Chapter 7: Securities Market
A customer makes a "short against the box" sale. His broker will mark the account to the market for all of the following purposes EXCEPT to--reduce the customer's tax liability.
A mark to market will not affect a customer's tax liability. All other choices are related to a short vs the box situation.
STY. SLD means
all prints are sales so it means slight delay- delay in printing of this report
market makers may quote a stock as
firm or subject
reducing limit order
on ex date- designated market market before the market opens, will automatically reduce all buy limit and sell stop orders on the book by full amount of div because markey value will open down by amount of div
cash transaction delivery is required
on the day of the transaction - NYSE transaction made for cash at or before 2 pm are due for delievery by 2:30 pm--trades made after 2pm are due for delievery within 30 min after the trade
A trade on the consolidated tape display that reads: ABC.SLD 52 means that: 100 shares were traded earlier, but the report is delayed
"SLD" indicates a transaction that is reported out-of-sequence. For example, a transaction that occurred earlier in the day may be reported later in the day. It is a delayed report.
sec rule 15c3-3 sale
10 bus days after settlement date-buy in
activity with GE: GE 10000s 57:37
10,000 shares were sold at 57.37
what was trade for UPJ: UPJ 79.25
100 shares sold at 79.25
trading acticty in HC
100 shares sold for 3.25 each
example of not good delivery
2 ctf of 50 shares,1 ctf of 125.... 25 shares must be seperate from the 100 share certificate
example of good delivery
3 ctfs or 65 and 3 for 35 ...and 10 share ctf, 10 share ctf and 5 share ctf
market on close and limit on close orders must be entered electronicallt by
3:45 pm -they can be canceled or reduced at any time after entry up untill 3:45 pm- after 3:58pm MOC and LOC orders cannot be canceled or reduced and no exceptions
reg t purchases
4 bus day after trade date- sell out
The following trade appears on Network A tape: ABC 45s 22.88 This indicates which of the following:4500 shares of ABC traded at 22.88
45s = 4,500 shares @ 22.88
A market maker, when asked for a quote, replies: "It is 5 to 5.50." Which of the following are correct concerning this quotation?-This is a firm quote, which is the type expected from a market maker.-The quote is normally assumed to be firm for 100 shares.
5 to 5.50 is a firm quote and market makers are only obligated to trade 100 shares, therefore I and III are correct.
markyp policy
5% guideline that must be used when calculating mark up( on buy) or mark down (on sell) transaction between narket maker and customer- this guideline specifies that the mark up must be fair considering all relavnt circumstances-policy applied to all OTC and does not apply to exhcnage securities
A municipal "workable indication" is a(n)-indication of a bid or offer that the dealer thinks he can fill
A municipal "workable indication" is an indication of a price the dealer thinks he can fill, but is not a firm price.
Which of the following are true when the designated market maker engages in the practice of stopping stock?He may stop stock for customer orders from NYSE member firms. The designated market maker guarantees a specific price while the broker tries to do better. The designated market maker guarantees the purchase or sale of a specific number of shares at a given price.
All choices are correct with the exception of IV, because the floor broker's permission is NOT required.
Mr. Smith calls his broker to sell 400 of XYZ and sends the stock certificates to his broker unsigned. How should the broker handle this?-Hold the stock certificate in safekeeping and send the customer a stock power to sign and return.
An unsigned certificate should never be returned to a customer. The customer should be sent a stock power, which when signed by the customer and attached to the certificate makes it negotiable.
Mr. Smith calls you his broker. He sells 400 XYZ and sends the stocks certificates to you unsigned. How should the broker handle this?-Hold the stock certificate in safekeeping and send the customer a stock power to sign and return.
An unsigned certificate should never be returned to a customer. The customer should be sent a stock power, which when signed by the customer and attached to the certificate makes it negotiable.
When does settlement take place on cash transactions? same day as trade date
Cash settlement takes place on the same day as the trade. Trade date plus 2 business days is a regular-way settlement, while trade date plus 4 business days is a Regulation T settlement.
If a customer purchased a listed stock for cash settlement on July 5, the trade would settle: july 5th
Cash settlement transactions settle on the SAME day as trade date.
