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Investments 1 > PP 5 - Financial Trading Market > Flashcards

PP 5 - Financial Trading Market Flashcards

(54 cards)

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1
Q

_____ securities are traded among investors

A

already-issued

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2
Q

issuing firm…

A

dosnnot receive proceeds and is not directing involved

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3
Q

what does issuing firm receive?

A

proceeds in the issuance market

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4
Q

three purposes of the trading market

A
  1. bring together buyers and sellers at a low cost
  2. minimize time to trade and promotes price continuity
  3. set and update prices of financial assets
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5
Q

bid price: market will…

A

purchase at this price

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6
Q

ask price: market will…

A

sell at this price

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7
Q

ask>bid, difference is..

A

bid ask spread

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8
Q

best bid price would be the…

A

lowest price

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9
Q

best ask price would be the…

A

highest price

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10
Q

order types specify…

A

how your orders get executed

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11
Q

the market moves so fast, how can you guarantee to get the best price?

A

Reg NMS requires exchanges to route orders to exchanges with the best price

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12
Q

Reg NMS establishes the best price - ____ using ____

A

NBBO (national best bid and offer), SIP (securities information processor)

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13
Q

Reg NMS requires exchanges to route order to the NBBO through…

A

rule 610 and 611

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14
Q

if bid is > ask…

A

many trades will be happening - BAD

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15
Q

57% of trading volume at NYSE comes from…

A

EXOTIC ORDER TYPES

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16
Q

exotic order types tagged DNS refuse…

A

Reg NMS routing to the NBBO

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17
Q

why do the majority of orders refuse Reg NMS routing to the best price?

A

because NBBO uses gross price NOT best price

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18
Q

rule 611 is the…

A

order protection rule

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19
Q

with rule 611, NYSE routes the market buy orders to..

A

NASDAQ to avoid trade-though to the best price

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20
Q

we find rule 611 always..

A

route orders to better prices

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21
Q

route 611 only account for ____% of routing

A

31

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22
Q

route 610 accounts for ____% of routing

23
Q

most routings led to…

Study These Flashcards
A

worse net prices

24
Q

rule 610…

Study These Flashcards
A

prohibits locked markets

25
with rule 610, NYSE routes the limit buy orders to NASDAQ to...
avoid a locked market
26
same price before fees is ____ price after fees
worse
27
routing fee =
0.30 cents per share
28
liquidity making rebates =
0.10 cents
29
routing lead to worse net price of...
0.40 cents
30
Reg NMA defines NBBO on _____, but...
gross price, traders also need to pay routing fees
31
what does DNS order do to the market?
unlock the market by canceling the order
32
how does DNS unlock the market?
canceling the order
33
the majority of rule 610 routings lead to...
worse net prices
34
what is the solution to rule 610?
add DNS instructions to refuse routing
35
we find that professional market makers use DNS orders to...
collect rebates and avoid fees
36
when rebate increase...
more orders refuse routing
37
DNS limit orders and liquidity
quick liquidity
38
DNS limit order are more likely to...
improve bid-ask spread
39
DNS rely on _____ to break even
the fees
40
what does add-liquidity-only (ALO) order do?
unlock the market and avoid take fees
41
how do add-liquidity-only (ALO) orders unlock the market?
avoiding routing fees
42
DNS orders avoid routing fees, but may...
pay take fees by taking local liquidity
43
ALO avoids what fees?
take fees and routing fees
44
ALO refuses to take liquidity in...
any market including NYSE
45
ALO executed ONLY...
when the order can collect the rebates
46
slide order and hide not slide order: unlock the market and...
avoid canceling
47
cancelation is costly to..
HFTs
48
why is cancelation costly to HFTs?
because they need to resubmit orders and may lose front-queue positions
49
what do slide orders do?
reprice the order to one tick away from locked price
50
what do hide not slide orders do?
unlock the market by hiding the quote
51
NYSE provides a ____ order to cater to firms who repurchase their shares
buy minus zero plus (BMZP)
52
NYSE provides BMZP order to...
cater to firms who repurchase shares
53
what does BMZP order do?
pegs the order to a reference price that is the higher price of the current bid and the last trade price (basically sets a price ceiling)
54
what does SEC rule 10b-18 say?
repurchase price cannot exceed highest bid or previous trade prices

Investments 1 (4 decks)

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