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Series 65 (FIN-451) > Unit 23 > Flashcards

Unit 23 Flashcards

Trading Securities

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Series 65 flashcards
1
Q

4 accounts that can only be opened as cash accounts

A
  1. Personal retirement accounts, such as IRAs
  2. Corporate retirement accounts;
  3. Custodial accounts, such as Uniform Transfer to Minors Act accounts (UTMAs)
  4. Coverdell ESAs
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2
Q

Regulation that identifies which securities are eligible for purchase on margin

A

Regulation T

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3
Q

3 types of securities that may be purchased on margin

A
  1. Exchange-listed stocks and bonds
  2. Stocks traded on the Nasdaq Stock Market
  3. Warrants
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4
Q

3 securities that cannot be purchase on margin

A
  1. Options
  2. Preemptive stock rights
  3. Insurance contracts, e.g., variable annuities and variable life
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5
Q

Can be used as margin collateral after 30 days of ownership

A

Mutual funds

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6
Q

3 Margin Account Agreements

A
  1. Credit Agreement
  2. Hypothecation Agreement
  3. Loan Consent
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6
Q

What credit agreement does

A

Discloses terms under which credit is extended, including use of securities as collateral for the margin loan

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7
Q

Hypothecation agreement

A

Gives the firm permission to pledge (hypothecate) securities held on margin to a lending institution

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8
Q

Agreement that is optional

A

Loan consent (Gives firm permission to lend securities in the margin account to other brokers)

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9
Q

Broker call loanrate

A

Interest rate banks charge broker-dealers on money they borrow to lend to margin account customers

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10
Q

When maintenance margin call would be sent

A

When customer equity in account drops below 25% of the total

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11
Q

Can firms sell any security if a maintenance call is not filled?

A

Yes, even if it was different than the one that dropped

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12
Q

Difference between minimum maintenance and house maintenance

A

Minimum maintenance set by SROs, House maintenance set by individual broker dealers

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13
Q

Long equity equation

A

CMV long – debit balance = long equity

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14
Q

Short equity equation

A

Credit balance – CMV short = short equity

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15
Q

Two big SEC Powers

A
  1. Suspend trading in any nonexempt security for up to 10 days without prior notice
  2. Suspend trading on an entire exchange for up to 90 days (in order to do this, the SEC must give prior notification to the president of the United States)
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16
Q

How many stock exchanges are listed as national stock exchanges

A

21

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17
Q

What designated market makers (DMM), in an exchange market do

A

Fill limit and market orders for the public and trades for his own account to either stabilize or facilitate trading when imbalances in supply and demand occur

18
Q

How OTC market is priced

A

Interdealer network, in other words, prices are negotiated

19
Q

Market-makers

A

Broker-dealers who stand ready to buy and sell at least the minimum trading unit, usually 100 shares

20
Q

Who regulates OTC

A

FINRA

21
Q

Who regulates listed stock exchanges

A

NYSE

22
Q

How NYSE market is priced

A

Determined by auction

23
Q

Broker capacity of a broker dealer

A

Facilitate trades between buyers and sellers and charge a commission

24
Q

Dealer capacity of a broker dealer

A

Selling security out of their inventory

25
Q

Ways dealer differs from broker (2)

A
  1. Charge markup instead of commission
  2. Makes markets
26
Q

BAC/DPP

A

Brokers act as Agents for Commissions/Dealers act as Principals for Profits

27
Q

Whenever a trade is made without a commission indicated on the confirmation, what does it mean

A

Markup/markdown was charged

28
Q

Bid price

A
  1. What broker-dealer buys at
  2. What investor recieves
29
Q

Ask price

A
  1. What broker-dealer sells at
  2. What investor pays
30
Q

Two items not on an order ticket

A
  1. Current market price of the security
  2. Client’s name or address
31
Q

A stop limit order

A

Order that, once triggered, becomes a limit order instead of a market order

32
Q

What Buy Stop Orders do (2)

A

Protect against loss/ protect gain from a short stock position

33
Q

What Sell Stop Orders do (2)

A

Protect against loss/ protect gain from a long stock

34
Q

A dark pool would most likely be used by

A

An institution

35
Q

Pegging

A

Manipulating the market by entering buy orders for the purpose of supporting a stock price

36
Q

Regulation T call

A

Original call for funds

37
Q

When comparing a clearing firm to an introducing firm, it would be expected that

A

The clearing firm has higher financial requirements

38
Q

What term used to describe a person on the floor of a stock exchange who stands ready to buy or sell shares of specified stocks?

A

Specialist

39
Q

What contra party is

A

Person on the other side of the trade

40
Q

Can an investment adviser charges two customers two different fees for a similar service?

A

Yes

41
Q

What is true about thinly traded stocks on the OTC market

A

Bid-ask price is likely to be larger than normal

42
Q

Minimum in a block trade

A

$10,000

43
Q

What a narrow bid-ask price means

A

More active trading volume in a stock

Series 65 (FIN-451) (21 decks)

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