Which of the following best describes interpositioning?-A broker-dealer sells stock to a customer which includes a mark-up and a commission.
Charging both a commission and markup is a violation of the FINRA Conduct Rules--called Interpositioning. Interpositioning is when the broker-dealer is trying to generate unnecessary commissions. For Answer C, there are times where a broker-dealer must be in the middle to "match up" two individuals (or in this case two broker-dealers). This is fine if the broker-dealer is doing it honestly.
Your customer, Mr. Abrams is long 500 WLL and short 500 WLL. The WLL Company makes a cash tender offer substantially above the current market price. To take advantage of this tender offer, Mr. Abrams should-cover the short position.
Customers may only tender shares from a Net Long position. Therefore Mr. Abram would be required to FIRST cover the short position before he could tender the Long position.
stopping stock
DMM gaurntees a floor broker a specific price on a fixed number of shares for a limiter period of time- done for NYSE-customers oder price is guarntees- order must be solcited by floor broker - there must be a spread of at least 2 cents
people trading on NYSE floor
DMM, $2 broker, competiive trader
FINRA 5% Markup Policy would apply to which of the following transactions?-Transactions executed in OTC Securities in the Secondary market as agent. Transactions executed in OTC Securities in the secondary market as principal.
FINRA Markup Policy applies only to OTC agency and OTC principal transactions - not to transactions on the exchanges and not to transactions where an offering circular or prospectus is distributed
A transfer agent for a security-cancels old certificates. issues new certificates.
I and II are correctIII is incorrect because the stock record book is kept by the Registrar.
between 3:45 and 3:56 MOC and LOC orders can be cacneeld or reduced only to correct entry
NYSE 80b states that if trading is halted for the remainer of the day all MOC and LOC orders will be canceled and NYSE corssing sessions may not take place
Which of the following best describes an order to buy or sell while the floor broker uses his judgment in the execution of the order?-not held
Not Held orders allow the floor broker to use his discretion in the timing of the execution of the order, so the best price can be obtained.
Which of the following orders are entered below the current market price of the stock?Sell Stop Buy Limit
Only Buy Limit and Sell Stop orders are entered below the current market price and will only be activated or executed if the market declines to the specified price or lower.
what was the trading activity in FTR PR
PR indicates preferred stock- doesnt always trade in round lots of 100- sometimes trade in 10, s-s means 10 shares is a round lot- so 40 shares of FTR PR were sold at 75
when entering sell long order for customer
RR must have reaonable assurance as to the location of the securities and the abilty of the customer to deliver the security within 2 business days
If a customer purchases a listed stock using regular-way settlement in a cash account on July 2, the stock will settle: july 5th
Regular way settlement of corporate securities (including listed stock) is the trade date + two business days (T+2). Here, the trade date is Monday, July 2nd and two business days (July 4th is a business holiday) would be Thursday, July 5th.
A customer purchases a listed security on a seller's option basis in his cash account. The trade will settle 30 days after trade date. To comply with Regulation T, funds to pay for the purchase are due no later than-four business days after trade date.
Regulation T settlement is 4 business days after trade date
regulation national market system
SEC reg meant to modernize and improve the ntional market system for equity securities - reg focused on ensuring investors recieve the best price executions for their orders by encouring competiion in various equity trading markets
SEC Rules impose sales practice requirements on certain low priced securities to protect investors. Under SEC Rule 15g-9 (Penny Stock Rule), sales practice requirements apply to broker-dealers recommending which of the following securities?-Non-NASDAQ OTC Securities.
Sales practice requirement rules do not apply to any Exchange Listed Securities (NYSE, AMEX or Regional) and do apply to NON-NASDAQ OTC Securities.
Which of the following best describes an arbitrage transaction?Sell short 100 XYZ common in New York and buy 100 in Chicago
Sell Short in New York Buy in Chicago - would be an arbitrage: buy in different markets
A customer is long one XYZ Dec 20 call as a hedge against a short position of 100 shares of XYZ common. The short sale should:-Be marked to the market daily.
