Chapter 6 - Dealing Flashcards
What is an order driven market?
Where an investor places an order with their broker, whose role is to find another member to fulfil the trade. Most equity markets operate this way
2 advantages and 2 disadvantages of an order driven market
Advantages - Fast execution of trades and bid/offer spread is narrower than quote driven systems
Disadvantages- Requires an appropriate volume of trades and large orders can distort prices
What are “dark pools”?
These are execution venues where details are anonymous, thus minimising the degree of market impact
What is the difference between principal and agent trading?
Principal = trading on own account
Agent = trading on breakdown of someone else
What shares are traded on the Stock Exchange Electronic Trading System? (SETS)
Shares on AIM All Share
ETF’s and Commodities
Most popular AIM and Irish securities
What are the two types of order extensions?
Market Order Extension: occurs when there are unexercised market orders on the book. The extension is 2 minutes plus 0-30 seconds with a random end period.
Price Monitoring Extension: occurs when the opening price is more than a given % away from yesterdays closing price. Price tolerance stands at 5% swing, extension is 5 minutes plus a 0-30 second period with random end
Define the following order types: Limit Order, Execute & Eliminate, Fill or Kill, Iceberg…
Limit Order - specifies the max price (buy) or min price (sale), and can last up to active for 90 days, can be partially filled
Execute and Eliminate - execute as many shares at the desired price, any leftover shares are deleted from the system
Fill or Kill - Entire order must be completed at price set by investor immediately or it is automatically deleted
Iceberg - Allow market participants to enter large limit orders but only a specified portion are publicly visible
What is TRAX?
Trade matching and regulatory confirmation system mainly used for bond trades in the OTC markets. Also acts as a reporting hub for multiple EU regulators
What is used to identify individual stocks quoted on the London Stock Exchange?
An EPIC code
An investment manager runs a portfolio which undertakes over-the-counter trades. The biggest risk with these trades is most likely to be:
Bilateral settlements
Shares were transferred via the CREST system. What establishes that the legal title to the shares has changed?
Operator Register Update
