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Investment Vehicles > The Secondary Market > Flashcards

The Secondary Market Flashcards

1
Q

Market Order

A

unpriced order that guarantees the investor an execution. The price is unknown

A market order to buy is executed at the lowest price available

A market order to sell is executed at the highest price available

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2
Q

Limit Order

A

An order that guarantees the investor a specific price limit but not an execution. Has a minimum or maximum price they are willing to Buy/ Sell at

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3
Q

Stop Orders

A

Protects investor from being hurt if the market goes the other way

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4
Q

Sell Stop

A

Used to protect a profit or long stock position. Placing an order that says don’t sell the stock unless at any point in time the stock starts to sell below the limit.

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5
Q

Sell Stop Limit

A

Same as sell stop but if its below a certain price then it turns into a limit order for that price instead of just a market order

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6
Q

Buy Stop

A

Used to protect a short stock position. Placing an order that says if any point in time the stock goes above a certain number then the order is to buy the stock.

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7
Q

Buy Stop Limit

A

Same as Buy stop but instead of becoming a market Order they become a limit order

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8
Q

What Does This Mean:

Sell 100 XYAZ @ 63 Stop Limit 62

A

Means if at any point in time the market goes below $63 sell the stock UNLESS its below $62 then don’t sell the stock.

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9
Q

What Does this Mean:

Buy 100 XYZ @ 68 Stop

A

Means if XYZ trades at or above 68 the order will be elected and become a market order to buy XYZ

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10
Q

What Does this Mean:

Buy 100 XYZ @ 68 Stop

A

Means if XYZ trades at or above 68 the order will be elected and become a market order to buy XYZ

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11
Q

What Does this Mean:

Buy 100 XYZ @ 68 Stop Limit 69

A

Means if XYZ trades at or above 68 the order will be elected and become a market order to buy XYZ UNLESS its above $69 then dont buy the stock.

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12
Q

All or Nothing Order

A

they either want to buy or sell all the stock position or none of it. No partial executions. Can be a day order or a Good Till Canceled Order

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13
Q

Immediate or Cancel Order

A

Limit order that will except partial executions. Basically buy or sell whatever you can RIGHT now then cancel the rest of the order.

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14
Q

Fill or Kill Order

A

An Immediate or Cancel Order except they don’t except partial Executions. All or nothing right now.

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15
Q

Not Held Order

A

gives the discretion to the floor trader or desk trader on whether it’s a good idea to buy or sell the security at that time and doesn’t hold the trader accountable if a better price comes available later in the day

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16
Q

Market on Open Order

A

You want to buy or sell the order on the market price on the opening of the market

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17
Q

Market on Close Order

A

You want to buy or sell the order on the market price on the closing of the market

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18
Q

Limit on Open

A

Same as Market on open except it’s a limit order not Market Order

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19
Q

Limit on Close

A

Same as Market on close except it’s a limit order not a market Order

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20
Q

VWAP Order (Volume Weighted Average Price)

A

Large Institutional Order for tons of shares to buy/ sell

Periodically throughout the day shares are bought usually at different prices. the VWAP is the average of those prices

VWAP = total dollars / number of shares

21
Q

Convert these stock split orders:

Type of split: 3:2

1) Sell 100 @ 60
2) Buy 100 @ 100

A

1) Sell 150 @ 40

2) Buy 150 @ 66.67

22
Q

What happens to orders on reverse stock splits?

A

the orders are canceled

23
Q

Commission House Broker

A

a Member of NYSE.

An employee of the member firm.

represent the orders for the broker-dealer and its customers.

24
Q

Two Dollar Broker

A

a Member of NYSE.

An independent floor broker who is there to carry out orders for the commission house brokers and other customers

used when the Commission House Brokers and other brokers are too busy

25
Q

Designated Market Maker

A

a Member of NYSE.

A person who is there to stand ready to buy and sell the designated securities for their own account and to help maintain a fair and orderly market in the securities in which they are the designated Market Maker

26
Q

Super Display Book

A

The NYSE’s electronic and routing and execution system this is how most retail orders are executed they are directed down to the floor electronically pop up on the screen next to the designated market marker then The DMM will execute the orders

27
Q

Supplemental Liquidity Providers

A

Off floor entities that are given access to the super display book to bid an offer for their own accounts. They must have a bid or an offer on the inside of the market at least 10% of the time.

