Terms-C

Question 1

Callable bond

Answer 1

A type of bond issued with a provision allowing the issuer to redeem the bond prior to maturity at a predetermined price.

Question 2

Capping

Answer 2

Placing selling pressure on a stock in an attempt to keep its price low or to move its price lower; this is manipulative.

Question 3

Cash account

Answer 3

An account in which the customer is required by the SECs Regulation T to pay in full for securities purchased not later than two days after the standard payment period.

Question 4

Cashiering department

Answer 4

Department within a brokerage firm that delivers and receives securities and money to and from other firms and clients of the firm.

Question 5

Cash settlement

Answer 5

Requires delivery of securities from the seller and payment from the buyer on the same day the trade is executed.

Question 6

Cash transaction

Answer 6

A settlement contract that calls for delivery and payment on the same day the trade is executed; payment is due by 2pm ET (or within 30 minutes of the trade if made after 2pm ET)

Question 7

C corporation

Answer 7

A traditional and most common type of incorporated company. A C corp is permitted to have an unlimited number of shareholders. Used by companies that require many investing shareholders and expect to offer shares publicly. Shareholders are shielded from personal liability.

Question 8

Chicago Board Options Exchange (CBOE)

Answer 8

The self-regulatory organization with jurisdiction over all writing and trading of standard options and related contracts listed on that exchange. The first national securities exchange listing and trading options.

Question 9

Churning

Answer 9

Excessive trading in a customers account by a registered representative who ignores the customers interests and seeks only to increase commissions.

Question 10

Circuit breaker halt

Answer 10

Occurs when all trading in Nasdaq and exchange-listed securities by member firms is halted, because extraordinary market movements cause a market wide drop in stock prices. For example, Rules 80B and 80C of the NYSE call for trading halts based on a decline in the S&P 509 and Russell 1000 Indexes.

Question 11

Class A Share

Answer 11

1. A class of mutual fund share issued with a front end load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay.
2. Shares of a company that have differing characteristics from other classes of stock.

Question 12

Class B share

Answer 12

A class of mutual fund share issues with a back end load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay.

Question 13

Class C share

Answer 13

A class of mutual fund share issued with a level load.

Question 14

Clearing agency

Answer 14

An intermediary between the buyer and sell sides in a securities transaction that receives and delivers payments and securities. Stock Clearing Corp of Philadelphia (SCCP), National Securities Clearing Corporation (NSCC)

Question 15

Clearing BD

Answer 15

A. Broker dealer that clears its own trades as well as those of introducing brokers. A clearing brokers dealer can hold customers securities and cash.

Question 16

Clearly erroneous trades

Answer 16

Transactions I which an obvious error has occurred in the security’s price, number of shares, identification, or other relevant terms. Under FINRA Rule 11890, such trades may be submitted to FINRA for review. FINRA may subsequently declare the transaction null and void, adjust the terms, or decline to act on the complaint. If a party to the trade wishes to appeal the staff determination, it may seek review by the Market Operations Review Committee. (MORC)

Question 17

Close

Answer 17

1. The price of the last transaction for a particular security on a particular day.
2. The midprice of a closing trading range.

Question 18

Closed end management company

Answer 18

An investment company that issued a fixed number of shares in an actively managed portfolio of securities. The shares may be of several classes, and they are traded in the secondary marketplace, either on an exchange or over the counter. The market price of the shares is determined by supply and demand and not by NAV.

Question 19

Closing Range

Answer 19

The relatively narrow range of prices at which transactions take place in the final minutes of a trading day.

Question 20

Code of Arbitration

Answer 20

FINRAs formal procedure for handling trade practice complaints involving violations of the Member Conduct Rules.

Question 21

Code of procedure (COP)

Answer 21

FINRAs formal procedure for handling trade practice complaints involving violations of the Master Conduct Rules.

Question 22

Collateral

Answer 22

Certain assets set aside and pledged to a lender for the duration of the loan.

