Trading Markets

Question 1

Stop Order

Answer 1

Becomes an order when the security trades at a specified price. Once market goes to stop price, becomes a market order.

Buy Stop Order - above market price

Sell stop order - below market price

Question 2

Network C Tape

Answer 2

Reports of trades of NASDAQ issues

Question 3

Network A Tape

Answer 3

Reports trades of NYSE-listed issues

Question 4

Network B Tape

Answer 4

NYSE American (AMEX) and regional exchange-listed securities.

Question 5

Size of Market

Answer 5

Highest Bid by the Lowest Ask

Question 6

Specialist “Stops Stock”

Answer 6

Specialist guarantees the price of the stock for a short period of time

Question 7

Trading halts

Answer 7

Regulatory halt imposed by regulator (SEC) or occurs because of circuit breaker was tripped. All trading in the stock must stop in all US markets

Non-regulatory halt only a certain exchange stops trading a stock.

Question 8

Circuit breaker

Answer 8

7% drop in the S&P 500 Index

Question 9

ACT

Answer 9

Automated Comparison of Funds. Reports all interdealer transactions

Question 10

Customer Confirmations

Answer 10

Must disclose commission, mark-up, and amount of accrued interest.

Does not need to disclose the inventory position of the dealer.

Question 11

Indication of Interest

Answer 11

Happens during cooling off period. Indication can be canceled by the customer and the brokerage firm.

Question 12

Stand-by Underwriting

Answer 12

investor makes firm commitment to stand by ready to buy any unsold shares after the issuer attempts to sell to existing shareholders

Question 13

All or None Underwriting

Answer 13

Best efforts underwriting in which investment banker agrees to underwrite but takes no financial liability if entire issue is not sold.

Question 14

Firm Commitment Underwriting

Answer 14

Underwriter buys issue from issuer and takes full financial liability.

Question 15

Western Syndicate

Answer 15

Responsible for certain percent of original amount. Only liable for their own shares.

Question 16

Competitive Bid Auction

Answer 16

Bid placed on yield of US Gov securities. Winning bids are lowest interest rates.

Weekly auction conducted each Monday and Tuesday. Settlement occurs on the issue date.

Question 17

Ask Price

Answer 17

Bid (NAV) over 100% - Sales Charge %

Question 18

REIT

Answer 18

Real Estate Investment Trust

Closed-ended management company. purchase real estate and property and the security trades on exchanges or in the OTC market.

Question 19

Subchapter M

Answer 19

Regulated under this if mutual funds distributes 90% or more of net investment income to shareholders. Only taxed on retained income.

Question 20

Equity REIT

Answer 20

REIT that buys or leases real estate. Shareholders dividends paid from lease or rental income.

Income derived from difference between net rental income and interest paid on loans

Question 21

BDC

Answer 21

Business Development Company

Make “private equity” investments in start-up companies

Publicly traded on an exchange.

Question 22

Immediate or Cancel

Answer 22

Execute the whole order at certain price. If not, execute part and cancel the rest

Question 23

Fill or Kill

Answer 23

Execute entire order at one price. If not, entire order is cancelled

Question 24

All or None

Answer 24

Execute whole order at certain price. Can try multiple times.

Question 25

"Short tender " rule

Answer 25

Net long position must be long - not short

Question 26

Opening sale

Answer 26

Short position Closed with a closing purchase

Question 27

Closing purchase

Answer 27

Short sale Opened with an opening sale

Question 28

Closing sale

Answer 28

Long stock Opened with an opening purchase

Question 29

Opening purchase

Answer 29

Long stock Closed with a closing sale

Question 30

Initial Margin Requirement

Answer 30

50% set by the FRB 75% for LEAPs

Question 31

Minimum maintenance requirement

Answer 31

25% for long stocks 30% for short stocks Set by FINRA

Question 32

Keogh Plan

Answer 32

HR-10 Retirement plans for self-employed individuals Fully deductible from income Employer contributions limited to 20%

Question 33

Leveraged buy out

Answer 33

Public company is taken private Financing for takeover provided by commercial bank or issuing junk bonds Existing shareholders tender their shares

Question 34

Defined Benefit Plan

Answer 34

Pension plan where employer promises to provide covered person with pre-set amount upon retirement. Older employees get more, younger ones get less. Annual benefit amount fixed at retirement Actuary determines annual contributions Employer must contribute whether or not company is profitable

Question 35

Stabilizing Market Maker

Answer 35

Managing underwriter

Question 36

Short against the box

Answer 36

End-of-year tax strategy that enables investor to lock in a gain on a profitable long position Sells short same number of shares equal to long profit at market price - locks in the gain Performed in an arbitrage account Does not defer taxes of a gain

Question 37

Inflation

Answer 37

Interest rates increase continuously for 3 consecutive quarters

Question 38

Interbank market

Answer 38

Unregulated global market in which large transactions occur between foreign and domestic banks Spot and Forward settlement

Question 39

Risk less Transaction

Answer 39

No risk to the dealer. Dealer earns a mark up

Question 40

Stock dividend

Answer 40

Will dilute a company’s earnings per share

Question 41

Tombstone

Answer 41

Announcement of public offering of securities Includes gross proceeds of a new issue offering and syndicate member names

Question 42

No load fund

Answer 42

Does not impose sales charges All mutual funds charge an annual management fee

Question 43

Money market funds

Answer 43

Typically sold without sales charge Fund dividends are taxable whether or not they are reinvested

Question 44

TRACE

Answer 44

Reports corporate, government, and agency trades Muni bonds and reported on RTRS