Unit 8: The Securities Exchange Act of 1934 & The Secondary Markets
Which of the following would be a secondary market transaction?
A broker-dealer arranges for a customer's order to be executed on the NYSE
Which of the following transactions would take place in the secondary market?
A broker-dealer selling securities out of its inventory to the public
A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following?
A carrying firm
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 in transactions unassisted by broker-dealers
Which of these broker-dealers would most likely have correspondent firms?
A self-clearing firm
Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following?
Carrying firm
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
Correspondent firms would be likely to have relationships with which of the following types of broker-dealers?
Self-clearing
A stock's market value is directly determined by which of the following?
Supply and demand
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 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.
An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another is known as
a custodian.
A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as
a market maker.
A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as
a market maker.
Having been told that a firm incorporates proprietary trading in its business model buying and selling securities into and out of its own inventory you would know that it is
a market maker.
An institutional investor selects a single Financial Industry Regulatory Authority (FINRA)/NYSE member firm to provide for financing and custody of securities while orders to buy or sell are placed with executing brokers. This is an example of
a prime brokerage account.
An institution or a 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 is best described as
a trustee.
A firm designated as self-clearing can
act in a back-office capacity for an introducing firm | clear and settle transactions executed by other firms
A firm designated as self-clearing can
act in a back-office capacity for an introducing firm | clear and settle transactions executed by other firms.
The transfer agent for a corporation is responsible for each of the following except
acting as an intermediary between the buy and sell sides of a transaction.
A central, physical, marketplace where securities are traded through a designated market maker is
an exchange.
Anyone who, as part of their business, gives investment advice for compensation must register as
an investment adviser under the Investment Advisers Act of 1940.
All of the following are associated with being a carrying firm except
being a fully disclosed firm.
A clearing corporation agent or depository for securities transactions
can be a commercial bank.
A business entity that performs the function of receiving and delivering payments and securities on behalf of both parties to a securities transaction is called a
clearing agency.
All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities except
credit unions.
Secondary markets exist to do all of these except
decrease liquidity in the national markets.
It is expected that financial markets
have transparent pricing for assets.
When investors buy and sell securities to and from one another, these transactions occur
in the secondary market.
A fully disclosed broker-dealer
is one that introduces its business to a carrying firm to clear transactions.
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 executing orders. This account would be known as a
prime account.
Electronic market centers designed primarily for institutional investors describes
the fourth market.
Great Plains Securities, an OTC market maker, holds inventory and provides liquidity for Modulux Homes, an NYSE listed company. This is an example of
the primary market.
A market maker
trades in a proprietary account to facilitate trading of a security and provide liquidity.
A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as
the Third Market.
Which of the following is true regarding a member firm operating under Financial Industry Regulatory Authority (FINRA) membership or the membership of another self-regulatory organization (SRO)?
Member 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.
Which of the following is not part of the secondary markets?
Mutual fund market
Some institutions can function as a depository and intermediary for settling transactions between buyers and sellers of securities. All of the following are acceptable for this purpose except
national banks.
All of the following are benefits of using a prime broker except
research.
Secondary market transactions would include all of the following except
sale of $10 million of corporate bond by a broker-dealer acting as an underwriter.
Both the individual and institutional investor are able to easily buy and sell securities to meet their objectives through
secondary markets.
All of the following would be secondary market transactions except
securities sold to the public by the issuer.
