Unit 1.2 Flashcards
1
Q
What is a firm that carries customer accounts and accepts funds and securities from customers?
A
Carrying/ Clearing firm
2
Q
What is the relationship between a fully disclosed firm and a clearing firm?
A
Fully disclosed firms introduce customers to clearing firms. Clearing firms act as the Fully Disclosed firms back office
3
Q
If a customer places a trade that will execute on an exchange who is responsible for handling it?
A
Floor Broker
4
Q
What is the role of Designated Market Makers?
A
Acts as the dealer on the floor of an exchange for a specific security and maintains an inventory of the security and guarantees liquidity.
5
Q
What is the OTC market?
A
Over the counter market, interdealer computer and telephone network where market makers in stocks show the bid and ask prices for stocks in which they make a market
6
Q
What is liquidity?
A
The ability to buy or sell a security easily
7
Q
If a security is very iliquid that means____?
A
It is very difficult to sell
8
Q
What is responsible for ensuring a corporation’s securities are issued in the correct owner’s name?
A
transfer agent
9
Q
What is the auction Market?
A
Alternate name for the exchange market
10
Q
Where are exchange-listed securities traded in the OTC market?
A
Third Market/Nasdaq Intermarket
11
Q
What is a fiduciary that oversees a trust?
A
Trustee
12
Q
What is a registrar?
A
A state licensed firm that provides audit and oversight services for transfer agents
13
Q
What is the interdealer computer and telephone network where market makers in stocks show the bid and ask prices for stocks in which they make a market?
A
Over the Counter Market
14
Q
What is a carrying firm?
A
A firm that carries customer accounts and accepts funds and securities from customers
15
Q
What are Dark pools?
A
Trading liquidity that is not openly available to the public?
16
Q
What securities are very liquid?
A
Treasury bills and NMS stocks
17
Q
What are day traders?
A
A type of retail investor that trades rapidly in an out of positions
18
Q
Which exchange member is responsible for maintaining an inventory of their specific security?
A
Designated Market Maker
19
Q
What is a dually registered firm?
A
A firm registered as both a BD and IA
20
Q
What is something that allows a customer to select one member firm to provide custody and other services?
A
Prime (brokerage) account
21
Q
What is a custodian of an estate?
A
Executor
22
Q
What is the difference between OTC Market Makers and exchange DMMs?
A
Multiple OTC Market Makers can deal in the same security, and compete to attract orders from BD’s
23
Q
What requirement must carrying firms meet?
A
Maintain asset levels (net capital) higher than that of firms that do not accept custody of funds or securities
24
Q
What is the DTCC?
A
The Depository Trust and Clearing Corporation, world’s largest securities depository that provides custody services for all securities except restricted securities
25
What is responsible for maintaining records of ownership for a corporation?
transfer agent
26
What is a location, physical or electronic where buyers and sellers gather and place trades?
Market Center
27
What is in the FINRA membership agreement?
Explains what lines of business the BD undertakes
28
What is a Prime Broker?
A member firm that provides custody of a prime brokerage account, and executes customer transactions or sends said transactions to executing brokers for a prime brokerage account respectively
29
What is the alternative name for the exchange market?
Auction Market
30
What firm must segregate customer funds and securities in their custody from its own capital and securities?
Carrying/clearing firm
31
What are BDs?
FINRA member firms that perform securities transactions for their own accounts or for their customers
32
What is a firm registered as both a BD and IA?
Dually registered firm
33
What requirements must agents of Investment Advisers meet (if they have a series 7)?
Register, and pass the Series 66 exam
34
What is responsible for handling problems relating to lost stolen or destroyed certificates for a corporation?
transfer agent
35
What are FINRA member firms that perform securities transactions for their own accounts or for their customers?
BDs, Broker-dealer firms
36
What is a fully disclosed firm?
A firm that introduces its customers to a clearing firm
37
Why might a institutional trading desk use dark pools?
To execute large block orders without impacting public quotes or price, or revealing their investment strategy regarding any of their holdings.
38
What criteria does a security need to trade in the third market?
Listed on the NYSE or regional exchanges, and as long as the trades are reported to the Consolidated Tape within 10 seconds of execution
39
What legislation regulates the secondary market?
Securities Exchange Act of 1934
40
What does a BD do when a customer purchases or sells an OTC security?
The Broker, who represents the client, chooses a market maker to complete the trade to get the customer a fair price
41
What is a facilitator?
An entity that helps customers perform transactions in the secondary markets
42
What is the name for any security listed for trading on an exchange?
