Terms-B

Question 1

Back away

Answer 1

The failure of an over the counter market maker to honor a firm bid and asked price; this violates Conduct Rules.

Question 2

Balloon maturity

Answer 2

A repayment schedule for an issue of bonds wherein a large number of the bonds come due at a prescribed time; a type of serial maturity.

Question 3

Basis points

Answer 3

A measure of a bonds yield, equal to 1/100 of 1% of a yield. A bond whose yield increased from 5.0% to 5.5% is said to increase by 50 basis points.

Question 4

Basis quote

Answer 4

The price of a security quotes in terms of the yield that the purchaser can expect to receive.

Question 5

Best efforts underwriting

Answer 5

A new issue securities underwriting I which the underwriter acts as an agent for the issuer and puts forth best efforts to sell as many share as possible. The underwriter has no liability for unsold shares, unlike a firm commitment underwriting.

Question 6

Best execution

Answer 6

The responsibility of the broker dealer to seek the most favorable terms for the execution of the client transaction.

Question 7

Bid

Answer 7

An indication by an investor, a trader, or a dealer of a willingness to buy a security or commodity; the price at which an investor can sell to a broker dealer

Question 8

Blank check company

Answer 8

A company with no business plan. Investors have no knowledge as to how cash assets on the firm are to be spent. A highly speculative company that has the view to merge with or acquire another command.

Question 9

Blockbuster

Answer 9

A trade that exceeds the single trade limit of a corespondent firm in the ACT system. Currently this limit is $1,000,000. The clearing form has 15 minutes to accept or decline the trade. If no indication is made, the clearing firm is obligated to accept the trade.

Question 10

Block positioners

Answer 10

Firms define under the SEC Rule 3b-8 as firms that purchase long or short blocks of stock worth $200,000 or more.

Question 11

Blue chip stock

Answer 11

The equity issues of financially stable well established companies that have demonstrated their ability to pay dividends in both good and bad times.

Question 12

Blue sky

Answer 12

To register a securities offering in a particular state.

Question 13

Blue sky laws

Answer 13

Nickname for state regulations governing the securities industry coined in the early 1900s by a Kansas Supreme Court justice who wanted regulation to protect against “speculative schemes that have no more basis than so many feet of blue sky”.

Question 14

Bona fide quote

Answer 14

A bid or an offer from a broker dealer to buy or sell securities, it indicates a willingness to execute a trade under the terms and conditions accompanying the quote.

Question 15

Bond

Answer 15

A legal obligation of an issuing company or government to repay the principal of a loan to bond investors at a specified future date. Bonds are usually issued with a par or face value of $1000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds.

Question 16

Bookrunning manager

Answer 16

The investment bank responsible for the order book including the allocation of securities. The bookrunning managers names appears above all other members of the syndicate on a tombstone advertisement.

Question 17

Branch office

Answer 17

Any location identified by any means to the public as a place where a registered broker dealer conducts business.

Question 18

Breaking the buck

Answer 18

Jargon used to describe the net asset value of a money market fund falling below $1. Breaking the buck may happen if a fund leverages assets. Without outside emergency help, the investors would lose money. Those investors needing added security may choose investment grade money market funds which have demonstrated a strong ability to meet the dual objectives of a money market fund of providing liquidity and preserving capital.

Question 19

Breakpoint

Answer 19

The schedule of sales charge discounts offered by a mutual fund for lump-sum or cumulative investments.

Question 20

Breakpoint sale

Answer 20

The sales of mutual fund shares in an amount just below the level at which the purchaser would qualify for reduced sales charges; this violates FINRA Conduct Rules.

Question 21

Broker

Answer 21

1. An individual or firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm.
2. The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.

Question 22

Broker Dealer

Answer 22

Person or firm in the business of buying and selling securities. A firm may act as both broker (agent) or dealer (principal) but not in the same transaction. Broker dealers normally must register with the SEC, the appropriate SROs, and any state in which they do business.

Question 23

Bulge bracket

Answer 23

1. Members of an underwriting syndicate who appear on a tombstone advertisement.
2. The largest full-service broker dealers in the world.

Question 24

Bunching orders

Answer 24

Combining individual trade executions at the same price for reporting purposes into a single trade report. Nasdaq no longer supports the bunched trade reports.

Question 25

Buy-in

Answer 25

The procedure that the buying firm of a security follows when the selling firm fails to complete the contract by delivering the security. The buying firm closes the contract by buying the security in the open market and charging the account of the selling firm for transaction fees and any loss caused by changes in the market.

Question 26

Buying power

Answer 26

The amount of securities a margin client can buy using the special memorandum account balance and without depositing additional equity. Buying power is 2 X SMA. For pattern day traders, buying power is 4 X maintenance margin excess.

Question 27

Buy-side

Answer 27

Those natural or institutional persons who trade for proprietary accounts, such as mutual funds, insurance companies, hedge funds, pension funds, etc. some large companies may both buy and sell side operations.