Chapter 9 Equity Securities: Equity Transactions KT

Question 1

The date on which a securities buyer must pay for a purchase or a seller must deliver the securities sold.

Answer 1

settlement date

Question 2

A type of brokerage account where the investor is expected to have either cash in the account to cover their purchases or to deliver the required amount of cash before the settlement date of the purchase.

Answer 2

cash account

Question 3

Also known as a stop loss order; an order that is triggered when a stock drops to the specified level.

Answer 3

on-stop sell order

Question 4

A client’s order to buy or sell securities at a specific price or better. The order will only be executed if the market reaches or betters that price.

Answer 4

limit order

Question 5

A type of order for the account of partners, directors, officers, major shareholders, IAs and employees of member firms.

Answer 5

professional (PRO) order

Question 6

An order placed to buy or sell a security immediately at the best current price.

Answer 6

market order

Question 7

The initial action a brokerage firm takes when changes in the values of an investor’s securities holdings or cash position results in the investor having insufficient margin in their margin account.

Answer 7

margin call

Question 8

What type of position does an investor have if they own securities?

Answer 8

long position

Question 9

An order to buy a stock at or above a certain price; used to protect a short position when the stock’s price is rising, or to ensure that a stock is purchased while its price is rising.

Answer 9

on-stop buy order

Question 10

Account used to buy or sell securities on partial credit where the client pays only a portion of the purchase price and the investment dealer lends the balance to the client.

Answer 10

margin account

Question 11

A buy or sell order that automatically expires if it is not executed on the day it is entered.

Answer 11

day order

Question 12

A printed acknowledgement, also called a contract, giving details of a purchase or sale of a security which is normally mailed to a client by the broker or investment dealer within 24 hours of an order being executed

Answer 12

confirmation

Question 13

A position created when an investor sells a security that he or she does not own.

Answer 13

short position

Question 14

An order to buy or sell that is good until either the order is filled, the client cancels the order, or the order expires.

Answer 14

good til cancelled

Question 15

The amount of money paid by a client when he or she uses credit to buy a security.

Answer 15

margin

Question 16

A contract that must be completed and signed by a client in order to open a margin account.

Answer 16

Margin Account Agreement Form