Question 23

Collateralized mortgage obligations

Answer 23

A mortgage backed corporate security. Unlike pass through obligations issued by FBMA and GNMA, its yield is not guaranteed and it does not have the backing of any agency if the federal government. These issues attempt to return interest and principal at a predetermined rate.

Question 24

Colocation

Answer 24

Exists when a high frequency trader sets up a trading platform (computer servers) on an exchange or in very close proximity to a market center to save a small amount of time on order execution. This small savings in time, measures in sub milliseconds gives the trader an advantage over those traders whose servers are on distant locations.

Question 25

Combined account

Answer 25

A customer account that has long and short margin positions in different securities.

Question 26

Commingling

Answer 26

The combining by a brokerage firm of one customers securities with another customers securities and pledging them as joint collateral for a bank loan; unless authorized by the customer, this violated SEC Rule 15c2-1.

Question 27

Commission

Answer 27

A service charge assessed by an agent in return for arranging the purchase or sale of a security. A commission must be fair and reasonable, considering all relevant factors of the transaction.

Question 28

Commission recapture

Answer 28

A form of institutional discount brokerage. Investment managers direct a portion of brokerage business to a member firm, which then rebates a portion of the commission back to the fund to pay for services, such as SIP services, accounting, and research. The rebate is paid directly to the firm as apposed to another CSA known as soft dollars. Both commission sharing agreements are regulated under Section 28(e) of the SEA.

Question 29

Commodities Futures trading commission (CFTC)

Answer 29

A federal government agency that regulates commodity futures and options markets

Question 30

Common stock

Answer 30

A security that represents ownership in a corporation. Holders of common stock exercise some control by electing a board of directors and voting on changes in capital structure, such as a stock split

Question 31

Competitive inactive markets

Answer 31

Occurs when there are two or three non-dominant market makers in a security with low trading activity. Contemporaneous sales to, and purchase from, other dealers are used to establish a prevailing price for markups and markdowns.

Question 32

Completion of the transaction

Answer 32

The point at which a customer pays any part of the purchase price to the broker dealer for a security he has purchased or delivers a security that he has sold. If the customer makes payment to the broker dealer before the payment is due, the completion of the transaction occurs when the brokers dealer delivers the security into the customers account, which is the settlement date.

Question 33

Compliance department

Answer 33

The department within a brokerage firm that oversees the trading and market making activities of the firm. It ensures that the employees and officers of the firm are abiding by the rules and regulations of the SEC, exchanges, and SROs.

Question 34

Confirmation

Answer 34

A printed document that states the trade, settlement date, and money due from or owed to a customer; it is sent or given to the customer on or before the settlement date.

Question 35

Consolidated Quotation Systems (CQS)

Answer 35

A quotation system only providing last sale reporting services for exchange listed equity securities. Newly registered CQS market makers must begin entering quotes within five days.

Question 36

Consolidated Tape

Answer 36

A service of the Consolidated Tape Association (CTA), an SEC registered SIP, that delivers real time market data to subscribers as they occur on the various exchanges. The Tape distributes reports to subscribers over two different networks that the subscriber can tap into through either the high speed electronic or the low speed ticker lines. Network A reports transactions in NYSE listed securities.Network B reports NYSE MKT and NYSE Arca securities transactions and reports of transactions in regional exchange issues.

Question 37

Contemporaneous trader

Answer 37

A person who enters a trade at or near the same time and in the same security as a person who has acted on inside information. The contemporaneous trader may bring suit against the inside trader.

Question 38

Continuing education

Answer 38

Firm element is required for all registered persons who have direct contact with the public; it is conducted annually. Regulatory element is required for all registered persons with 120 days of the second registration anniversary and every three years after.

Question 39

Continuous Net Settlement (CNS)

Answer 39

An automated book entry accounting system. The system provides clearance for equities, corporate and municipal bonds, UITs, and more.