Trading Markets Flashcards
Stop Order
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
Network C Tape
Reports of trades of NASDAQ issues
Network A Tape
Reports trades of NYSE-listed issues
Network B Tape
NYSE American (AMEX) and regional exchange-listed securities.
Size of Market
Highest Bid by the Lowest Ask
Specialist “Stops Stock”
Specialist guarantees the price of the stock for a short period of time
Trading halts
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.
Circuit breaker
7% drop in the S&P 500 Index
ACT
Automated Comparison of Funds. Reports all interdealer transactions
Customer Confirmations
Must disclose commission, mark-up, and amount of accrued interest.
Does not need to disclose the inventory position of the dealer.
Indication of Interest
Happens during cooling off period. Indication can be canceled by the customer and the brokerage firm.
Stand-by Underwriting
investor makes firm commitment to stand by ready to buy any unsold shares after the issuer attempts to sell to existing shareholders
All or None Underwriting
Best efforts underwriting in which investment banker agrees to underwrite but takes no financial liability if entire issue is not sold.
Firm Commitment Underwriting
Underwriter buys issue from issuer and takes full financial liability.
Western Syndicate
Responsible for certain percent of original amount. Only liable for their own shares.
Competitive Bid Auction
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.
Ask Price
Bid (NAV) over 100% - Sales Charge %
REIT
Real Estate Investment Trust
Closed-ended management company. purchase real estate and property and the security trades on exchanges or in the OTC market.
Subchapter M
Regulated under this if mutual funds distributes 90% or more of net investment income to shareholders. Only taxed on retained income.
Equity REIT
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
BDC
Business Development Company
Make “private equity” investments in start-up companies
Publicly traded on an exchange.
Immediate or Cancel
Execute the whole order at certain price. If not, execute part and cancel the rest
Fill or Kill
Execute entire order at one price. If not, entire order is cancelled
All or None
Execute whole order at certain price. Can try multiple times.
“Short tender “ rule
Net long position must be long - not short
Opening sale
Short position
Closed with a closing purchase
Closing purchase
Short sale
Opened with an opening sale
Closing sale
Long stock
Opened with an opening purchase
Opening purchase
Long stock
Closed with a closing sale
Initial Margin Requirement
50% set by the FRB
75% for LEAPs
Minimum maintenance requirement
25% for long stocks
30% for short stocks
Set by FINRA
Keogh Plan
HR-10
Retirement plans for self-employed individuals
Fully deductible from income
Employer contributions limited to 20%
Leveraged buy out
Public company is taken private
Financing for takeover provided by commercial bank or issuing junk bonds
Existing shareholders tender their shares
Defined Benefit Plan
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
Stabilizing Market Maker
Managing underwriter
Short against the box
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
Inflation
Interest rates increase continuously for 3 consecutive quarters
Interbank market
Unregulated global market in which large transactions occur between foreign and domestic banks
Spot and Forward settlement
Risk less Transaction
No risk to the dealer. Dealer earns a mark up
Stock dividend
Will dilute a company’s earnings per share
Tombstone
Announcement of public offering of securities
Includes gross proceeds of a new issue offering and syndicate member names
No load fund
Does not impose sales charges
All mutual funds charge an annual management fee
Money market funds
Typically sold without sales charge
Fund dividends are taxable whether or not they are reinvested
TRACE
Reports corporate, government, and agency trades
Muni bonds and reported on RTRS
