Vocabulary Flashcards

Learn vocabulary for Chapter 1

1
Q

May Day

A
  1. May 1, 1975
  2. the day on which brokerage commission rates were fully deregulated
  3. now established by competition among firms
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2
Q

Initial public offering (IPO)

A

public offering of securities which were previously privately held (a.k.a. going public)

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3
Q

firm-commitment basis

A

a public offering in which the underwriter purchases the securities from the issuer and then sells them to the public

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4
Q

best-effort basis

A
  1. the underwriter acts as an agent for the issuer

2. promises to use its best effort to sell the securities

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5
Q

lettered stock

A
  1. newly issued stock sold in large lots at a discount to investors
  2. sold in a private placement prior to a public offering of the same issue
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6
Q

registered representative

A

an employee of a registered brokerage firm who is qualified to serve as an account executive for the firm’s customers

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7
Q

Series 7

A
  1. a general securities registered representative license

2. qualifies the broker to solicit, purchase, and/or sell all securities products

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8
Q

Series 6

A

a license that qualifies the broker to sell:

  • open-end mutual funds
  • initial offerings of closed-end investment companies
  • variable products such as variable annuities (must have appropriate insurance license)
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9
Q

Gramm-Leach-Biley Act

A
  1. passed in 1999

2. repealed the Glass-Steagall Act (the Bank Act of 1933)

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10
Q

floor trader

A
  1. one holding a seat on an exchange who trades for his or her own account.
  2. Also known as a registered competitive market maker (RCMM).
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11
Q

seat

A

a membership in the New York Stock Exchange

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12
Q

dual listing

A

a security listed for trading on more than one exchange

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13
Q

over-the-counter (OTC)

A

the market in:

  1. unlisted securities
  2. off-board trading in listed securities
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14
Q

electronic communications network (ECN)

A
  1. organizations that provide networks in which customers trade securities directly with each other.
  2. ECNs make up the forth market.p
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15
Q

market order

A

immediate execution to buy or sell at the best price available

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16
Q

limit order

A

an order to buy or sell at a prespecified price

17
Q

bear raid

A

an attempt to drive prices down by massive short sales

18
Q

self-regulatory organization

A
  1. Regulated by the SEC under the authority of the Securities Act of 1934.
  2. SROs include the NYSE, the AMEX, and NASDAQ.
19
Q

Securities Investor Protection Corporation (SIPC)

A
  1. a federal agency

2. guarantees the safety of brokerage accounts up to $500,000, no more than $100,000 of which may be in cash

20
Q

introducing firm

A

the firm that employs the individual broker who takes the customer’s order and sees that the order gets executed

21
Q

clearing firm

A
  1. the firm that holds the customer’s cash and securities

2. sends out statements describing the assets it holds as “on deposit” for the customer

22
Q

street name

A
  1. held in a customer account at a brokerage house

2. registered in the firm’s name

23
Q

discretionary account

A

broker is authorized to exercise discretion with regard to purchases and sales

24
Q

wrap account

A
  1. a single annual fee known as a wrap fee is paid
  2. allows a customer access to an independent money manager without requiring the client to enter into a direct contract with the money manager
25
Q

churning

A

trades that are made for the primary purpose of generating commission income for the broker

26
Q

cash account

A
  1. the most basic account for an investor

2, sometimes referred to as a Type 1 account

  1. An investor must have sufficient cash already in the account to complete any purchases.
27
Q

margin account

A
  1. partially funded with money borrowed from the brokerage firm
  2. regulated by the Fed
28
Q

paying for order flow

A

the practice in which a dealer pays a firm or a particular broker for the number of orders that are sent to him or her (ethical issue)