unit 8

a broker dealer that executes trades and settles transactions for another broker dealer is called

a carrying firm.

your broker dealer, rather than clear its own securities transactions, chooses to introduce its business to another firm that will clear, processes and handle all back office operations for it. The firm receiving the business is known as...

a carrying firm.

a broker dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? a depository trust. a fully disclosed introducing firm. a carrying firm. an investment company.

a carrying firm. most firms choose to introduce their customers to another member firm known as a clearing or carrying firm to handle back office tasks such as clearing trades sending trade confirmations, settlement and reporting compliance, trade execution and custody of customer funds and securities.

a firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is

a clearing agent. a clearing agent is an intermediary between buy and sell sides of a transaction that receives and delivers payments and securities on behalf of both parties while some broker dealers are self-clearing, simply being a broker dealer does not always include being able to provide the services of a clearing agent.

which of the following statements would describe the fourth market?

a market for institutional investors in which large blocks of stock, both listed and unlisted, trade and transactions unassisted by broker dealers. The fourth market is a market for institutional investors in which blocks of stock trade through ECNs that are open 24 hours a day acting as agents.

an institutional investor selects a single financial industry regulatory authority FINRA member firm to provide financial custody of securities while orders to buy or sell are placed with executing brokers. this is an example of...

a prime brokerage account. a prime brokerage account is one in which a customer / institution selects one member to provide custody and financing of securities and executes trades with other firms known as executing brokers.

an institution or person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services as best described as...

a trustee. a trustee is legally appointed to manage as of douchiary assets in a trust.

The transfer agent for a corporation is responsible for each of the following except... ensuring that it's securities are issued in the correct owner's name. maintaining records of ownership. acting as an intermediary between the buy and sell sides of a transaction. canceling old and issuing new certificates.

acting as an intermediary between the buy and sell sides of a transaction. The transfer agent often a bank for a corporation is responsible for ensuring that it's securities are issued to the correct owner's name, canceling old and issuing new certificates, maintaining records of ownership, and titling problems related to lost, stolen, or destroyed certificates. acting as an intermediary in a trade is the function of the clearing corporation.

a clear incorporation agent or depository for securities transactions can be a...

commercial bank. a clearing agent can be a broker dealer but does not have to be. in addition to broker dealers, commercial banks can act as a clearing agencies and depositories, as can corporations that are set up specifically to clearing securities transactions and taking custody of funds and securities.

when shares are held in street name, this refers to shares being...

held in the name of the broker dealer for the beneficial owner. when chairs are held in street name, they are being held in the name of the broker dealer for the beneficial owner. this is done to facilitate payment and delivery this does not encumber the shares regarding receipts or dividends of their transferability if sold.

a broker dealer's business model allows for only the purchase of sales and securities for retail customer accounts. it does not execute, settle, or clear its customers transactions, nor does it tend to any back office functions such as sending trade confirmations or forwarding proxies. this broker dealer would be best described as what type of firm?

introducing / fully disclosed. essentially the clearing firm acts as the introducing firms back office.

a broker dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. which of the following would best describe this type of firm.

introducing / fully disclosed. this firm introduces its customers to a clearing firm. clearing firms hold their customers funds and securities as well as those of their correspondent introducing firms. essentially, the clearing firm acts as the introducing firms back office because the risk associated with holding customer funds and securities is not present net capital requirements are much lower for introducing firms then they are for self clearing or carrying broker dealers.

for margin transactions taking place through introducing broker dealers, those who do not clear their own transactions, extension requests are

made by the clearing firm. broker dealers who are self-clearing will make their own extension requests. for those who are not self-clearing, known as introducing broker dealers, the extension request will be made by the clearing firm.

a broker dealer designated as a carrying firm would be expected to do all of the following except... maintain a lower net capital than non-carrying broker dealers. clear transactions for customer accounts. take custody of customer funds and securities. perform back office functions, such as sending trade confirmations to customers.

maintain a lower net capital than non-carrying broker dealers. a firm carrying customer funds and securities assumes certain risks and is therefore required to maintain levels of net capital higher than that of the firms that do not accept custody of funds or securities.

a broker dealer designated as a clearing firm would be expected to do all the following except... maintain a lower net capital than non-carrying broker dealers. clear transactions for customer accounts. perform back office functions such as sending trade confirmations to customers. take custody of customer funds and securities.

maintain a lower net capital than non-carrying brokers. carrying firms have a required amount of funds that they must maintain then non-carrying firms.

an institutional customer, such as a hedge fund, utilizes the services of a broker dealer who provides custody of securities, as well as other back office functions, while allowing the customer to establish relationships with other broker dealers for the purpose of it of executing orders. this account would be known as a...

prime account.

in a prime brokerage account, the prime broker...

provides custody and clearing services as well as margin loans. The prime broker may provide some execution services and contract with other brokers to provide additional execution services.

in a prime brokerage account the prime broker

provides custody and clearing services, as well as margin loans.

which of the following is true regarding a member firm operating under FINRA membership or the membership of another self-regulated organization?

remember firms can offer all types of investment products such as stocks bonds mutual funds options and others or limit the products they offer to only a few.

All of the following are benefits of using a prime broker except

research. an institutional investor may select one firm the prime broker to provide custody and financing of securities while other firms, called executing brokers, handle all trades placed by the customer it is not unusual for large companies to use dozens of executing broker dealers. trade confirmations from the many executing brokered dealers are consolidated and are provided along with account statements by the prime broker. prime brokerage is efficient and saves the customer time and money. research is not associated with prime brokerage accounts.

correspondent firms would likely have a relationship with which of the following types of broker dealers? market maker. self-clearing. introducing. fully disclosed.

self-clearing. a self-clearing firm holds the funds and securities of the fully disclosed or introducing firms customers and performs related functions, such as sending confirmations and statements for them those firms whom the caring firm performs these services are known as their correspondence.

electronic market centers design primarily for institutional investors describes...

the fourth market. The market centers that operate through electronic communication networks are known as the fourth market. these centers were created to serve large institutional investors like mutual funds and pension plans. The fourth market reduces the transparency of trading activity by these organizations and allows them to trade more efficiently.

Great plains securities and OTC market maker, holds inventory and provides liquidity for modular homes, and NYSE listed company. this is an example of...

the third market. an exchange listed security trades in the OTC market, it is being traded in the third market. The fourth market is composed of electronic communication networks that is primarily used by institutional investors primary markets are for raising capital.

a market maker...

trades in a proprietary account to facilitate trading of a security and provides liquidity.

it is expected that financial markets have...

transparent pricing for assets. a number of different assets such as equities debt currencies and derivative products like options can be offered and traded in the financial markets. these markets are expected to have transparent pricing aligning with supply and demand and to adhere to basic rules and regulations.