28
Q

Short Sales

A

Selling the stock high and buying it back low

You borrow the stock from someone you sell it short, and then later, you buy the stock back and give it back to the borrower. If the stock dropped in the price you made money of whatever it dropped to.

29
Q

Affirmative Determination

A

all registered reps are required to determine if the investor is selling stock long (meaning they actually own the stock) or if they are selling it short and can borrow that stock to affect delivery. All orders being carried out must be clearly marked as long or short (that way people know if they actually own the stock or not)

30
Q

An order is Long if:

A
  • The seller has the securities
    • They have purchased the securities by trade and the transaction hasn’t settled. How they will say it on the test: “The person has entered into an unconditional contract to acquire the securities but has not yet done so”
    • Has issued conversion or exercised instructions for convertible security options, rights, or warrants (they must have issued instructions otherwise they still don’t own the stock)
31
Q

How frequently are firms required to report short stocks?

A

twice a month. for them and their customers

32
Q

What does regulation SHO do?

A

clarifies the regulations set in place for selling stocks short

33
Q

Rule 200

A

talks about order marking. When can you mark that security order long or short

34
Q

Rule 203

A

says you may not enter or accept an order to sell short without having borrowed the security

35
Q

Easy To Borrow List

A

a list of stocks the broker doesn’t have to go find to short sell. THE LIST MUST BE LESS THAN 24 HOURS OLD

36
Q

Third market

A

An exchange-listed security (NYSE listed) trading on NASDAQ. This is done sometimes because it will be quicker and easier to sell it on NASDAQ

37
Q

Fourth Market

A

Institutions to Institutions trading not on the exchanges or NASDAQ

38
Q

OTC BB and Pink OTC

A

Alternative trading systems where securities may be traded.

Securities traded here are NOT listed securities.

39
Q

Requirements for selling on the OTC BB

A

the issuer must be a reporting issuer meaning

they file their annual and quarterly reports with the SEC

and their material events with the SEC

40
Q

Requirements for selling on the Pink OTC

A

no requirements anything can trade on the OTC

41
Q

What’s the difference between a broker and a dealer?

A

Broker - acts as an agent for a fee

Dealer - acts as a principle and participates in the trade. They buy the stocks and sell the stocks from their inventory

42
Q

Five Percent Markup Policy

A

Says Five percent is reasonable to charge a customer as a broker-dealer.

You cannot charge the customer for 5% on the Buy then 5% on the sell (if immediately after the buy) because that would be 10% total and that’s too much

43
Q

Selling Stock out of Dealers Inventory

A

You don’t mark up the stock price based upon what the dealer bought it for in the first place but what they are selling it to the customer for after its been sitting in their inventory.

44
Q

Dominated and Controlled Markets

A

If the Dealer (Market Maker) has a majority ownership of a stock then they can then mark up that stock based on their initial purchase of the stock instead of the price they sell it to the customer for.

45
Q

Block Trades

A

The trading desk cannot purchase a block worth more then $500k in the last 20 minutes to make their books look good for the end of the day.

46
Q

Trading Along

A

For Institutional Customers only.

when the broker dealer wants to purchase the same stocks a large institutional customer wants to buy as well.

They must get permission from the institution and report all the prices bought throughout the process.

47
Q

Circuit Breakers

A

Market Wide Trading Halt for extreme volatility
Level 1 S&P falls by 7% 15 minute trading halt
Level 2 S&P falls by 13% 15 minute trading halt
Level 3 S&P falls by 20% Trading halted forday

It cant hit the level 1 or 2 circuit breaker twice

48
Q

Limit Up/ Down Rule

A

Used to ensure that stock prices are reflecting the fair price without unfair manipulation.

It’s a price determined by a algorithm based upon the last 5 minutes of trading.

If nobody is selling it at the limit price calculated by the algorithm a 5 minute trading pause will occur.

After the 5 minutes the price will be the new price the algorithm determined.

Investment Vehicles (10 decks)

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