Unit 8: Trading Securities Flashcards
Trading of securities in the secondary market is regulated by the
The Securities Act of 1934.
The Act of 1934 created the _________and gave it authority to regulate securities exchanges and the OTC market.
Securities and Exchange Commission (SEC)
The Securities Act of 1933 regulates_______ issues of securities
primary
The Securities Act of 1934 (aka Exchange Act) regulates_______ trading
secondary
The Exchange Market is the ________Market
Auction Market
The Over-the-Counter (OTC) Market is the ________ Market
Second Market
The_______ Market (OTC Listed) is the Nasdaq Intermarket, where exchange listed securities are traded in the OTC
Third
The ______ Market is for institutional investors; transactions are through ECNs
Fourth
A_______ cannot act as both a broker and a dealer in the same transaction.
firm
A _______:
- acts as an agent transacting orders on the client’s behalf
- charges a commission
- is not a market maker
- must disclose its role to the client and the amount of its commissions
Broker
A ________:
- acts as a principal, dealing in securities for its own account and at its own risk
- charges a markup or markdown
- may make markets and take positions (long or short) in securities
- must disclose its role to the client and the markup or markdown if a Nasdaq security.
Dealer
Securities traded on the NYSE, known as ______ securities, must satisfy the exchanges listing requirements.
listed
They are both agent and principal. They facilitate trading in specific stocks and their chief function is to maintain a fair and orderly market in those stocks. They also minimize price disparities that may occur at the opening of daily trading.
Specialist or Designated Market Maker (DMM)
Exchange securities are bought and sold in an ______ market. Exchange markets are also referred to as a double auction market because both buyers and sellers call out their best bids and offers in an attempt to transact business.
auction
Orders places are by:
_______ – first order in
_______ – largest order of those submitted
_______ – random drawing
Priority;
Precedence;
Parity
Volatile Market Conditions
Level 1 Halt – _____ Decline (3:25pm)
Level 2 Halt – _____ Decline (3:25pm)
Level 3 Halt - ______ Decline (at any time) Trading shall halt and not resume
Level 1 Halt – 7% Decline
Level 2 Halt – 13% Decline (3:25pm)
Level 3 Halt - 20% Decline
The type of order that you execute immediately at the market price
Market Orders
The type of order that limits the amount paid or received for a security
Limit Orders
This type of order becomes a market order if the stock reaches or goes through the ______ (trigger or election) price
Stop Orders;
stop
This type of order is entered as a stop order and changed to a ______ order if the stock hits or goes through the stop (trigger or election) price.
Stop Limit;
limit
Short Sale Rules – the ________ prohibits directors, officers and principal stockholders (insiders) from selling short stock in their own companies.
Securities Exchange Act of 1934
_______ Exchanges – tend to focus on the securities of companies within their regions. (DUAL LISTING if securities are also listed on the NYSE).
Regional Exchanges
A large percentage of the orders the NYSE receives each day are processed through a computerized trading and execution system known as ___________.
Super Display Book (SDBK)
The ______ tape receives, validates and sequences the last sale price and size of all equity transactions in listed securities from all U.S. Stock Exchanges and FINRA.
The consolidation tape