Short selling must be done in a margin account. The account must be marked to market daily, for example, adjusting the account to reflect the current market price of the stock a the end of the day. Short selling is a bearish strategy. Therefore, rises in price will reduce the customer's equity and price declines will increase the customer's equity. If the increases in price accumulate to the point that the customer's equity falls below 30% of the current market price of the stock, the customer will get a margin call. Even though the investor has purchased a Call for upside protection on the short stock position - the short stock would still have to be marked to market DAILY.
A customer's order for 350 shares of an OTC stock must be entered by the registered representative as-one order for 350 shares on one ticket.
Since there are no longer any odd lot dealers, orders which include both round and odd lots are entered as one order on one ticket
Of the following situations, all would allow for the suspension of trading of a security on NASDAQ EXCEPT:the company issues non-voting common stock.
The NYSE would delist a company for issuing non-voting common stock, but that rule does not apply to NASDAQ.
The "pink sheets" list-inter-dealer quotes.
The Pink Sheets are for interdealer use only - not for the public. Pink Sheet quotes are always subject.
Unless an extension of time is granted, a customer must be "bought in" if he does not deliver securities which he sold long for his account within how many business days after the settlement date?10
The customer is allowed 10 business days after settlement date to deliver securities before he will be bought in.
Orders entered or noted in the designated market maker's book include: stop and limit
The designated market maker enters limit orders on the book and also would make a memo of all stop orders entered. The market maker can accept the following orders: market orders, open orders, and day orders. That being said, market orders fill immediately, so they would not be put on the books, but the DMM can accept those orders.
Assume a customer places an order with a registered representative and the order ticket is written up as follows (order has not been executed):Open limit
The order is considered "open" because it is GTC and is a limit because it specifies a specific price of execution - @ 85-.
A registered representative opens a new account for a customer by telephone and receives an order to sell 300 shares of ABC at the market. Under FINRA Rules, the registered representative must do which of the following before executing the transaction?-Receive reasonable assurance from the customer that the stock will be delivered in good deliverable form within two business days from trade date
The registered rep must receive reasonable assurance that the stock can be delivered by the regular-way settlement date, which is within two business days from trade date.
A market maker is quoting ABCD common stock, a NASDAQ security. The spread in this security is best described as the difference between-the dealer's quoted bid and ask price
The spread in a market maker's quote is the difference between the quoted bid and ask price published by the market maker, which is based on the current value of the stock, not the market maker's cost.
When a firm buys and sells securities into and out of the firm's own account, charging mark-ups and mark-downs, the firm is acting in which of the following capacities?-In a principal capacity as a dealer
When a firm buys and sells securities into and out of the firm's own account, charging mark-ups and mark-downs, the firm is acting in a principal capacity as a dealer.
When an investor sells a common stock and forgets to sign the assignment form on the back of the certificate the firm will:--send the investor a stock power
When an investor forgets to sign the back of their certificate they will be sent a "stock power" which when attached to the certificate makes the certificate negotiable.
maket makers(traders) may take long or short position at ant any time
a market maker must report trading volume daily
sell limits and buy stops
above market price- will not be executed unless the market value moves up to or abve the price indicated in the order
order protection rules for trading centers require that
access to quotes must be immediate and automatic -excution of trades take place at a price that is at or better than the national best bid or offer
broker
act as an agent or in an agency capacity by brinding together buyers and sellers of securities - charge commition for services
dealer
acts in pricntpal capcity which mean firm buys or sells securities from the firms own inventory act- chanrges mark up or mark down
mark to market
adjusting the price of a secuirty or a portfolio to relect current market values-it is an adjustment that is mde between market value and contract value of a security- margin accts are marketed to market to ensure compliance with margin maintenance requirements
penny stocks are
also called non nasdaq securities, before an investor buys the rep must disclose the bid and offer and compensation to be paid to both registed rep and frim for the trade- broker must provide risk disclosure statement, broker must provide monthly statements reflecting market value of each penny stock
short sales can only be done in a margin acct
and are marked to market daily
stop order does not permit the broker to exercise discretion as to time of execution
