Term
| What are Market Makers called on US Exchanges? |
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Definition
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Term
| What are the two main functions of a specialist? |
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Definition
1. They serve as brokers to match buy and sell orders and to handle special limit orders placed with member brokers.
2. To act as a dealer to maintain a fair and orderly market by providing liquidity when the normal flow of orders is not adequate. |
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Term
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Definition
| Super DOT is an electronic order-routing system through which member firms transmit market and limit orders in NYSE listed securities directly to the posts where securities are traded or to the member firm's booth. The is a NYSE system. |
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Term
| What is the Display Book? |
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Definition
| The Display Book is an electronic workstation that keeps track of all limit orders and incoming market orders. This includes incoming Super DOT limit orders. This is a NYSE feature. |
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Term
| What is Opening Automated Report Service (OARS)? |
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Definition
| OARS, the opening feature of the Super Dot system, accepts member firms' preopening market orders up to 30,099 shares. This is a NYSE system. |
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Term
| What is market order processing? |
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Definition
| Super Dot's postoperating market-order system is designed to accept member firms' postopening market orders up to 30,099 shares. This is a NYSE feature. |
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Term
| What is the limit order processing systems? |
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Definition
| The limit order processing system electronically files orders to be executed when and if a specific price is reached. This is a NYSE system. |
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Term
| What is the Small-Order Execution System (SOES)? |
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Definition
| SOES was introduced in 1984. Market Makers receiving SOES orders must honor their bids for automatic executions up to 1,000 shares. SOES became compulsory following the October 1987 clash, when many small investors could not trade and suffered significant loses. This is a NYSE system. |
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Term
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Definition
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Term
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Definition
| Introduced in 1990, SelectNet is an order routing and execution service for institutional investors that allow brokers and dealers to communicate through Nasdaq terminals instead of the phone. Once two parties agree to a trade on SelectNet, the execution is automatic. |
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Term
| What is the Consolidated Quotation System (CQS)? |
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Definition
| CQS is an electronic service that provides quotations on issues listed on the NYSE, the AMEX, and regional exchanges, and issues traded by market makers in the Nasdaq InterMarket (the third Market). |
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Term
| What is the Intermarket Trading System (ITS)? |
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Definition
| ITS is a centralized quotation and routing system developed by the American, Boston, Chicago, New York, Pacific, and Philadelphia Stock Exchange and the NASD. |
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Term
| What is the Computer-Assisted Execution Service (CAES)? |
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Definition
| CAES is a service created by NASDAQ that automates order routing and transaction execution for securities listed on domestic exchanges that are part of the ITS. This system makes it possible for market makers who are involved with ITS to execute trades with specialists on the exchanges using CAES. |
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Term
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Definition
| A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services. |
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Term
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Definition
| A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services. |
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Term
| What are the characteristics of a good market? |
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Definition
1. Timely and accurate information on the price and volume of past transactions.
2. Liquidity.
3. Low transaction costs.
4. Prices that adjust to new information. |
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Term
| What is the primary market? |
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Definition
| The primary market is where new issues of bonds, preferred stock, or common stock are sold by government units, municipalities, or companies to acquire new capital. |
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Term
| What are the different segments of government issues? |
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Definition
All US government bonds are subdivided into three segments based on their original maturities.
1. Treasury Bills
2. Treasury Notes
3. Treasury Bonds |
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Term
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Definition
| Treasury bills are negotiable, non-interest-bearing securities with original maturities of one year or less |
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Term
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Definition
| Treasury Notes are negotiable, non-interest-bearing securities with original maturities of 2 to 10 years. |
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Term
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Definition
| Treasury bonds are negotiable, non-interest-bearing securities with original maturities of more than 10 years. |
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Term
| What are seasoned equity issues? |
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Definition
| Seasoned equity issues are new shares offered by firms that already have stock outstanding. |
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Term
| What are Initial public offerings (IPOs)? |
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Definition
| IPOs involve a firm selling its common stock to the public for the first time. |
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Term
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Definition
| New issues (seasoned or IPOs) are typically underwritten by investment bankers, who acquire the total issue from the company and sell the securities to interested investors. |
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Term
| What are Secondary Markets? |
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Definition
| Secondary Markets permit trading in outstanding issues. |
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Term
| What are the different trading systems? |
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Definition
There are two major trading systems.
1. Pure auction market
2. Dealer market. |
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Term
| What is a pure auction market? |
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Definition
| A pure auction market is one in which interested buyers and sellers submit bid and ask prices for a given stock to a central location where the orders are matched by a broker who does not own a stock but acts as a facilitating agent. |
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Term
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Definition
| A dealer market us a market where individual dealers provide liquidity for investors by buying and selling the shares of stock for themselves. |
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Term
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Definition
| In call markets, the intent is to gather all the bids and asks for the stock at a point in time and attempt to arrive at a single price where quantity demanded is as close as possible to the quantity supplied. |
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Term
| What is a continuous market? |
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Definition
| In a continuous market, trades occur at any time the market is open wherein stocks are priced either by auction or by dealers. |
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Term
| What are Primary Listing Markets? |
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Definition
| Primary listing markets are formal exchanges or markets where a corporate stock is primarily or formally listed. |
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Term
| What exchanges are considered primary listing markets? |
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Definition
| This category includes the two traditional national exchanges (New York Stock Exchange and American Stock Exchange) and the Nasdaq Market. |
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Term
| What are Alternative trading systems (ATSs)? |
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Definition
| ATSs are nontraditional, computerized trading systems that compete with or supplement dealer markets and traditional exchanges. |
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Term
| What are the most well known Alternative Trading Systems (ATSs)? |
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Definition
The most well-known ATSs are the,
1. Electronic Communication Networks (ECNs)
2. Electronic Crossing Systems (ECSs) |
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Term
| What are Electronic Communication Networks (ECNs)? |
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Definition
| ECNs are electronic facilities that match buy and sell orders directly via computer, mainly for retail institutional trading. ECNs don not buy and sell from their own account but act as very cheap, efficient brokers. |
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Term
| What are Electronic Crossing Systems (ECSs)? |
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Definition
| ECSs are electronic facilities that act as brokers to match large buy and sell orders. The most well-known ECSs are POSIT, Global Instinet Crossing and Arizona Stock Exchange. |
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Term
| What are the different kinds of exchange memberships? |
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Definition
Stock exchanges typically have four major categories of membership:
1. Specialist
2. Commission broker
3. Floor broker
4. Registered traders |
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Term
| What are Commission brokers? |
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Definition
| Commission brokers are employees of a member firm who buy and sell for the customers of the firm. |
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Term
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Definition
| Floor brokers are independent members of an exchange who act as brokers for other members. For example, when commission brokers for Merrill Lynch become too busy to handle all of their orders, they will ask one of the floor brokers to help them. |
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Term
| What are Registered traders? |
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Definition
| Registered traders use their memberships to buy and sell for their own account. |
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