trading securities Flashcards
what are the 4 secondary trading markets?
- exchanges
- over the counter
- third market
- fourth market
describe exchange trading
- listed securities
- trade at physical location
- trade on an auction market
describe over the counter trading
- not listed securities
- no physical location
- trading is negotiated between buyer and seller
describe third market trading
- listed securities traded OTC
- no physical location
- trading is negotiated between buyer and seller
describe fourth market trading
- listed and unlisted securities
- direct trading between financial institutions
- use ECNs to trade
describe dark pool trades
- private trading done on the fourth market after hours by institutions
- instinet
what are two types of ECNs
- superdot - nyse
- instinet - 4th market institutions
describe floor brokers
broker working for an individual broker/dealer on the exchange floor
describe two-dollar brokers
employees of nyse who help other brokers on floor and charge fees for their assistance
describe a specialist
designated market maker (DMM)
- buy and sell to make market move
- maintains fair and orderly market
- provide liquidity
what is a market order
are orders that are executed immediately at best available price
market orders are guaranteed to be ___, ___ is not guaranteed.
- filled
- price
what order are market orders filled?
1st-priority-time
2nd-precedence-size
3rd-parity-heads or tails
when are limit orders executed?
they are executed at a specified price or better
describe a buy limit
buy for $20 or better
- entered below CMV
- no fill guarantee
describe a sell limit
sell for $20 or better
- entered above CMV
- no fill guarantee
purpose of stop orders
- provide protection
- limit losses (called “stop loss” orders)
describe buy stop orders
buy @ 35 stop
- triggered @ 35
- become market order and executed at next price
- entered above CMV
- PROTECTS SHORT POSITION
describe sell stop orders
- sell @ 35 stop
- triggered @ 35
- become market order and executed at next price
- entered above CMV
- PROTECTS LONG POSITION
describe buy stop limit orders
- buy @ 25 stop limit 26
- 25 if trigger price
- order will be filled at 25 but not more than 26
- entered above CMV
describe sell stop limit orders
- sell @ 25 stop limit 24
- 25 is trigger price
- order will be filled at 25 but no less than 24
- entered below CMV
cheat for remembering if orders are filled above or below the CMV
SLoBS
BLiSS
sell limits and buy stops
buy limits and sell stops
describe day orders
cancel any unexecuted portion at end of the day
describe GTC (good till cancelled) orders
any unexecuted portion remains working until the last trading day of April or October
describe Fill or Kill (FOK) orders
entire order executed immediately or entire order is cancelled
describe immediate or cancel (IOC) orders
- execute any portion available immediately
- cancel any balance remaining
describe all or none (AON) orders
- execute all if available
- become a GTC order if not all of order can be filled
describe market at open orders
- execute orders at or near the open of the day
- not guaranteed exact opening price
describe market at close orders
- execute orders at or near the end of the day
- not guaranteed exact closing price
describe market not-held orders
held by floor broker having time and price authority
-order not guaranteed
specialists (DMM) order display books contain?
- limits (high bid price/low ask price)
- stops and stop limits
describe the 3 market halts
based on declines in the S&P 500
- level 1-7% decline = 15 min halt
- level 2-13% decline = 15 min halt
- level 3 -20% decline = market done for day
what kind of securities trade OTC?
- unlisted stocks and bonds
- govt securities
- municipal securities
describe principal market makers
- maintain inventory
- maintain liquidity
- mark up or down
- charges not disclosed
describe agents as a non-market makers
- represents clients
- charge commission
- charges are disclosed
describe the markup policy
usually 5%
- guide for listed and unlisted transaction charges
- markup policy can vary depending on the effort used to finalize deal
