Unit 1.3 Flashcards by Unknown Unknown

For what reason are bond/stock powers usually used?

When certificates are mailed and therefore less secure

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What is a settlement that occurs by the end of the business day one business day following the trade date?

Regular way settlement

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What is the inside market?

The highest available bid or the lowest available ask

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What is it called when a security is held in electronic form by a BD on behalf of a customer?

Being held in street name

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What is a person who believes that a given market or stock is likely to go up in value rather than down?

Bull/Bullish

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What are sales proceeds?

Money received when a long position is closed

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What is a size?

The number of shares currently available at the bid and at the ask (usually expressed in round lots (units of 100 shares))

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What is an order?

An instruction given to a broker to buy or sell a security on behalf of an investor

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What is the difference between the bid and the ask prices?

The spread

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What position is Buy to open, sell to close?

Long position

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How are Good-til-canceled orders canceled?

If they are not executed by the last business day of April and October

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In which markets is a customer filing a Market-at-close order or Market-at-open order not guaranteed the exact opening or closing price?

Exchange, OTC

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What is a trigger price, that when reached, will trigger a market order?

Stop order

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What is a market order?

buy or sell; order is executed immediately at the best available market price

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What is a market order designated to be executed at the opening of the day?

Market-at-open order

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What are the Good delivery rules requirements for a position held in street name?

None, there is no physical certificate or signature required for good delivery when a position is held in street name

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What is the highest amount someone is currently willing to pay for a security?

The bid

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What is the risk associated with a long position?

The price of the security may fall, potentially resulting in maximum loss if the security becomes worthless

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What is a long position

A bullish position that anticipates a bought security will rise in value and can eventually be sold for profit

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What order is set to a specific price at which their order will trigger and then execute at a predetermined limit price?

Stop limit order

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What is the lowest amount someone is currently willing to sell a security?

The ask

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Under what circumstances is sub-penny pricing allowed?

If the stock trades below $1.00

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What order is executed immediately at the best available market price?

Market order

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What order is only valid until the close of trading on the day it is entered?

Day order

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What is the number of shares currently available at the bid and at the ask?

The size

Abbreviations, '&' symbol, are not permissible under ______ rules?

Good delivery rules

What type of transaction is it when a customer trades with another person found by a broker through an exchange?

Agent transaction

What is an All-or-None order?

An order that does not have be filled immediately and that must be executed in its entirety or not all

What position is Sell to open, buy to close?

Short position

When a bond certificate or physical stock is delivered, what must it contain?

1. Endorsed (signed) by all owners whose name appears on the face of the certificate 2. Signed EXACTLY as the name appears

What happens if a Day order is partially filled?

Any unexecuted portion of the order is canceled at the end of the trading day

What is a Market-at-close order?

A market order designated to be executed at the close of the day

What is selling a security one does not own in anticipation that the security will decline in value?

Short position/shorting

What is an order that is valid until executed or canceled?

Good-til-canceled order

What is the amount paid for in a long position?

Cost basis

What type of transaction when a customer makes a trade directly with a dealer?

Principal transaction

What on a stock/bond power is identified?

The specific certificate (issuer, number of shares, and certificate number)

What is a limit order?

buy or sell; an instruction to buy or sell a security at a specific price or better

What is a stop order?

A trigger price, that when reached, will trigger a market order

What is an Immediate-or-cancel order?

An order that requires the entire order to be executed immediately, and if any part of it cannot be filled right away, the unfilled portion is automatically canceled

What is a person who believes that a given market or stock is likely to go down in value rather than up?

Bear/Bearish

What are the components of a quote on a stock?

Name + bid price — ask price + (bid size x ask size)

What is the alternative name for same-day settlement?

Cash settlement

What is an instruction given to a broker to buy or sell a security on behalf of an investor?

Order

What is a principal transaction?

When a customer makes a trade directly with a dealer

What is a settlement that requires delivery of securities from the seller and payment from the buyer on the same day a trade is executed?

Cash/same-day settlement

What is a regular way settlement?

A settlement that occurs by the end of the business day one business day following the trade date.

What is a Fill-or-kill order?

An instruction to fill (execute in its entirety) the order immediately or cancel the order completely.

What is the ask?

The lowest amount someone is currently willing to sell a security

In what capacity is a BD acting when they When they sell securities from the firm's inventory to a customer or buy a security from a customer for their own inventory

Dealer

What is a round lot?

unit of 100 shares

What is the alternative name for cash settlement?

