Question 1

Among the advantages of dark pools are less or no visibility and no price discovery.

Accepted Answer

A) True 
 B)False  False

Question 2

One outcome of ________ (also called consolidators) is that customer order flow is "less sticky"; that is, the order flow will switch from one execution service to another quickly based on short-term, quantitative information.

Accepted Answer

A)  sticky order routers 
B)  consolidator orders 
C)  consolidator routers 
D)  smart order routers 
A)  sticky order routers 
B)  consolidator orders 
C)  consolidator routers 
D)  smart order routers D

Question 3

Trading in stocks listed on the NYSE is conducted as a ________ at a designated physical location on the trading floor, called a ________, with brokers representing their customers' buy and sell orders.

Accepted Answer

A)  decentralized discontinuous auction market; post 
B)  centralized continuous auction market; post 
C)  decentralized discontinuous auction market; seat 
D)  centralized continuous auction market; seat 
A)  decentralized discontinuous auction market; post 
B)  centralized continuous auction market; post 
C)  decentralized discontinuous auction market; seat 
D)  centralized continuous auction market; seat B

Question 4

Electronic communication networks (ECNs) ________.

Accepted Answer

A)  are not a limit order book. 
B)  offer transparency, anonymity, automated service, and reduced costs, and are therefore effective for handling small orders. 
C)  may not be linked into the Nasdaq marketplace via a quotation representing the ECN's best buy and sell quote. 
D)  do not use the Internet to link buyers and sellers, thus employing brokers and trading floors. 
A)  are not a limit order book. 
B)  offer transparency, anonymity, automated service, and reduced costs, and are therefore effective for handling small orders. 
C)  may not be linked into the Nasdaq marketplace via a quotation representing the ECN's best buy and sell quote. 
D)  do not use the Internet to link buyers and sellers, thus employing brokers and trading floors.

Question 5

Contrast the NYSE exchange with Nasdaq

Accepted Answer

Fundamentally, the NYSE has been an auct

Question 6

Direct market trading is a relatively recent type of trading technique whereby an overall trade (either buy or sell) is conducted electronically in a series of small transactions instead of one large transaction.

Accepted Answer

A) True 
 B)False

Question 7

In a ________, sometimes called a period call, orders from customers are batched together for a simultaneous trade at a specific point in time.

Accepted Answer

A)  call auction 
B)  regulated auction 
C)  put auction 
D)  buyer's auction 
A)  call auction 
B)  regulated auction 
C)  put auction 
D)  buyer's auction

Question 8

Over the years, the Nasdaq became more of a stock market by adding trade and volume reporting and automated trading systems. In October 2002, the Nasdaq started a system, called SuperMontage. Describe how SuperMontage has changed Nasdaq.

Accepted Answer

The initiation of SuperMontage has led t

Question 9

Some of the regional stock exchanges, including Philadelphia and Boston, as well as the Amex have been driven by trading in stock options and index options rather than stocks in recent years.

Accepted Answer

A) True 
 B)False

Question 10

Overall, after demutualization, the market participants and market owners were the same via memberships, seats, or access privileges.

Accepted Answer

A) True 
 B)False

Question 11

Exchanges have usually been mutual organizations with memberships or "seats". Adopting a new technology ________.

Accepted Answer

A)  may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization. 
B)  may benefit the customers of an exchange by increasing the transaction costs but also increase the value of access privileges and seats of a membership organization.. 
C)  may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization., 
D)  may benefit the members of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization... 
A)  may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization. 
B)  may benefit the customers of an exchange by increasing the transaction costs but also increase the value of access privileges and seats of a membership organization.. 
C)  may benefit the customers of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization., 
D)  may benefit the members of an exchange by reducing the transaction costs but also decrease the value of access privileges and seats of a membership organization...

Question 12

The term fair and orderly market means a market in which there is price continuity and reasonable depth.

Accepted Answer

A) True 
 B)False

Question 13

Dealers ________.

Accepted Answer

A)  operate as agents, not principals. 
B)  continually provide bids and offer quotes to buy for or sell from borrowed inventories and profit from the spread between their bid and offer quotes. 
C)  compete with each other in their bids and offers. 
D)  have a perspective that views the "best" market as the highest bid and lowest offer. 
A)  operate as agents, not principals. 
B)  continually provide bids and offer quotes to buy for or sell from borrowed inventories and profit from the spread between their bid and offer quotes. 
C)  compete with each other in their bids and offers. 
D)  have a perspective that views the "best" market as the highest bid and lowest offer.

Question 14

During the 1990s, the SEC continued its emphasis on greater quote and price transparency. In this regard, the SEC instituted new order handling rules in 1997. These rules include: ________.

