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unit 8
| Question | Answer |
|---|---|
| Secondary Market | The market where investors trade securities with each other; the issuer is generally not involved. |
| Securities Exchange Act of 1934 | The federal law that regulates the secondary market and created the SEC. |
| Market Center | Any physical or virtual location where buyers and sellers connect to trade securities. |
| Exchange Market (First Market) | An auction market with a physical floor (like the NYSE) where listed securities trade. |
| Designated Market Maker (DMM) | An exchange member responsible for maintaining a fair and orderly market in specific assigned stocks. |
| Listed Stock | Any security that has met the requirements to be traded on an exchange. |
| OTC Market (Second Market) | A decentralized, negotiated market for unlisted securities; trades occur between market makers. |
| Market Maker | A broker-dealer that maintains an inventory of a security and provides liquidity by posting bid/ask quotes. |
| Spread | The difference between the bid and ask price; represents the market maker's profit. |
| Third Market | A market where exchange-listed securities are traded over-the-counter (OTC). |
| Fourth Market | A market for institutional investors to trade large blocks of stock directly via ECNs without broker-dealers. |
| Dark Pools | Private trading networks (Fourth Market) that allow institutions to trade anonymously to avoid market disruption. |
| Retail Investor | An individual investing their own money for personal goals; most industry rules protect this group. |
| Institutional Investor | Large organizations (mutual funds, banks, insurance companies) managed by professionals. |
| Fiduciary | A person/entity legally obligated to act in the best interest of a beneficiary (e.g., trustees, guardians). |
| Investment Adviser (IA) | A person/firm that provides investment advice for a fee as a regular part of their business. |
| Carrying Firm (Clearing Firm) | A large broker-dealer that holds customer funds and securities and settles transactions. |
| Fully Disclosed Firm (Introducing BD) | A firm that takes orders but introduces its customers to a carrying firm for holding funds and clearing trades. |
| Prime Broker | A firm that provides centralized custody and settlement for an institution that trades with many different executing brokers. |
| Transfer Agent | The entity responsible for maintaining ownership records, canceling/issuing certificates, and handling lost certificates. |
| Registrar | A separate firm that audits and oversees the work of the transfer agent. |
| DTCC (Depository Trust & Clearing Corp) | The world's largest securities depository; provides custody and clearing for most U.S. securities. |
| OCC (Options Clearing Corp) | The clearing agency that standardizes, guarantees, and issues listed options contracts. |
| Bull / Bullish | An investor who believes a security or the market will rise in value. |
| Bear / Bearish | An investor who believes a security or the market will fall in value. |
| Bid Price | The highest price a buyer is willing to pay; the price an investor receives when selling. |
| Ask (Offer) Price | The lowest price a seller is willing to accept; the price an investor pays when buying. |
| Size | The number of shares available at a quote, expressed in round lots (1 lot = 100 shares). |
| Market Order | An order to buy or sell at the best available price immediately; guarantees execution but not price. |
| Limit Order | An order to buy or sell at a specific price or better; guarantees price but not execution. |
| Buy Limit | A limit order placed below the current market price to buy at a maximum price. |
| Sell Limit | A limit order placed above the current market price to sell at a minimum price. |
| Stop Order | A trigger price that creates a market order once the stock trades at or through that price. |
| Stop Limit Order | A trigger price that creates a limit order once the stock trades at or through the stop price. |
| GTC Order (Good-til-Canceled) | An order that remains valid until it is either executed or explicitly canceled by the customer. |
| FOK Order (Fill-or-Kill) | An instruction to fill an entire order immediately or cancel it entirely; no partial fills allowed. |
| IOC Order (Immediate-or-Cancel) | An instruction to fill as much of an order as possible immediately and cancel the remainder. |
| AON Order (All-or-None) | An instruction to fill the entire order or none of it, but it does not have to be filled immediately. |
| Long Position | Owning a security (Buy to Open); bullish position with limited risk. |
| Short Position | Borrowing and selling a security you don't own (Sell to Open); bearish position with unlimited risk. |
| Broker (Agent) | A capacity where the firm matches buyers and sellers and charges a commission. |
| Dealer (Principal) | A capacity where the firm trades from its own inventory and charges a markup or markdown. |
| Regular Way Settlement | The standard timeframe for trade completion; currently $T+1$ (Trade date + 1 business day). |
| Cash Settlement | A same-day settlement that requires both parties' agreement before the trade. |
| Stock Power | A separate legal document used to endorse a stock certificate for transfer, often for security when mailing. |
| Book Entry | A method of recording security ownership electronically rather than using physical paper certificates. |
| Street Name | When a security is held in electronic form by a broker-dealer on behalf of the customer. |
| agency | if a bd charges a commission for service provided the firm is acting as an agent also called an agency basis or broker |
Created by:
ria868