Same-day settlement

What is the money received when a long position is closed?

Sales proceeds

What is the inside quote?

The highest available bid or the lowest available ask

What other order(s) can an All-or-None order be?

Good-til-canceled, day order

What is the alternative to signing a bond/stock power?

Signing the back of a bond/stock certificate?

What is a settlement?

The process that ensures that both parties to an executed transaction receive what they are supposed to receive; money to the seller and securities to the buyer

What is a Good-til-canceled order?

An order that is valid until executed or canceled. However all GTC orders are automatically canceled if unexecuted on the last business day of April and October

What is a Market-at-open order?

A market order designated to be executed at the opening of the day

What order executes at a specified price or better?

Limit order

What is a bullish position that anticipates a bought security will rise in value and can eventually be sold for profit?

Long position

What is an order that does not have be filled immediately and that must be executed in its entirety or not all?

All-or-None order

What is an order assumed to be?

Day order

Where is evidence of ownership held for securities sold without a certificate?

At a Central agency

What is the risk of selling short?

The price of borrowed shares may increase, forcing the seller to buy back at a higher price instead of a lower price as anticipated. Because there is no limit on how high a security's price may rise, a short seller has unlimited loss potential

What is a Day order?

Orders are assumed to be day orders, and is valid only until the close of trading on the day it is entered.

How are different orders prioritized?

Market orders always take precedence over limit orders. Limit orders also stand in time priority

The rules that govern the specifications of the delivery of a physical stock or bond certificate in a trade are known as what?

Good Delivery rules

What is the other term for the lowest available ask?

Inside quote or inside market

What happens if a Day order is not filled?

The order is canceled at the close of the day's trading

What is a bid?

The highest amount someone is currently willing to pay for a security

Put simply, what is the cycle of a long position?

Buy to open, sell to close–Buy low, sell high

When are certificates required to be physically delivered?

When securities are issued with physical paper certificates

Put simply, what is the cycle of a short position?

Sell to open, buy to close

What is an order that requires the entire order to be executed immediately, and if any part of it cannot be filled right away, the unfilled portion is automatically canceled?

Immediate-or-cancel order

What is a stop limit order?

An order set to a specific price at which their order will trigger and then execute at a predetermined limit price

What is the value relationship between the bid and ask?

The bid is always less than the ask price

What is the spread?

The difference between the bid and the ask prices

What is the alternative to signing the back of a bond/stock certificate?

Sign a bond/stock power

What is a Bull?

A person who believes that a given market or stock is likely to go up in value rather than down

What are some grammatical examples of things not permissible under Good Delivery rules?

Abbreviations, '&' symbol,

What are the components of a quote?

bid, ask, size (usually)

In what capacity is a BD acting when they assist their customer in buying a security from a securities dealer or selling securities to a dealer?

Broker

What is selling a borrowed security to buy back the security at a lower cost?

Shorting

When does a BD act as a broker?

When they assist their customer in buying a security from a securities dealer or selling securities to a dealer

What is the other term for the highest available bid?

Inside quote or inside market

What is an agent transaction?

When a customer trades with another person through an exchange, and the broker finds the other person with whom to trade

When does a BD act as a dealer?

When they sell securities from the firm's inventory to a customer or buy a security from a customer for the dealer's inventory

What is short position?

Selling a security one does not own (borrowed from a stock lender) in anticipation that the security will decline in value, enabling the customer to buy back the shares later at a lower cost

What order is an instruction to execute the entire order immediately or cancel the order completely?

Fill-or-kill order

What does it mean to be "being held in street name"

When a security is held in electronic form by a BD on behalf of a customer

What are the components of a bid or ask?

Name + stock + bid price + size (in Round lot)

What is a market order designated to be executed at the close of the day?

Market-at-close order

What is the unit for 100 shares?

Round lot

What is a Bear?

A person who believes that a given market or stock is likely to go down in value rather than up

How is transfer of ownership recorded by the U.S treasury?

It is entered on the books or electronic files

Broadly, how does a market maker make money?

Buying at the bid and selling at the ask

What is a cash settlement?

A settlement that requires delivery of securities from the seller and payment from the buyer on the same day a trade is executed

What is the cost basis?

The amount paid for in a long position

How are U.S treasury securities issued?

In book-entry form

What is the process that ensures that both parties to an executed transaction receive what they are supposed to receive; money to the seller and securities to the buyer?

Settlement