Series 7: Trading Securities

Third Market

Exchange Listed securities traded OTC

Order Audit Trail System (OATS)

For an equity stock listed on Nasdaq, the source that would provide the most complete information regarding the handling of the order and its execution, including a timeline of all relevant entry and execution events

OPD

Delayed Opening reported on the Consolidated Tape System (CTS)

Fourth Market

Direct trades between institutions, pension funds, broker/dealers, and other financial entities occur, utilizing electronic communications networks (ECNs)

FINRA may Terminate quotation in Small Cap Stock if

A) The issuer declares bankruptcy. B) FINRA deems termination to be in the public interest. C) The issuer's independent auditor renders a disclaimer opinion

OTC Bulletin Board

Any quote displayed over the OTCBB is acceptable as long as it is properly identified

FINRA can initiate trading halt for

Bulletin Board stocks NASDAQ listed stocks trading OTC

FINRA's Trade Reporting Facility (TRF)

Electronically facilitates the reporting of trade data such as price and volume for trades in Nasdaq-listed securities and exchange-listed securities when they occur off of the exchange trading floor Broker Dealer - Broker Dealer

Dark pools of liquidity

trading volume that occurs or liquidity that is not openly available to the public This diminishes market transparency for public retail customers The bulk of this volume represents large trades engaged in by institutional traders and trading desks away from the exchange markets and is not visible to the public

electronic communications networks (ECNs)

Institutional investors can trade stock after hours through ECNs, which are open 24 hours per day

Exchange Market

Listed securities traded on exchanges Highest bid and the Lowest offer prevail.

Super Display Book (SDBK)

NYSE uses the Super Display Book system for processing orders.

CTS

The Consolidated Tape System (CTS) receives and validates the last sale price and size of listed equity securities transactions on the NYSE and other regional exchanges and FINRA Options transactions are not reported to the CTS.

OTC trading practices in corporate securities are supervised by

The Securities and Exchange Commission (SEC) is responsible for regulating securities trading throughout the United States. FINRA is the authorized SRO for the OTC market

Position Trading

The dealer is buying for its inventory

OTC Market

Unlisted securities traded over the counter DEALER MARKET Negotiated Market Market Makers are broker/dealer -Listed registered. -Unlisted nonexempt. -Registered unlisted. -Unregistered exempt

broker or an agent

When the broker/dealer is not acting for its own account

OTC Pink

With updates made weekly, quotes found on the electronic OTC Pink are never firm

5% markup policy applies to

agency transactions in non-exempt unlisted securities principal transactions in the OTC market agency transactions on an exchange (The 5% policy DOES NOT apply to exempt securities transactions such as municipal bond trades )

"Subject" quote

always must be reconfirmed with the OTC trader or market maker that provided it. Subject quotes are typically used in conjunction with thinly traded securities or before filling large block orders

The Federal Open Market Committee (FOMC)

determines the course of open market purchases and sales by the Fed in effecting monetary policy

The Nasdaq market includes securities in the

global select, global, capital markets (UNLISTED SECURITIES)

OTCBB

includes equity issues not listed on Nasdaq or any other U.S. exchange

Securities Industry Association (SIA)

is a trade organization that promotes the interests of broker/dealers

Nasdaq stock market

is an equity and equity equivalent market. Listed are common stock, preferred stock, warrants, limited partnerships, ADRs, and convertible bonds

minimum requirements for listing on the NYSE

market value of publicly held shares number of publicly held shares number of shareholders (No minimum earnings per share requirement)

"Work Out" quote

means that the quote is approximate, or nominal.

Riskless and simultaneous transactions

permissible if they comply with the 5% policy

broker/dealer makes a market

principal activity The broker/dealer stands ready, willing, and able to buy or sell securities for its own account A dealer acts as a principal when it owns the securities it trades