Unit 8- Trading Securities Flashcards
OTC Market
inter-dealer market in which unlisted securities trade
Second Market
OTC Market
Third Market
Nasdaq Intermarket, in which exchange listed securities are traded in the OTC market by market makers
Fourth Market
for institutional investors to trade large blocks of stock
ATS (Alternative Trading Systems)
alternative trading systems used for dark pools
FINRA TRF
Trade Reporting Facility is an automated trade reporting and reconciliation service operated by ACT
CHB (Commision House Broker)
floor brokers
Two Dollar Brokers
when CHB too busy, go to two-dollar brokers who charge commisions
Registered Trader
trade primarily for their own accounts and registered with SEC
DMM (Designated Market Maker)
facilitate trading in specific stocks
FCTN: maintain a fair and orderly market
Level 1 Halt
What % drop? How long of a halt?
7% 15 minutes (before 3:25), no halt (after 3:25)
Level 2 Halt
What % drop? How long of a halt?
13% 15 minutes (before 3:25), no halt (after 3:25)
Level 3 Halt
What % drop? How long of a halt?
20%
The rest of the day
SLP (Supplemental Liquidity Provider)
off-floor market maker operates and competes wtih DMM.
- Must maintain bid or offer in an assigned block for at least 5% of trading day
Crossing Orders
one order to buy 1,000 and one order to sell 1,000
DMM may use these orders to fulfill one another if a bid for $.01 higher is rejected by the trading crowdf
Market Order
executed immediately at the market price
Limit Order
limits the amount paid and received for securities
Priority is based on first orders submitted (time)
Stop Order (also Stop Loss Order)
If the stock reaches the stop price (trigger price), the order goes through
Stop Limit Order
If the stock reaches the stop price, the stop order changes into a limit order
Benefits of buying a stop order
protects a profit/limits a loss in a short position
Benefits of SELLING a stop order
protects profits/limits loss in a long position
Day Orders
only valid for that trading day
Good-Till-Canceled Orders (GTC)
valid until executed or canceled
At-the-Open / Market-On-Close Orders
executed at the opening or close of market
NH (Not Held) Orders
customer agrees not to hold the broker to a particular time and price of execution.
*Can only be DAY ORDERS
Fill or Kill Order (FOK)
fill the order completely or kill it
IOC- Immediate or Cancel Order
immediate fill the order, partially fill is fine, and then cancel the rest of the order
All-or-None (AON) Orders
Executed in their entirety or not at all, but they can be Day Orders OR GTC orders
Alternative Orders (OCO)
Place two orders for two scenarios. If one order is executed, the other is canceled.
Do Not Ship (DNS) Orders
limit order to buy or sell that can be executed by the NYSE only
Regulation SHO
Short Sales may now occur at any time during trading day.
Locate Requirement: must locate the securities for borrowing to ensure delivery
Super Display Book (SDBK)
- Nearly 75% of orders are processed through here
Broker/Dealers use this computerized order routing system to route an order directly to the appropriate equity post on the trading floor
CTS (Consolidated Tape System)
receives, validates, and sequences the last sale price and size of all equity transactions
DIGITS & VOL DELETED (TAPE MESSAGE)
first digit of price and volume will be dropped
REPEAT PRICES OMITTED (TAPE MESSAGE)
only show price of transactions that differ in previous report
SLD (TAPE MESSAGE
did not report a sale on time
HALT
trading in a security is halted
Who is the OTC regulated by?
FINRA & SEC
OATS (Order Audit Trail System)
tracks orders, quotes and other trade info
Backing Away
refusing to do business at quoted price is VIOLATION
Workout Quote
aproximate figure, often used with block positions
Nominal Quote
someones assessment of an inactively traded security- not a firm quote
In order to charge markups and markdowns, the market maker must be acting as PRINCIPAL/AGENT?
PRINCIPAL- dealing with inventory that holds financial risk
NASDAQ Quote Service: Level 1
ONLY INSIDE QUOTE (eg. DWAQ 35 - 35.13) - not guaranteed
NASDAQ Quote Service: Level 2
INSIDE QUOTE & QUOTES from market makers (guaranteed for at least 100 shares)
NASDAQ Quote Service: Level 3
INSIDE QUOTE & Market Maker Quote & ABILITY TO UPDATE THEIR OWN QUOTES ON SECURITIES WHICH THEY MAKE MARKETS FOR
How long after a market maker makes a trade does he/she have to report it?
30 seconds
INSIDE MARKET
BEST BID and BEST ASK PRICES
