Term
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Definition
| A means for exchanging assets, usually cash, for something of value. |
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Term
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Definition
| Occurs when prices respond quickly to new information, when each successive trade is made at a price close to the preceding price, and when the market can absorb large amounts of securities or assets without changing the price significantly. |
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Term
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Definition
| A measure of the speed with which an asset can be converted into cash at its fair market value. |
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Term
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Definition
| Markets for existing assets that are currently traded between investors. |
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Term
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Definition
| Markets in which participants buy their assets directly from the source of the asset. |
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Term
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Definition
| Acts as a middleman in the process of raising funds and, in most cases, takes a risk by underwriting an issue of securities. |
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Term
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Definition
| Refers to the guarantee the investment banking firm gives the selling firm to purchase its securities at a fixed price, thereby eliminating the risk of not selling the whole issue of securities and having less cash than desired. |
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Term
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Definition
| Occurs in connection with an investment banker whereby the issuing firm assumes the risk and simply takes back any securities not sold after a fixed period. |
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Term
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Definition
| Rare occurrence in which the corporation sells its securities directly to the public. |
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Term
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Definition
| Group of investment banking firms that share the risk and the burden of distribution of an IPO. |
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Term
| Initial public offering (IPO, p.30) |
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Definition
| Event whereby a private company is brought public for the first time. |
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Term
| New York Stock Exchange (NYSE, p.32) |
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Definition
| Securities market that has both a central location where trading between buyers and sellers occurs at trading posts on the floor and an online platform for exchanging securities. Was one of the first organized exchanges. |
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Term
| Organized exchange (p.32) |
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Definition
| Major exchange where securities are traded. |
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Term
| Over-the-counter-market (p.32) |
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Definition
| A decentralized market of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of a physical trading floor. There is no central exchange or meeting place for this market. |
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Term
| Electronic Communication Network (ECN, p. 33) |
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Definition
| An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over-the-counter market maker, and permits such orders to be entirely or partly executed. Automatically matches buy and sell orders at specified prices. |
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Term
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Definition
| Member of an exchange such as the NYSE that acts as an agent for clients and executes buy and sell orders on the floor of the exchange. |
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Term
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Definition
| Type of floor broker that represents NYSE member firms such as Merrill Lynch or Morgan Stanley Smith Barney, which used to be known as investment houses. These brokers trade either for clients of the investment house or for the firm's direct account. |
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Term
| Independent brokers (p.35) |
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Definition
| Type of floor broker who may individually or as an employee of a very small "boutique" firm provide trade execution services to member firms or nonmember firms as well as to house brokers who need extra help. |
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Term
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Definition
| Type of member on an exchange floor that consists of a limited number of firms that have been assigned specific stocks by the NYSE. These members have enough financial resources to make a market in the stocks they are assigned. |
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Term
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Definition
| Designated order transfer system that allows NYSE member firms to electronically transmit all market and limit orders directly to the specialist at the trading post or the member trading booth. |
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Term
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Definition
| Feature of Super Dot that greatly aids the specialist. |
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Term
| Exchange traded funds (ETFs, p.36) |
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Definition
| A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. |
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Term
| Nasdaq Stock Market (p.36) |
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Definition
| National securities exchange that used to be considered an over-the-counter market even though it had listing requirements for the companies that traded on its market. The second largest exchange in the United States by dollar trading volume, but it often trades more shares on a daily basis than the NYSE. |
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Term
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Definition
| A large electronic market that claims to be the third largest exchange in the world based on the notional value of its trades. |
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Term
| Chicago Board Options Exchange (CBOE, p.38) |
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Definition
| Founded in 1973, the CBOE is an exchange that focuses on options contracts for individual equities, indexes and interest rates. The CBOE is the world's largest options market. It captures a majority of the options traded. It is also a market leader in developing new financial products and technological innovation, particularly with electronic trading. |