Listed securities
43
Carrying firms, fully disclosed firms, prime brokers are all ______?
BD firms
44
What is a person who manages a minor's account under the Uniform Transfers to Minors Act (UTMA) or the Uniform Gift to Minors Act (UGMA)?
Custodian
45
What is a member firm that provides custody of a prime brokerage account, and executes customer transactions or sends said transactions to executing brokers for a prime brokerage account respectively?
Prime Broker
46
When do NYSE trades take place?
9:30 am - 4:00 pm ET each Business day
47
What is a firm that holds assets in a qualified retirement account?
Custodian
48
What is a buyback?
When the issuer of a security buys the security from investors through the secondary market
49
What is trading liquidity that is not openly available to the public?
Dark pools
50
Who are those who buy and sell securities in the secondary markets?
Investors
51
What is a state licensed firm that provides audit and oversight services for transfer agents?
Registrar
52
Under what legislation must anyone who gives investment advice as a regular part of their business and does so for compensation register to be an Investment Advisor?
Investment Adviser Act of 1940 and the Uniform Securities Act
53
What are the advantages of a prime brokerage account?
Provides a client with the ability to trade with multiple brokerage houses while maintaining a centralized master account with all of the client's cash and securities
54
What is an entity that helps customers perform transactions in the secondary markets?
Facilitator
55
What is a market center?
Location, physical or electronic where buyers and sellers gather and place trades
56
What are the four types of Secondary Market market centers in the U.S?
The exchanges, OTC, Nasdaq, ECNs
57
What is the third market?
Nasdaq Intermarket, trading market in which exchange-listed securities are traded in the OTC market
58
A security that can be easily sold is _____?
Very liquid
59
What are listed securities?
Any security listed for trading on an exchange
60
Where are unlisted stocks traded?
OTC market
61
How long are ECN's open for?
24 hours
62
Under what conditions must a person register as an Investment Advisor?
Anyone who gives investment advice as a regular part of their business and does so for compensation
63
What explains what lines of business the BD undertakes?
FINRA membership agreement
64
What is the difference between the bid and ask
Spread, the market maker's income
65
Which exchange member is responsible for acting as the dealer on the floor of an exchange for a specific security?
Designated Market Maker
66
What firm acts as a Fully disclosed firm's back office?
Carrying/clearing firm
67
What is anyone who gives investment advice as a regular part of their business and does so for compensation?
Investment Advisor
68
If a security is very liquid that means____?
It is very easy to sell
69
What is the OCC?
Options Clearing Corporation, Is the clearing agent for listed options contracts–those listed for trading on U.S options exchanges.
70
What entity standardizes, guarantees the performance of, and issues options contract?
OCC, options clearing corporation
71
In which market is it typical for institutional investors to transact large blocks of listed or unlisted stock trade?
Fourth Market (ECNs)
72
What is it called when the issuer of a security buys the security from investors through the secondary market?
Buyback
73
What must carrying firms do regarding customer funds and securities held in their custody and the firm's own capital and securities?
The firm must segregate the two and it may not comingle it's assets with client assets
74
What entities can be considered clearing agencies?
Securities depositor, BDs, commercial banks...any organization that receives and delivers payments and securities on behalf of both parties
75
Can a BD act as a broker and a dealer on a transaction?
Never
76
What is a custodian?
A person who manages a minor's account under the Uniform Transfers to Minors Act (UTMA) or the Uniform Gift to Minors Act (UGMA), OR a firm that holds assets in a qualified retirement account such as an IRA
77
What is the largest exchange?
NYSE
78
A security that can't be easily sold is _____?
Iiquid
79
What exchange member represents their specific firm and their firm's clients on the exchange floor?
Floor Broker
80
What requirements must agents of Investment Advisers meet?
Register, and pass the series 65 or 66 exams (for representatives with a Series 7)
81
What is proprietary trading?
Trading a firm's own capital
82
Carrying firms act as what firm's back office?
Fully disclosed/introducing firm
83
What is a court-appointed custodians over a minor or an incapacitated adult?
Guardian
84
In what market is the seller never the issuer?
Secondary market
85
What firm must maintain asset levels (net capital) higher than that of firms that do not accept custody of funds or securities?
Carrying/clearing firms
86
What is a prime account?
An account that allows a customer to select one member firm (prime broker) to provide custody and other services
87
What market is open for 24 hours a day?
Fourth market (ECNs)
88
What is a type of retail investor that trades rapidly in an out of positions?
Day trader
89
In what market is the seller the issuer?
