BUS 171A: Chapter 18

Amex ________. A) is not an auction-type market based on orders. B) lists stocks from throughout the United States but not international stocks. C) has a specialist system that is dissimilar to that of the NYSE. D) is a national exchange.

D

A major role of a NYSE-assigned specialists is ________. 2. As catalysts, they help to bring buyers and sellers together. 3. As dealers, they trade for their own accounts when there is a temporary absence of public buyers or sellers, and only after the public orders in their possession have been satisfied at a specified price. 4. As auctioneers, they quote current bid—ask prices that reflect total supply and demand for each of the stocks assigned to them. A) As auctioneers, they quote current bid-ask prices that reflect total supply and demand for each of the stocks assigned to them. B) As principles, they execute market orders entrusted to them by brokers, as well as orders awaiting an indeterminate market price. C) As catalysts, they trade for a customer's accounts when there is a temporary absence of public buyers or sellers. D) All of these

A

Dealers ________. A) compete with each other in their bids and offers. B) have a perspective that views the "best" market as the highest bid and lowest offer. C) operate as agents, not principals. D) continually provide bids and offer quotes to buy for or sell from borrowed inventories and profit from the spread between their bid and offer quotes.

A

In a ________, sometimes called a period call, orders from customers are batched together for a simultaneous trade at a specific point in time. A) call auction B) regulated auction C) buyer's auction D) put auction

A

Trading in stocks listed on the NYSE is conducted as a ________ at a designated physical location on the trading floor, called a ________, with brokers representing their customers' buy and sell orders. A) centralized continuous auction market; post B) decentralized discontinuous auction market; post C) decentralized discontinuous auction market; seat D) centralized continuous auction market; seat

A

________ is a market in which buy and sell orders of public participants (who are the holders of the securities) establish the prices at which other public participants can trade. A) An order-driven market or auction market B) A market-driven auction market C) A limit-driven market D) A quote-driven market

A

Electronic communication networks (ECNs) ________. A) are direct descendants of (and part of) the NYSE, not Nasdaq. B) display bids and offers; that is, they provide an open display. C) are not off-exchange exchanges. D) provide institutions and market-makers with an known way to enter orders.

B

Exchanges have usually been mutual organizations with memberships or "seats". Adopting a new technology ________. A) may benefit the members of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization. B) may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization. C) may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization. D) may benefit the customers of an exchange by increasing the transaction costs but also increase the value of access privileges and seats of a membership organization.

B

One outcome of ________ (also called consolidators) is that customer order flow is "less sticky"; that is, the order flow will switch from one execution service to another quickly based on short-term, quantitative information. A) sticky order routers B) smart order routers C) consolidator orders D) consolidator routers

B

The U.S. stock market is composed of ________. A) OTC markets and off-exchange markets. B) stock exchanges, OTC markets and off-exchange markets. C) stock exchanges, OTC markets, off-exchange markets, and government markets. D) stock exchanges and off-exchange markets.

B

________ is an electronic order routing and reporting system that links member firms worldwide electronically directly to the specialist's post on the trading floor of the NYSE. A) The SuperElectronic reporting system B) The SuperDOT system C) The SuperSPOT system D) None of these

B

________ matches buy and sell orders in a multinational trade at a price that is set elsewhere. A) A debit network B) A crossing network C) WorthNET D) Investment Technologies Groups (ITG)

B

Electronic communication networks (ECNs) ________. A) are not a limit order book. B) do not use the Internet to link buyers and sellers, thus employing brokers and trading floors. C) offer transparency, anonymity, automated service, and reduced costs, and are therefore effective for handling small orders. D) may not be linked into the Nasdaq marketplace via a quotation representing the ECN's best buy and sell quote.

C

In contrast to ________ that is a nonprofit organization, a publicly owned equity-based organization is ________ and operated for a profit. A) a corporation; a government entity B) a government entity; an exchange C) an exchange; a corporation D) a corporation; an exchange

C

The types of changes in the U.S. stock exchanges include ________. A) the market structures of the exchanges and decline of the off-exchange markets. B) the trading mechanisms of the exchanges and consolidation domestically. C) consolidation among different types of assets, for example, securities options and futures . D) consolidation internationally and the trading mechanisms of the broker-dealers.

C

________ began trading in 1969 and was essentially the first electronic communications network. A) CBOE B) ISE C) Instinet D) Nasdaq

C

________ is often defined as a market where intermediaries meet to deliver and execute customer orders. A) A quote driven market B) An order driven market C) An exchange D) A market structure

C

________ permit intermediaries to provide liquidity. Intermediaries may be brokers (who are agents for the naturals); dealers or market-makers (who are principals in the trade); and specialists, as on the New York Stock Exchange (who act as both agents and principals). Dealers are independent, profit-making participants in the process. A) A dealer-driven market B) A limit-driven market C) A quote-driven market D) An auction market

C

A fundamental difference between U.S. and international exchanges involves ________. A) the nature of the exchanges' business organizations. B) their method of trading. C) their market structure. D) All of these

D

Dark pools ________. A) fulfill the need for a neutral gathering place but do not fulfill the traditional role of an exchange in the new paradigm. B) are not designed to prevent information leakage and offer access to undisclosed liquidity and leave "footprints." C) are electronic execution systems that do displaying quotes and providing transactions at externally provided prices. D) are private crossing networks in which participants submit orders to cross trades at externally specified prices and, thus, provide anonymous sources of liquidity (hence, the name "dark").

D

During the 1990s, the SEC continued its emphasis on greater quote and price transparency. In this regard, the SEC instituted new order handling rules in 1997. These rules include: ________. A) if the ECN's own best quote was not shown in the quote montage, then the market-maker had to update its own quote in Nasdaq to match the ECN quote. B) any market-maker who held a customer order had to display that order in their quote. C) a market-maker could place a more aggressive quote in an ECN, if the ECN displayed the top of its book in the Nasdaq quote montage. D) All of these

D

Exchanges ________. A) have usually been mutual organizations that are owned and operated on a profit basis for the benefit of their members, those who operate on the trading floor. B) have memberships or "seats" that provide floor access or trading privileges but not ownership rights. C) have traditionally been organizations built around an electronic trading floor. D) None of these

D

In carrying out their duties, specialists ________. A) are allowed to engage in transactions in securities in which they are registered unless such transactions are necessary to maintain a fair and orderly market. B) profit only from those trades in which they are involved; that is, they realize revenue for trades in which they are an agent. C) simply fill customer market orders or limit or stop orders by similar orders. D) None of these

D

The SuperDot system ________. A) can be used for under 100,000 shares with priority given to orders of 2,100 shares or less. B) is used for small market orders, limit orders, and basket (or portfolio) trades and program trades. C) routes NYSE-listed stock orders electronically directly to a specialist on the exchange trading floor, rather than through a broker. D) All of these

D

The construct of the Nasdaq as a dealer system has made it ________ for ECNs and others to conduct the trades directly and report them to the exchange. A) impossible B) difficult C) possible D) easy

D

________ is an entity independent of a registered securities exchange that collects and disseminates securities quotes and trades. A) The National Exchange (NSX) B) Trade Reporting Facility (TRF) C) Automated Confirmation Transaction System (ACT) D) An alternative display facility (ADF)

D