ are instructions that indicate if a stock goes down or up to a specified price, then an order is entered.

A
  1. Stops

2. Stop Limits

106
Q

______ must be placed below the market, and instruct that if a stock goes down to the stop price, the stop is elected or triggered. Once the stop has been elected, the order becomes a market order for immediate execution.

A

Sell Stop Orders

107
Q

Sell stop is the most ______ of all orders. Sell stops are entered at or below ______ for a stock.

A
  1. Bearish

2. Support

108
Q

If the trading range of a stock is 56 to 65, ______ is at 56 and ______ is at 65.

A
  1. Support

2. Resistance

109
Q

The ______ order price is adjusted down for dividends on the stock’s ex-dividend date.

A

Sell Stop

110
Q

______ must be placed above the market, and are executed at or above the stop price. Once the market hits the order price, and releases the stop, execution is at the very next trade.

A

Buy Stop Orders

111
Q

Buy stops are the most ______ of all orders. Buy stops are placed at or above ______ on a stock.

A
  1. Bullish

2. Resistance

112
Q

The principal use of a(n) ______ is as protection for short sales where the position has unlimited risk from market appreciation.

A

Buy Stop

113
Q

The ______ is entered below current market price. It is triggered when the stock price trades at or below the stop price. Then it becomes a live limit order, where it will only be executed at a designated price or better (higher).

A

Sell Stop Limit

114
Q

______ can be used for protection of long positions (buys) or to take short positions (opening sales).

A

Sell Stop Limits

115
Q

The ______ is entered above current market value. It is triggered at or above the stop price, then becomes a live limit order, to be executed at or below the limit price.

A

Buy Stop Limit

116
Q
  1. ______ at or above the stated price; used to take short positions or close our long positions, at or above the limit price.
  2. ______ at or above the stated price. When the stop is off or triggered, the order is executed at market. Most bullish of all orders.
  3. ______ at or above the stated price. When the stop is off or triggered, the order is a limit order to be filled at or below the stated price.
  4. ______ at or below the stated price. When the stop is off or triggered, the order is executed at market; most bearish of all orders.
  5. ______ at or below the stated price. When the stop is off or triggered, the order is a limit order to be filled at or above the stated price.
  6. ______ at or below the stated price. Used to take long positions or close out short positions, at or below the limit price.
A
  1. Sell Limit
  2. Buy Stop
  3. Buy Stop Limit
  4. Sell Stop
  5. Sell Stop Limit
  6. Buy Limit
117
Q

______ at or above the stated price; used to take short positions or close our long positions, at or above the limit price.

A

Sell Limit

118
Q

______ at or below the stated price. When the stop is off or triggered, the order is executed at market; most bearish of all orders.

A

Sell Stop

119
Q

______ at or below the stated price. When the stop is off or triggered, the order is a limit order to be filled at or above the stated price.

A

Sell Stop Limit

120
Q

______ at or below the stated price. Used to take long positions or close out short positions, at or below the limit price.

A

Buy Limit

121
Q

______ at or above the stated price. When the stop is off or triggered, the order is executed at market. Most bullish of all orders.

A

Buy Stop

122
Q

______ at or above the stated price. When the stop is off or triggered, the order is a limit order to be filled at or below the stated price.

A

Buy Stop Limit

123
Q

The orders that are adjusted to account for dividend payments include ______, ______, and ______. Each of these are used at or ______ the stated price.

A
  1. Buy Limits
  2. Sell Stops
  3. Sell Stop Limits
  4. Below
124
Q

Buy limits, sell stops, and sell stop limits are adjusted automatically for dividend payments, unless a(n) ______ instruction is given.

A

DNR (Do Not Reduce)

125
Q

______, ______, and ______ are placed above current market value and are, therefore, not reduced by dividend payments.

A
  1. Buy Stops
  2. Buy Stop Limits
  3. Sell Limits
126
Q
  1. ______, 2. ______, 3. ______

—– CURRENT PRICE —–

  1. ______, 5. ______, 6. ______
A
  1. Buy Stop
  2. Buy Stop Limit
  3. Sell Limit
  4. Buy Limit
  5. Sell Stop
  6. Sell Stop Limit
127
Q

______ execute at a specific price or better.

A

Limit Orders

128
Q

______ elect or trigger another order.

A

Stop Orders

129
Q

Investors will use a(n) ______ when they would like to purchase a security below the market at a specific price or lower.

A

Buy Limit Order

130
Q

An investor will use a(n) ______ when they want to sell at a price above the market or higher.

A

Sell Limit

131
Q

A(n) ______ will guarantee the price, but not that the order will be executed.

A

Limit Order

132
Q

______ are not true orders. They elect or trigger a market order.

A

Stop Orders

133
Q

A(n) ______ can be placed below the support level and establish a short position if the support level is broken on a stock. Once the stop price is hit, the stop is erased and then the market price will be used to execute the trade.