and number of shares because it becomes a market order
low priced stocks listed on an exchange
are not called penny stocks
stocks bonds, mutual fund and life insurance
are not insured by FDIC
alternative order
assue a customer has sold short 1,000 shares of ABC @ $105 per shares - customer limits risk by entered altnerative order: order to buy 1,000 shares of ABC at 109 stop GTC or buy 1,000 shares at ABC 101 GTC--
stock of a corportation traded on nasdaq may be suspended from trading on nasdaq
at request of corp, pending an announcedment and if net worth declines below certain amount
risk arbitrage
attempts to profit from a m and a - it could asire as result of a tender offer- one company might place an offer for another companys stock above its present mkt price- this is not a riskless sitation because if the tender offer is not successful the companys stock that ws being solicted will fequently delcine in price
order audiit trail system
automated system that captures order info in NMS stocks and OTC equity securities reported by members for inegration with trade and quotation info to provide finra with accurate time record orders
trade reporting facility
automated trade reporting and recon service operated on the ACT tech platform- electronically facilatets the post execution teps of prce and volume reporting
market makers
b/ds that maintain a firm bid and offer price in a given security by standing ready to buy or sell from their own inventory at publically quoted prices, sometimes referred to as position trading
Stock can be borrwed indefenityl but the frim can demand that the stock
be returned at any time
sell stops will speed up the decline in the price of a stock in a
bear market
stock price hits restince level
bearish indicator- people will want to sell because it hit high
buy limited and sell stops
below market price- will not be executed unless the market moves down to or below the pirce indicated in the order
good delivery
between b/d means that a stock or bond certificate is in a form permitting ownership to be readily transfered - certificate must either be in units of 100 shares (round lots), multiples of 100 shares, combos permitting 100 share units
cancel former order
both instructions are sent to the trading floor on the same ticket
interpositioning
bring an unessary b/d into a transaction or result in charging customer both mark up and commision or excess commisitions are a violation of FINRA rules and are illegal-customer can be charged one or the other but not both
cashiers department is resposbible for
broker and bank delievries, customer acct transfers, bank loand -not responsible for transmittal of orders for exectuion
buy stops will speed up the rise in the price of a stcok in a
bull market
stock price hits the support level
bullish indicatior-- demand will rise -- people will buy cheaper-
any order canceled and rebill must be reviewed and approved
by reg supervisor or operation manager in branch offie
settlement of financial instruments
can be in either of two forms physical and book entry - most are settled electronically/ book entry- possible to get stock certificate
nasdaq types
capital- includes small cap ---global- includes large cap
net transaction
client will be charged a mark up on a buy or a mark dwon on a sell which will be adjusted in the net amount of the transaction
stop limit order
combo of a stop order and a limit order- when a stop/limit order is entered, it is always first a stop, then instead of becoming a market order, it becomes a limit order
regular way settlement 2nd business day
common, preffered, corporate bonds, muni bonds
automated confirm of transaction
compared trade info and facilties reporting and clearing of trades
ticker tape
computerized cystem that displays stock symbol, latest price and volume on securities traded on floor- reports sell side of reach order executed0 odd ltos and options are not reported on tape
listed stock trades are reported to
consolidated tape at execution price without the commission
spread is the difference between
current bid and ask
short against the box-
customer is long a stock in their acct and sells the same security short (borrows from the firm) they are then short against the box-this is done to arbitrage and hedge an anticipated decline in their long stock
delivery dates : sellers option contract or delayed delivery
customer is traveled and has his rep execute seller option 180 day contract- seller must deliver the security no sooner than the 2nd day afte rtrade date, but no later than the 180th calender day after trade date--under reg t the buyer must put up funds for the purchase by the 4th bus day after trade date
risk involved- rep must satisfy the penny stock disclosure rules when recommending stock to new customer -this includes
determine the suitability of such an investment for the customer, send customer a copy of suitabilty determination, recieve a signed copy of suitabilty determination form the customer prior to executing the order
real time transaction reporting system
each b/d or muni securities dealer shall report to the board info about each each purchased/sall within 15 min of execution of a muni bond transaction to national securities clearing corp
super DOT (designated order turnaround system automatically executes market and limit orders)