Primary market
90
After becoming a FINRA member, what must firms never state?
That they are endorsed, approved, or recommended by a regulator in both verbal and written communications
91
What firm introduces its customers to a clearing firm?
Fully disclosed firm/Introducing BD/firm
92
What is a guardian?
Court-appointed custodians over a minor or an incapacitated adult
93
Which exchange member is responsible for guaranteeing liquidity?
Designated Market Maker
94
What is a transfer agent?
Typically a commercial bank or trust company used by a corporation that is responsible for:
1. Ensuring that its securities are issued in the correct owner's name
2. Canceling old and issuing new certificates?
3. Maintaining records of ownership
4. Handling problems relating to lost stolen or destroyed certificates
95
What is the role of Floor Brokers?
Are representatives of firms and their firm's clients on the exchange floor. If a customer places a trade that will execute on an exchange they are responsible for handling it
96
What is the clearing agent for listed options contracts–those listed for trading on U.S options exchanges.
OCC, options clearing corporation
97
What is a trustee?
A fiduciary that oversees a trust
98
In the secondary market is the seller the issuer?
Never
99
How can an issuer be involved in the secondary market?
Through a buyback, where the issuer of a security may buy the security from investors through the secondary market
100
What is the Nasdaq Intermarket?
Third market, trading market in which exchange-listed securities are traded in the OTC market
101
What is the purpose of the Securities Exchange Act of 1934?
Regulates the secondary market
102
What is a clearing agency?
An intermediary between the buy and sell sides of a transaction.
103
What is the exchange market composed of?
NYSE and other exchanges on which listed securities are traded
104
How is a prime brokerage account opened?
A prime broker must sign an agreement with the customer, containing the terms of the business relationship, and names of all executing brokers the customer has contracted with. The prime broker then enters into written agreements with each executing broker named.
105
What is the relationship between transfer agents and registrars?
Registrars provide audit and oversight services for transfer agents
106
What is the fourth market?
ECNs (Electronic Communication Networks), a market for institutional investors in which large blocks of listed or unlisted stock trade in transactions unassisted by BD's
107
How are exchanges defined?
Physical location and Pricing system
108
What is the largest securities depository?
DTCC (The Depository Trust and Clearing Corporation)
109
What is a person that manages assets for another person?
Fiduciary
110
What does the Over the Counter market typically trade?
unlisted stocks, most bonds
111
What are considered fiduciaries?
Custodian, Trustee, Guardians, Executors, investment adviser
112
What is an executor?
Custodian of an estate
113
What are the different types of members of the exchange?
DMM(Designated Market maker), Floor broker, Two-Dollar Broker, Floor Trader
114
Where does OTC trading occur?
Between Market Makers in a decentralized electronic market
115
What does every member firm BD operate under?
Individualized membership agreement with FINRA and possibly other SROs (Self-regulatory organizations)
116
What securities are very iliquid?
Limited partnership units
117
What is the alternate name for carrying firm?
Clearing firm
118
What is the alternate name for fully disclosed firm?
Introducing BD
119
What happens when a customer sells a security in the OTC market?
The customer sells to a dealer through a BD at the bid price, meaning the dealer purchases the bid from the customer
120
Who can conduct transactions in the third market?
BD's registered as OTC market makers in listed securities
121
What is the ability to buy or sell a security easily?
Liquidity
122
What happens when a customer buys a security in the OTC market?
The customer buys from a dealer through a BD at the ask price
123
What are the three types of BD firms?
Carrying firms, fully disclosed firms, prime brokers
124
What is responsible for canceling old and issuing new certificates for a corporation?
transfer agent
125
What are the primary functions of the OCC?
Standardize, guarantee the performance of, and issue options contracts. The OCC determines when new options contracts should be offered to the market on an underlying security. It also designates contract specifications, such as strike prices and expiration months.
126
Who can transact trades on the floor of the exchange?
Members of the exchange
127
What are investors?
Those who buy and sell securities in the secondary markets
128
Besides being a securities depository, what are the other functions of the DTCC?
Provides automated clearing and settlement services in a book-entry format to banks and BDs for stock and bond trades and employs a Continuous net settlement system. It also functions as a central securities depository by in more than 60 countries
129
Orders that can be placed anonymously and their volume and price not disclosed to the public are known as what?
Dark pools
130
What is a fiduciary?
A person that manages assets (usually financial) for another person
131
Can employees of the exchange transact trades on the floor of the exchange?
No
132
What is it called when a firm trades its own capital?
Proprietary trading?