A

Sell Stop

134
Q

A(n) ______ may be used to protect a profit or further loss in a long position.

A

Sell Stop

135
Q

A(n) ______ is an order placed above the market. They are used to protect a profit or against further loss in a short position.

A

Buy Stop

136
Q

An investor could place a(n) ______ just above a resistance level to establish a long position if resistance is broken.

A

Buy Stop

137
Q

If the investor is not comfortable having a market order once the stop is triggered, then they can choose to place a(n) ______. This becomes a limit order when the stop is triggered.

A

Stop Limit Order

138
Q

A(n) ______ is a market order that gives the floor trader time and price flexibility. Rather than filling it immediately, the floor broker may fill the order at any time throughout the day that the floor thinks best.

A

Not Held Order

139
Q

A not-held order IS / IS NOT a discretionary order, where the broker/dealer controls at least on of the three “A”s:

  1. ______ (buy/sell)
  2. ______ (choice of which security)
  3. ______ (number of securities or dollar amount of trade)
A
  1. IS NOT
  2. Activity
  3. Asset
  4. Amount
140
Q

All orders are ______ unless entered as ______. If unexecuted during the day’s trading, ______ are canceled and must be re-entered the following day if desired.

A
  1. Day Orders
  2. GTC (Good Till Canceled)
  3. Day Orders
141
Q

Quantity is the top priority in a(n) ______ order. Time is secondary. Therefore, these orders do not have to be filled immediately.

A

All or None

142
Q

______ a year, existing GTC orders must be re-entered or they are canceled. This occurs on the last trading day of ______ and ______.

A
  1. Twice
  2. April
  3. October
143
Q

Both quantity and time are priorities of ______ orders. This order must be executed in its entirety at the time of order entry. They must be killed if they are not immediately executed.

A

Fill or Kill (FOK)

144
Q

Time is the top priority with ______ orders. When the order is placed, it must be filled immediately with as many shares as are available. If the order is only partially filled, the unfilled amount is canceled.

A

Immediate or Cancel (IOC)

145
Q

______ are entered to be filled at the close of the trading day. These are sometimes identified as ______ orders. On the NYSE these orders may be placed no later than ______ unless there is an order imbalance, in which case they may be placed same as NASDAQ orders up to ______.

A
  1. Market Orders at the Close
  2. MOC
  3. 3:45 PM ET
  4. 3:50 PM ET
146
Q

______ are done off of the floor and off tape as an endeavor to maintain an orderly market. It usually involves taking a block trade on a low-priced, comparatively thinly traded stock into the Third Market (listed stocks traded OTC, usually NASDAQ), and dribbling the order in slowly throughout the trading day, rather than all at once on the exchange.

A

Block Orders

147
Q

______ are block or stock cross orders with one or two specialists involved. This block is handled on the floor of the exchange and recorded on the tape.

A

Exchange Distributions

148
Q

A(n) ______ is an attempt to stabilize a falling stock price with the announcement made prior to the execution. If effective, the whole block need not be filled as the word goes out that “the big boys are supporting the stock.” This block is also on floor and on the tape.

A

Special Offer

149
Q

There is NO physical location for the ______ market.

A

Over-The-Counter (OTC)

150
Q

The ______ is a decentralized, global, 24-hour market that takes place over telephone lines and the internet. It is by far the world’s largest market and the largest debt market, as well. Most corporate debt, all government, government agency, and municipal debt trade here.

A

Over-The-Counter (OTC)

151
Q

Unlike the ______, where there are auctions, the ______ is a negotiated market. Each trade is a negotiation between two parties, either online or on the telephone.

A
  1. Exchanges

2. Over-The-Counter (OTC)

152
Q

Shares of the largest corporations trade OTC and are on an electronic quotation system called ______. The stocks quoted and traded on ______ must meet ______’s listing requirements, including asset size and number of outstanding shares.

A

NASDAQ

153
Q

NASDAQ, OTC, and listed trades report within ______ of their execution.

A

10 Seconds

154
Q

A(n) ______ gives the seller the option to deliver the security during any time period ranging from ______ to ______ business days. This is called a(n) ______. It also locks in the right to buy and sell the security at a specific price.

A
  1. Seller’s Option
  2. 6 to 60
  3. Negotiated Settlement
155
Q

The OTC, or unlisted market, is called the ______. It is the ______ market.

A
  1. Second Market

2. Negotiated

156
Q

Broker/dealers provide ______ for all OTC stocks, both NASDAQ and non-NASDAQ.

A

Liquidity

157
Q

All ______ are broker/dealers; however, not all broker/dealers are ______. Many brokerage firms either do not have the capital or choose not to risk their capital to make a(n) ______ in a security.