electronic and routes them to DMM- all NYSE stocks are eligible, reports are instantously reported back to firm, system is used by individuals and institions, accepts market and limit orders, order size limitations, executed trade must be reported within 10 seconds
market order entered at the opening on an
exchange always have priroty over limit orders
thrid market
exchange lusted securitues are traded OTC
5% mark up does not apply to
exchange traded securities
priror to executing short sale in an equity security
firm must confirm that is has the securoty that will be borrowing- LOCATE
trading activity for x: x 67.12 and x 2s 67.25
first 100 shares sold at 67.12 and 200 shares were sold at 67.25
instinet
first and is one of the largest ECNs, provides quotations for and handles many large block trades executed in the 4th market, particpants can trade anonymously if desired, fourth market traders are not crossed on the floor of an exchange
handling stock/bond certificate the transfer agent
for a security cancels old certificates, issues new certificate and resolves porblems
there is no waiting period
for a security to trade on NASDAQ once its registration becomes effetive
adjustment to orders
for cash div or distribution- unless marketed do not reduce -buy limit and sell stop open order prices will be reduced by the full dollar amount of the div or distribution
electronic communication network
generally privately owned electronic order execution system that display, match and execute order on listed and OTC securities away from exchanges or market makers-do not maintain inventories of securities whereas market makers do maintain inventories
odd lots
good delivery in any denomination as long as the odd lot certificates total the exact # of shares representing odd lot
all orders entered with DMM except dat orders are considered
good till canceled-maintain position on book if the GTC orders are renwed properply
regular way settlement 1st business day
govt bonds and options
to be quoted on nasdaq secuirty must
have at least two registered market makers, have minimum # of stock holders, have a minimum # of shares outstanding
bid price
highest price on buy side would be bid price
execution of either of these orders causes cancellation of the other
if there is a partial execution of one side of this order, both sides of the order are adjusted for the partial execution- assume in our order 700 shares of ABC are filed @101- remaining open order would become either-- buy 300 shares of ABC at 109 stop GTC or buy 300 shares of ABC at 101 GTC
DMM can contact potential buyers
if there is an influx of sell orders
investor would enter buy stop order
if they wanted to take advantage of price going above resistence level
federal deposit insurance corp
indepent agency of fed gotv which insures deposits in banks and thrift institions for at least 250,000--limiyed effect on the econoy and financial system whe a bank of thrift insition fails
reorg department in a brokerage firm
is responsible for handling the exchange of one secuirty for another
DVP/RVP acct benefit client because
it elimanate princiapl risk i.e risk of defauly by the counter party at settlement, client doesnt have its assets in the brokerage acct to make trades-- settlemnt date can be expressly agreed by the parties to the trade generally the first business day after a purchase or first business day after a sale
nasdaq is the worlds largest electronic stock market
it provides subscribers with current quotations on NASDAQ securities in the system through electronic data terminals
if order is entered for 350 shares
it would be entered as one order or one order ticket (100 shares is a round lot and 50 shares is an odd lot)
designated market maker
key indivual on an exchnage and is required to maintain fair and orderly mkt- may act as broker(execute orders for members and recieve commission) or as a dealer(buy and sells for or from the firms own acct)
DTCC
largest securities depositories- created to reduce costs and povide clearing and settlement to finaical markets- provides safe keeping and transfers securities electronically using bookkeeping entries
nasdaq wuotes are avialble on
level 1,2,3
stop order can be used to protect a
long position by using sell stop order--or short position by using a buy stop order
ask price
lowest price on the sell side on the page would be ask
handling stock/bond certificate the register
maintains the stock record book, must acct for all shares, including preventing the over issuance of shares
member frim decide to make purchases on the floor of exchange to cause the price of stock to go up an anticpaton to seconary distribution
market manipulation - prohibited
desiganted market maker can accept
market orders, open order and day order
when trading stocks for own acct DMM
may only trade inside the current bid and ask so they are not competing with customer orders onbook
stop order
memorandum order from a customer that becomes a market order if a trade takes place at or through the price stated in the memorandum- stop order will protect a profit or limit losee on an existing position - cannot assure a specific price or execution
margin department
monitor margin accts
reg t settlement 4th bus day
most securities
good for the week or month offers
must be canceled by the member firm- not the customer - designated market maker or floor broker
prices and OTC are determined by
negiotating - # of securities traded in OTC are greater than on all exchanges combinded, stocks of insurance and banks are traded OTC- market faciltates trading in publically held securities not traded on an exchange -- sytmbol for secuity traded usually is 4 letters
