Vocabulary Flashcards
Learn vocabulary for Chapter 1
May Day
- May 1, 1975
- the day on which brokerage commission rates were fully deregulated
- now established by competition among firms
Initial public offering (IPO)
public offering of securities which were previously privately held (a.k.a. going public)
firm-commitment basis
a public offering in which the underwriter purchases the securities from the issuer and then sells them to the public
best-effort basis
- the underwriter acts as an agent for the issuer
2. promises to use its best effort to sell the securities
lettered stock
- newly issued stock sold in large lots at a discount to investors
- sold in a private placement prior to a public offering of the same issue
registered representative
an employee of a registered brokerage firm who is qualified to serve as an account executive for the firm’s customers
Series 7
- a general securities registered representative license
2. qualifies the broker to solicit, purchase, and/or sell all securities products
Series 6
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)
Gramm-Leach-Biley Act
- passed in 1999
2. repealed the Glass-Steagall Act (the Bank Act of 1933)
floor trader
- one holding a seat on an exchange who trades for his or her own account.
- Also known as a registered competitive market maker (RCMM).
seat
a membership in the New York Stock Exchange
dual listing
a security listed for trading on more than one exchange
over-the-counter (OTC)
the market in:
- unlisted securities
- off-board trading in listed securities
electronic communications network (ECN)
- organizations that provide networks in which customers trade securities directly with each other.
- ECNs make up the forth market.p
market order
immediate execution to buy or sell at the best price available
limit order
an order to buy or sell at a prespecified price
bear raid
an attempt to drive prices down by massive short sales
self-regulatory organization
- Regulated by the SEC under the authority of the Securities Act of 1934.
- SROs include the NYSE, the AMEX, and NASDAQ.
Securities Investor Protection Corporation (SIPC)
- 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
introducing firm
the firm that employs the individual broker who takes the customer’s order and sees that the order gets executed
clearing firm
- 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
street name
- held in a customer account at a brokerage house
2. registered in the firm’s name
discretionary account
broker is authorized to exercise discretion with regard to purchases and sales
wrap account
- a single annual fee known as a wrap fee is paid
- allows a customer access to an independent money manager without requiring the client to enter into a direct contract with the money manager
churning
trades that are made for the primary purpose of generating commission income for the broker
cash account
- the most basic account for an investor
2, sometimes referred to as a Type 1 account
- An investor must have sufficient cash already in the account to complete any purchases.
margin account
- partially funded with money borrowed from the brokerage firm
- regulated by the Fed
paying for order flow
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)
