Exam 18: Markets for Common Stock: Structure and Organization

Since options exchanges are registered with the SEC, they too can initiate and operate stock exchanges. During 2007, two options exchanges, the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), began stock exchanges, called the ISE Stock Exchange and the Chicago Board Options Stock Exchange, respectively. Describe the two components of the ISE stock market.

In contrast to ________ that is a nonprofit organization, a publicly owned equity-based organization is ________ and operated for a profit.

A major role of a NYSE-assigned specialists is ________. 2. As catalysts, they help to bring buyers and sellers together. 3) As dealers, they trade for their own accounts when there is a temporary absence of public buyers or sellers, and only after the public orders in their possession have been satisfied at a specified price. 4) As auctioneers, they quote current bid-ask prices that reflect total supply and demand for each of the stocks assigned to them.

________ is an entity independent of a registered securities exchange that collects and disseminates securities quotes and trades.

Specialists are also responsible for balancing buy and sell orders at the opening of the trading day in order to arrange an equitable opening price for the stock.

Which of the below statements is TRUE?

Which of the below statements is FALSE?

The construct of the Nasdaq as a dealer system has made it ________ for ECNs and others to conduct the trades directly and report them to the exchange.

In general, options trading is composed of one component: options on individual stocks.

________ permit intermediaries to provide liquidity. Intermediaries may be brokers (who are agents for the naturals); dealers or market-makers (who are principals in the trade); and specialists, as on the New York Stock Exchange (who act as both agents and principals). Dealers are independent, profit-making participants in the process.

The U.S. stock market is composed of ________.

Direct market access (DMA) refers to the use of electronic systems to access various liquidity pools and execution venues directly, without the intervention of a sell-side firm trading desk or broker.

________ matches buy and sell orders in a multinational trade at a price that is set elsewhere.

________ is often defined as a market where intermediaries meet to deliver and execute customer orders.

Demutualization occurs by giving the members shares or equity in the demutualized organization in exchange for their seats in the mutual organization.

What is a dark pool? Describe two of the sponsors of dark pools.

What does direct market access (DMA) refer to? Name two advantages of DMA to a buy-side firm?