Accepted Answer

A)  any market-maker who held a customer order had to display that order in their quote. 
B)  a market-maker could place a more aggressive quote in an ECN, if the ECN displayed the top of its book in the Nasdaq quote montage. 
C)  if the ECN's own best quote was not shown in the quote montage, then the market-maker had to update its own quote in Nasdaq to match the ECN quote. 
D)  All of these 
A)  any market-maker who held a customer order had to display that order in their quote. 
B)  a market-maker could place a more aggressive quote in an ECN, if the ECN displayed the top of its book in the Nasdaq quote montage. 
C)  if the ECN's own best quote was not shown in the quote montage, then the market-maker had to update its own quote in Nasdaq to match the ECN quote. 
D)  All of these

Question 15

The OTC market is often called a market for "listed" stock.

Accepted Answer

A) True 
 B)False

Question 16

A structural change that has occurred in exchanges is their evolution from publicly owned electronically traded (that is, no trading floor) organizations to membership-owned, floor-traded organizations.

Accepted Answer

A) True 
 B)False

Question 17

The Nasdaq, as an electronic exchange, has no physical trading floor, but makes all its trades through a computer and telecommunications system.

Accepted Answer

A) True 
 B)False

Question 18

________ is an electronic order routing and reporting system that links member firms worldwide electronically directly to the specialist's post on the trading floor of the NYSE.

Accepted Answer

A)  The SuperDOT system 
B)  The SuperElectronic reporting system 
C)  The SuperSPOT system 
D)  None of these 
A)  The SuperDOT system 
B)  The SuperElectronic reporting system 
C)  The SuperSPOT system 
D)  None of these

Question 19

A fundamental difference between U.S. and international exchanges involves ________.

Accepted Answer

A)  their method of trading. 
B)  their market structure. 
C)  the nature of the exchanges' business organizations. 
D)  All of these 
A)  their method of trading. 
B)  their market structure. 
C)  the nature of the exchanges' business organizations. 
D)  All of these

Question 20

In carrying out their duties, specialists ________.

Accepted Answer

A)  simply fill customer market orders or limit or stop orders by similar orders. 
B)  are allowed to engage in transactions in securities in which they are registered unless such transactions are necessary to maintain a fair and orderly market. 
C)  profit only from those trades in which they are involved; that is, they realize revenue for trades in which they are an agent. 
D)  None of these 
A)  simply fill customer market orders or limit or stop orders by similar orders. 
B)  are allowed to engage in transactions in securities in which they are registered unless such transactions are necessary to maintain a fair and orderly market. 
C)  profit only from those trades in which they are involved; that is, they realize revenue for trades in which they are an agent. 
D)  None of these

Exam 18: Markets for Common Stock: Structure and Organization

Among the advantages of dark pools are less or no visibility and no price discovery.

One outcome of ________ (also called consolidators) is that customer order flow is "less sticky"; that is, the order flow will switch from one execution service to another quickly based on short-term, quantitative information.

Trading in stocks listed on the NYSE is conducted as a ________ at a designated physical location on the trading floor, called a ________, with brokers representing their customers' buy and sell orders.

Electronic communication networks (ECNs) ________.

Contrast the NYSE exchange with Nasdaq

Direct market trading is a relatively recent type of trading technique whereby an overall trade (either buy or sell) is conducted electronically in a series of small transactions instead of one large transaction.

In a ________, sometimes called a period call, orders from customers are batched together for a simultaneous trade at a specific point in time.

Over the years, the Nasdaq became more of a stock market by adding trade and volume reporting and automated trading systems. In October 2002, the Nasdaq started a system, called SuperMontage. Describe how SuperMontage has changed Nasdaq.

Some of the regional stock exchanges, including Philadelphia and Boston, as well as the Amex have been driven by trading in stock options and index options rather than stocks in recent years.

Overall, after demutualization, the market participants and market owners were the same via memberships, seats, or access privileges.

Exchanges have usually been mutual organizations with memberships or "seats". Adopting a new technology ________.

The term fair and orderly market means a market in which there is price continuity and reasonable depth.

Dealers ________.

During the 1990s, the SEC continued its emphasis on greater quote and price transparency. In this regard, the SEC instituted new order handling rules in 1997. These rules include: ________.

The OTC market is often called a market for "listed" stock.

A structural change that has occurred in exchanges is their evolution from publicly owned electronically traded (that is, no trading floor) organizations to membership-owned, floor-traded organizations.

The Nasdaq, as an electronic exchange, has no physical trading floor, but makes all its trades through a computer and telecommunications system.

________ is an electronic order routing and reporting system that links member firms worldwide electronically directly to the specialist's post on the trading floor of the NYSE.

A fundamental difference between U.S. and international exchanges involves ________.

In carrying out their duties, specialists ________.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters

Trading in stocks listed on the NYSE is conducted as a at a designated physical location on the trading floor, called a , with brokers representing their customers' buy and sell orders.