A
  1. Market Makers
  2. Market Makers
  3. Market
158
Q

Some market maker transactions are considered “______ and ______.” This involves the buying or selling by a broker/dealer of a security for its own account to fill an order previously received from a customer. Although the firm is acting as a principal in the trade, the transaction is relatively riskless because the purchase and sale are completed almost simultaneously.

A
  1. Riskless

2. Simultaneous

159
Q

Riskless and simultaneous transactions ARE / ARE NOT subject to the FINRA Five Percent markup rule.

A

ARE

160
Q

The ______ market is open to all firms that are members of FINRA, and they are allowed to register as a(n) ______ for a particular security if minimum requirements are met.

A
  1. NASDAQ

2. Market Maker

161
Q

A(n) ______ is a broker/dealer that publishes a bid and ask on NASDAQ and stands ready to buy or sell ______ shares at those prices.

A
  1. Market Maker

2. 100

162
Q

The FINRA member firm may subscribe to the NASDAQ system via the following:

  1. ______
  2. ______
  3. ______
A
  1. NASDAQ Level 1
  2. NASDAQ Level 2
  3. NASDAQ Level 3
163
Q

______ shows the inside market, which is the highest bid and lowest offer for a security. This level shows information needed by a(n) ______ to report the market to customers. At least ______ market makers must enter a quote in order for the system to show a quotation.

A
  1. NASDAQ Level 1
  2. Registered Representative
  3. Two
164
Q

______ shows all market makers for a given security along with their bid and ask. Each market maker’s bid and ask is firm for ______ shares. This is the level used by a(n) ______, who needs to see the depth of the market and the identities of the market makers.

A
  1. NASDAQ Level 2
  2. 100
  3. Trader
165
Q

______ provides the same information as ______, but gives market makes input ability to enter and change their quotes.

A
  1. NASDAQ Level 3

2. Level 2

166
Q

A market maker is registered with ______ to make a market and maintain controlled inventory in a given NASDAQ security. Market maker quotes are firm for at least ______ shares, and market makers cannot withdraw quotes (______) without being assessed a penalty. Typically, when a NASDAQ market maker withdraws its quote without having permission, it cannot reenter its quote for ______.

A
  1. FINRA
  2. 100
  3. Back Away
  4. 20 Days
167
Q

NASDAQ: WXYZ 25.25 + .25; B 25; A 25.12

WXYZ: ______
25.25: ______
B 25: ______
A 25.12: ______

A

WXYZ: Name of the Security
25.25: Last Trade
B 25: Bid Price
A 25.12: Ask Price

168
Q

The majority of OTC traded stocks are ______, some of which are not very actively traded. Non-NASDAQ stocks are OTC stocks that are too ______ to meet the listing requirements of NASDAQ. These non-NASDAQ stocks are quoted by market makers via a publication called the “______” (which are accessed electronically).

A
  1. Small
  2. Small
  3. Pink Sheets
169
Q

The ______ list the stock, market makers, sometimes the market maker’s phone number, and their quotes. Companies that quote on the ______ are not necessarily SEC-reporting companies. ______ (low-priced stocks) are typically quoted on the ______.

A
  1. Pink Sheets
  2. Pink Sheets
  3. Penny Stocks
  4. Pink Sheets
170
Q

The OTCBB is the ______. To display on the board, corporations must be reporting companies and file reports with the SEC, such as ______ (annual reports).

A
  1. Over-The-Counter Bulletin Board

2. 10Ks

171
Q

Almost any trade can be found on the ______, including bids wanted, offers wanted, and firm quotes.

A

Bullet Board

172
Q

In order for a security’s ______ (the highest price a buyer will pay for a security and the lowest price a seller will accept) to be displayed, there must be at least two active market makers on the ______ showing firm quotes for both the bid and the ask.

A
  1. Inside Quote

2. Bulletin Board

173
Q

The role of a(n) ______ is to provide market liquidity and to ensure that a market exists in a given security.

A

Market Maker

174
Q

______ are broker/dealers that “make a market” in a security by trading with customers from their own inventory.

A

Market Makers

175
Q

______ act as principals or dealers on a trade; therefore, they do not charge ______; instead, they make a profit on the “______” between the bid and the ask prices of the securities of the trade.

A
  1. Market Makers
  2. Commissions
  3. Spread
176
Q

______ adjust their quotes throughout the trading day to reflect current market conditions and supply and demand.

A

Market Makers

177
Q

There can be more than one ______ for a security.

A

Market Maket

178
Q

The ______ refers to the trading of exchange-listed securities in the over-the-counter (OTC) market.