stock of a corp traded OTC will
not be suspended if the company issues non voting common shares
size of market
number of shares at bid and ask would be the size
continuous net settlement
operated by NSCC-automated settlement that centralizes and matches settlement of securities transactions and money balances of its member particpants - settles all trades in equity securities, corp bonds, and muni bonds through clearing corp which elimantes window settlement where sell delivers the actual security directly yo buyer
does not apply when a prospectus
or offering cicular must be delievered- does not apply to new issues , registered secondary dstributions and open end investment company shares
limit order :good for the day
order expires on the day it is entered unless it is executed - if order is partially executed the remainder of the order will be canceled at the end of day-if changed to GTC order it will lose position in designated market maker book
immediate or cancel
order must be executed at once in it entirety or partially- if order is partially filled the remaining balance is canceled
good till canceled
order remains in effect untill it is executed or canceled and is also called an open order
limit order
order to buy or sell a security at a sepific price or better
market order
order to buy or sell a security at best price available when order reaches marketplace
fill or kill order
order which must be executed at once in it entireky or it will be canceled- not accepte don NYSE floor
all or none
order which must be executed in its entirety but not immediatly - not appecpted on NYSE floor
auction procedures
orders are entered on the floor of an exchange, compeitive bidding occurs and orders are executed based on priotiy (large and market orders ) parity(orders with matching sizes) and precedence(order that are recived firm
DMM does not
particapte in distribution of new issues- they do executee off lot orders
penny stocks or designated securities
pink sheet securities with a market price of less than $5 per share
stop order to buy could be used to take advantage of the oppurtunity
presented by a break in the resistance level for a security
ask is
price a market maker will sell to a customer/ price a customer will pay when buying
bid is
price market maker will buy from a customer/ price a customer will recieve when selling
subject quote
provides info only and is subject to change example(5-5.05 close, it is quoted 5-5.05, it is 5-5.05 work out, it is 5-5.05 small)
consolidated quotation service
provides on a current and continuous basis the best quote and size available at that time in all elliable listed secuirty in the system
OTC bulletin board
quotation service that displays real time quotes, last sale prices and volume info, in low priced OTC securities and other thinly traded securities- companies do not have to meet listing requirements to trade on the OTCBB
fixed income clearing corp
subsidary of DTCC, provides centralized clearing, info and settlement for govt securities including t bills, t notes, TIPs, bonds - handles repos and mortgage backed securities
national securities clearing corp
subsidiary of the DTCC that provides centralized clearing, info and sttlement services to the financial industry - all securities listed are eligible
purchase and sale department
record and process order executions
DMM order display book
record of limit orders that have been recieved from customers to be executed when the market reaches the limit order price or better
DVP, RVP acct
refers to a delivery versus payment or receive vs payment method of seeling --also known as a COD (cash on delivery) acct-- act is ued by an institional client that uses bank as custodian of its assets to settle trades that it makes through its executed broker-settlment is done electronically - safest way to settle trades
info prived to the news media by nasdaq
reflects inter dealer quotations, high and low prices, relfects subject prices(not firm) reflects inside market
GTC orders are:
renewed teice a year in arpil and october- some firms may allow GTC orders to be entered as good for the week or good for the month -permiited for round and odd lots- properly renwed it maintains its postion in disginated market makers book
market makers are NOT
required to disclose profits or losses on their inventory positions
open orders to buy or sell a security that are subject to reverse spilt
requires that all open orders must be canceled
short sale
sale of stock by a customer who has borrowed the stock from their b/d- expects market place to decline
when as and if issued contracts
settlement date for when issued contract is a date agreed uopon by both parties, which is normally 2 business days after the security goes the regular way --contracts may have to be market to maker depending upon market flucation, reg t requires that the customer pay in full no later than 4 business days after security goes regilar way
arbitrage
simulatanous purchase and sale of the same or similar secutity done in order to take advantege of price disparity in diff markets
stop order influences
size of price flucations of a particulare stock they become makrte orders when the market hits the stop price
electronic muni market access
source for offical statments - continuing discloure documents, advance refunding documents and real time trade price info