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Term
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Definition
| Gives the owner the right to buy 100 shares of the underlying common stock at a set price for a certain period. |
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Term
| Intercontinental Exchange (ICE, p.39) |
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Definition
| Founded in 2000 to create a 24-hour electronic market for energy contracts. The goal was to consolidate a fragmented market, to create more liquidity and efficiency, and to lower the costs through the use of an electronic market. |
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Term
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Definition
| An auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date. Trading is carried on through open yelling and hand signals in a trading pit. |
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Term
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Definition
| Trading by non exchange-member brokers/dealers and institutional investors of exchange-listed stocks. In other words, the third market involves exchange-listed securities that are being traded over-the-counter between brokers/dealers and large institutional investors. |
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Term
| Over-the-counter bulletin board market (OTC.BB, p.39) |
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Definition
| An over-the-counter market that does not have any listing requirements and do file regulatory reports with the SEC. |
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Term
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Definition
| An over-the-counter market that has no listing requirements and do not file regulatory reports with the SEC. |
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Term
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Definition
| The trading of exchange-listed securities between institutions on a private over-the-counter computer network, rather than over a recognized exchange such as the New York Stock Exchange (NYSE) or Nasdaq. Trades between institutions will often be made in large blocks and without a broker, allowing the institutions to avoid brokerage fees. |
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Term
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Definition
| Electronic networks used by institutional investors to cross trades anonymously. |
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Term
| Algorithmic trading (p.41) |
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Definition
| The use of mathematical models that automatically execute trades when certain conditions exist. |
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Term
| Securities and Exchange Commission (SEC, p. 41) |
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Definition
| Governing body that regulates organized securities markets. Established by the Securities Exchange Act of 1934. |
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Term
| Securities Act of 1933 (p.44) |
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Definition
| Legislative act created to enforce full disclosure of all pertinent investment information whenever a corporation sells a new issue of securities. |
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Term
| Securities Acts Amendments of 1975 (p.45) |
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Definition
| Major focus of this legislation was to direct the SEC to supervise the development of a national securities market. |
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Term
| Investment Advisor Act of 1940 (p.45) |
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Definition
| Legislation established to protect the public from unethical investment advisers. |
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Term
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Definition
| Trading that occurs through established computer trigger points. Examples include large volume trades that are initiated by institutional investors. |
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Term
| High-frequency trading (p.42) |
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Definition
| A program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. This trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. |
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Term
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Definition
| Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. |
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Term
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Definition
| The quick drop and recovery in securities prices that occurred shortly after 2:30pm Eastern Standard Time on May 6, 2010. Initial reports that the crash was caused by a mistyped order proved to be erroneous, and the causes of the flash crash remain unknown. |
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Term
| Securities Investor Protection Corporation (SIPC, p.45) |
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Definition
| Governing body established by the Securities Investor Protection Act of 1970 to oversee liquidation of brokerage firms and to insure investors' accounts to a maximum value of $500,000 in case of bankruptcy of a brokerage firm. |
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Term
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Definition
| The buying or selling of a security by someone who has access to material, nonpublic information about the security. In this case, we are referring to the positive use of the term as applied to the exchange of securities by executives in a company. |
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Term
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Definition
| Someone who gets paid by the brokerage company for which he works for each order of securities he executes on a customer's behalf. |
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Term
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Definition
| A broker that does not sell in even multiples of 100. |
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Term
| Registered trader (Matching Quiz for Ch.2) |
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Definition
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Term
| Spread (Matching Quiz from Ch.2) |
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Definition
| The difference between the bid and the ask price of a security or asset. |
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Term
| Government securities (Matching Quiz from ch.2) |
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Definition
| Largest dollar volume on OTC. |
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Term
| Give ups (Matching Quiz from ch.2) |
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Definition
| Method to pay for research. |
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Term
| Block trade (Matching quiz ch.2) |
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Definition
| An order or trade submitted for sale or purchase of a large quantity of securities. |
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