Exam 14: Secondary Markets

Without a secondary market, issuers would be unable to ________, or they would have to pay a higher rate of return, as investors would ________ in compensation for expected illiquidity in the securities.

In the United States, secondary trading of common stock occurs ________.

Pricing efficiency refers to a market where prices at all times fully reflect all available information that is relevant to the valuation of securities.

Which of the following statements is FALSE?

________, orders are grouped together for simultaneous execution at the same price.

The ________ can be viewed as the price charged by dealers for supplying immediacy together with short-run price stability (continuity or smoothness) in the presence of short-term order imbalances.

A market is not perfect only because market agents are price takers but is also free of transactions costs and any impediment to the interaction of supply and demand for the commodity. Economists refer to these various costs and impediments as frictions. Frictions include ________.

Commissions are all of the brokerage costs of transacting.

Which of the below statements is TRUE?

This practice of selling securities that are not owned at the time of sale is referred to as ________.

In the absence of an effective short-selling mechanism, security prices will tend to be biased toward the ________, causing a market to depart from the standards of a perfect price-setting situation.

Because the bond business has been ________ rather than ________ business, the capital of the market makers is critical.

Primary markets help the issuer of securities to track their values and required returns.

The same Wall Street firms that have been the major market makers in bonds have also been the ________ of electronic trading in bonds.

In the United States, secondary trading of common stock occurs in a number of trading locations. Describe these locations.

The combination of the decreased risk and the increased profitability of bond market making has induced the major market markets to deemphasize this business in the allocation of capital.

Which of the below statement is FALSE?

In the secondary market, an issuer of securities (whether it is a corporation or a governmental unit) may obtain regular information about the value of the asset. Describe the nature of this information and value that a secondary market offers.

Perfect market results when ________.

Which of the below statements is FALSE?