A

Third Market

179
Q

If an institutional investor came to a broker/dealer and wanted to buy shares of IBM, the first place the B/D would look for the security would be in their own ______. If they have the security and wish to sell to the customer out of their own ______, then IBM, a security listed on the NYSE, trades in an ______ transaction. That is a(n) ______ trade.

A
  1. Inventory
  2. Inventory
  3. Over-The-Counter (OTC)
  4. Third Market
180
Q

______ securities include any exchange-listed stocks, American Depositary Receipts (ADRs), rights, or warrants.

A

Third Market

181
Q

Why are securities traded in the Third Market? The ______ must maintain a fair and orderly market, so a trade large enough to create an order imbalance in a particular listed stock will be done ______. These trades can be done after hours when the exchange is closed.

A
  1. NYSE’s Specialist

2. OTC

182
Q

Part of the Third Market is represented in the ______, at attempt by the SEC to provide for centralized trading information on all actively traded U.S. equities, wherever they may be traded.

A

Consolidated Tape

183
Q

There are also Third Market ______ designated by ______ in these listed stocks trading on NASDAQ. Third Market ______ are required to register as ______.

A
  1. Market Makers
  2. FINRA
  3. Market Makers
  4. Designated Reporting Members (DRMs)
184
Q

If both firms are designated reporting members (DRMs) in a security, the ______ is required to report the transaction within 10 seconds. If both firms are non-reporting members, the ______ reports in 10 seconds. If just one firm is a DRM, the ______ reports.

A
  1. Sell Side
  2. Sell Side
  3. Designated Reporting Member (DRM)
185
Q

The ______ constitutes the most active of the pink sheet equities.

A

OTC Bulletin Board

186
Q

______ contain interdealer net and last trade information on corporate notes and bonds.

A

Yellow Sheets

187
Q

The ______ consists of institutional investors, such as mutual funds and pension funds, electronically trading big blocks of securities with one another.

A

Fourth Market

188
Q

Fourth market investors use ______, which facilitate agency cross services, taking the shares from the seller and delivering them to the buyer electronically, and provide confirmation records to each institution.

A

Electronic Communication Networks (ECNs)

189
Q

Using ______ in the Fourth Market is a less costly way of trading because without a middleman, there are no ______.

A
  1. Electronic Communication Networks (ECNs)

2. Commissions

190
Q

It’s important that the broker/dealer provides ______ for its customers. The SEC requires that a(n) ______ be published. This is often referred to as the NBBO.

A
  1. Best Execution

2. National Best Bid and Offer

191
Q

FINRA requires members and their associated persons to use reasonable due diligence to determine the ______ for executing a customer order so that the customer receives the ______. The following factors are taken into consideration:

  1. The market’s ______: price, volatility, liquidity, pressure on communications.
  2. The size and type of ______.
  3. The number of ______ the member firm checked before entering the order.
  4. The accessibility of a(n) ______.
  5. The terms and conditions of the ______ (whether it is market, not held, or a stop loss).
A
  1. Best Market
  2. Best Possible Price
  3. Characteristics
  4. Transaction
  5. Markets
  6. Quotation
  7. Order
192
Q

One violation involving orders is called ______, which is when the broker/dealer places another firm between itself and the customer. ______ is only allowable if it provides a better price to the end customer.

A

Interpositioning

193
Q

Broker/dealers can choose to direct or route their orders through systems available for order routing, such as ______, which are usually used by order entry firms. Broker/dealers must disclosure their order routing policies ______ to FINRA.

A
  1. Advanced Computerized Execution System (ACES)

2. Quarterly

194
Q

Linked electronic communications networks (ECNs) use ______ to report their trades.

If the firm is using an alternative display facility (ADF) and on an unlinked electronic communications network (ECN), the system used for trade reporting is ______ and ______ is used to report OTC non-NASDAQ.

The ______ is used to track orders that have been placed by broker/dealers. The system audits orders based on the timestamps to make sure that the firm was not ______ the customer order and was providing the customer with ______.

A
  1. Trade Reporting Facilities (TRFs)
  2. Trade Reporting and Comparison Service (TRACS)
  3. OTC Reporting Facility (ORF)
  4. Order Audit Tracking System (OATS)
  5. Front Running
  6. Best Execution
195
Q

______ reports trades by broker/dealers who complete transactions in U.S. treasury and corporate bonds. It requires that both the buy and sell side report within ______ of the transaction. Once both sides of the trade reports through ______, FINRA will release the information to the public immediately.

A
  1. Trade Reporting and Compliance Engine (TRACE)
  2. 15 Minutes
  3. Trade Reporting and Compliance Engine (TRACE)
196
Q

The ______ is the MSRB system which tracks municipal bonds. The availability of this information provides greater bond market transparency to the public.

A

Real-Time Transaction Reporting System (RTRS)

Series 7 Rep Level (14 decks)

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