b/d will guarntee the customer signature and it be guarnteed acceptable by transfer agent -the following would be acceptable
stock in name of an individul signed by individual, stock in name of joint tenants, stock in name of partnership signed by one of the genral partners, stock in the name of corp signed by officer, stock in name of estate and signed by legal representative
resistence level
stock trading at a high
support level
stock trading at low
assume you place an order prior to opening "sell 100 STY 33.12 STOP LIMIT" what happened to the order
stop limit orders are first stop orders entered below the market- since trading didnt go to or below 33.12 nothing is done
workout market
subject quote that provides an estimated price range within which a dealer feels they can obtain a security within a reasoable period of time when the security is not readily avialable (such as thinly traded securities)
nasdaq reporting
subject to real time reporting which requires all transactions to be reported within 10 seconds of execution by the seller for the round lot trades -last sales prices are displayed in the systemm- info priced to the new
if sell transaction is executed regular way
the customer cannot request that the sale proceeds be paid out early
wider the spread
the less actively traded the stock
the narrower the spread
the more activly traded the stock
when entering sell long order
the rep must determine the physical location of the securities becing sold- and must be sure that the customer does have a net long position
if customer is short aginst the box and wants to sell their long position
the sale must be done as a short sale
investor can be short a stock
their whole life
if client tells rep to cover short position in ABC at close
then oder will be executed at or near to the close as possible- does not mean that the oder will be executed at the offering price on the close
types of orders
these type of orders represent the different choices an investor has when entering an order to buy or sell a security - these oders can be netered on common stock, preffered stock, bonds and opitions
if customer is short aginst the box and wants to tender their long stock position (turn in stock in a takeover)
they must first cover their short position - customers can only particapte in tender offers if they have a net long position - sec rules prohibt the tendering of shares by investors who are short the stocl
firm quote
they will trade at least 100 shares at the quoted price example (5-5.05, it is 5-5.05, we,ll do it 5-5.05, 5-5.05 firm)
transactions recommened by a b/d
to an existing customer would not be automaticallt exempted from disclosure rules
hot held orders give floor brokers discretion as to when
to execute an order therfore they are not handled by DMM
reg rep cannot
trade on NYSE floor
exemptions from penny stock
transactions with institional accredited investors, transactions which satisfy reg D requirements(private placement), transaction where customer owns 5% or more of the stock, an established customer if the rep did not make the recommendtion
wire room orders
trnasmit orders for execution
sec rule 15c-3
tule prescribes mandatory buy in period for customer who fail to deliver securities that they have sold- mandatory buy in period is 10 bus days after settlemetn date
broker dealers
two manners in whcih they conduct transactions for their customers
order ticket which is sent to the floor of a stock exchange for execution must have
type of order, time of entry and designation of customers acct- commsions will not appear on ticket
OTC
unlisted market- securities trades that take place off the floor of an orgainzed exchange- main differnce between listed an d unlisted are listed securities traded by DMM on an exchange while unlisted securities traded by markert makers in OTC and trade frominventory
level ii
used by OTC trader and gives quotes of each of the market makers for all authorized securities
level iii
used by nasdaq registered market maker and allows the market makers to change bid and ask quotations and quotation sizes on the sysem for the securities for which they have been authorized to enter quotes
level 1
used by rep and gives inside quote for reach quothorized security whcih is the highest bid and lowest ask of all market makers- these are subject quotes and are avialble to public
short agaisnt the box cannot be
used to postpone taxes to a future date
policy applies
when a memeber firm is acting either as a dealer (principal) (mark up or mark down) or as broker (agent) (commission)
order flow through a brokerage firm
when a transaction is processed through a b/d the order in which the brokerage operation are performed is as follows- wire room order, purchase and sale department, margin department, cashiers department
fourth market
where financial institions trade direclty with each other (mutual fund buys various securities directly from a life insurance company port) commissions are generally lower trades executed on the exchange
cashier department
where funds are recived and disbursed
all seel orders must indicate
whether the investor is long or short
pink sheets
wholesale inter dealer quotes, published daily on low priced OTC equity securities which do not meet requiremens to be carried in NASDAQ system- always subject quotes
an order to buy or sell at the opening
will be cancelled and returned to broker if the order does not reach the trading post on the exchange floor by the opening of trading