Equity Trading Markets

Question 1

Market Order

Answer 1

Customer wants to buy/sell. Execution is Certain at most advantageous price obtainable immediately after the order is entered. Customer specifies security and size of order only.

Question 2

Good Till Canceled Order (GTC)

Answer 2

AN ORDER TO BUY/SELL THAT REMAINS IN EFFECT UNTIL IT IS EITHER EXECUTED OR CANCELED. ALSO CALLED AN OPEN ORDER.

Question 3

Not Held Order

Answer 3

An order that gives the floor broker discretion as to time and price. (DMMs can’t accept these orders.)

Question 4

OTC Pink Markets

Answer 4

May be non-reporting companies

Question 5

OTCBB (Bulletin Board)

Answer 5

Must be reporting cos.

Question 6

Inside Market / Level 1 Nasdaq

Answer 6

Highest bid and lowest asked/offer. W/o identifying the market Maker. (And smallest size)

Question 7

Level 2 Nasdaq

Answer 7

Quotes of all market makers that deal in the security

Question 8

Level 3 Nasdaq

Answer 8

Same as Level 2 but allows market makers ability to change quote

Question 9

Insider Regulation - Act of ‘34

Answer 9

Officer/director with greater than 10% owner must register w/ SEC w/in 10 days. Report purchases and sales by end of 2nd business days. (To sell must file 144)

Question 10

Foruth Market

Answer 10

Where institutions trade securities between each other

Question 11

Third Market

Answer 11

Listed securities traded OTC.
Facilitated by Consolidated Quotation System (CQS)
Trades INCLUDED in NYSE volume totals

Question 12

Full Registration Timeline

Answer 12

1) Pre-reg period
-Doc prep
-No communication w public
2) File Reg Statement: Begin 20 day cooling off prd
-No sales/money accepted
-Issuer distributes prelim prospectus (red herring)
+all info except exact price/date
+non-binding indications of interest
-“Blue Sky” the issue (register at state level)
-Final due dili meeting held prior to effective date
3) Post registration period: Effective date
-Sales confirmed and final prospectus delivered
-Publish tombstone ad

Question 13

What information can be found on the Consolidated Quotation System?

Answer 13

The Consolidated Quotation System (CQS) provides subscribers with bid/asked quotations for securities listed on national exchanges, including quotes from OTC market makers in those securities (the third market).

Question 14

Settlement for All Securities

Answer 14

Corporate and municipal securities settle regular-way three business days after the trade date (T + 3). Mutual fund shares typically settle the same day, while U.S. Treasury securities and option contracts settle T + 1. Keep in mind that an exercised stock option involves the purchase and sale of a corporate security, and, therefore, settles T + 3.

Question 15

Dark Pool

Answer 15

Trading between investors, allowing them to buy and sell securities anonymously without quotes being displayed

Question 16

IOC Order

Answer 16

An immediate-or-cancel (IOC) order must be executed immediately but does not need to be executed in its entirety. Part of the order may be executed.

Question 17

Day Order

Answer 17

An order to buy or sell that, if not executed, expires at the end of the trading day on which it was entered.

Question 18

Level X Market Decline

Answer 18

Level 1: -7% vs. close of S&P 500: 15min halt
Level 2: -13% vs. close of S&P500: 15min halt
Level 3: -20% vs. close of S&P500: end trading day

**No halt for Level 1/2 if occurs after 3:25pm

Question 19

Order Ticket

Answer 19

• Customer Acct Number
• Action (buy/sell/sell short)
• Description of security
• Quantity
• Type of account (cash/margin)
• Discretionary/nondiscretionary
• Solicited/unsolicited
• Time of entry
• Price qualifications (stop, limit, stop limit)

Question 20

Fill or Kill order (FOK)

Answer 20

Entirety immediately, Nasdaq only

Question 21

IOC

Answer 21

Whatever you can get

Question 22

AON (All or nothing)

Answer 22

Entirety but not immediately (must be 1 transaction), Nasdaq only

Question 23

GTC

Answer 23

Good until filled or cancelled

Question 24

Regulation A Offering

Answer 24

Exempt from Act of 1933: Small biz raising up to $5mm in 12 month time frame. Investors receive “offering circular” instead of prospectus

Question 25

Rule 147

Answer 25

Exempt from Act of 1933: Intrastate offerings. 
80% of revenues in-state
80% of assets in the state
80% proceeds used in state
100% of deal sold to residents
Can't sell for 9 months following sale

Question 26

Regulation D

Answer 26

Private placement sold to select group

• Officers/directors
• Institutional investors
• Individ Investors ($1mm net worth, $200k annual income, $300k couple)
• 35 non-accredited investors total

Question 27

Regulation S

Answer 27

Offerings outside US. Can’t live in US and buy security but you can buy if US citizen living abroad. 1 year seasoning prd for equity; 40 days for bonds.