Exam 17: Markets for Common Stock: The Basic Characteristics

The ________ is the electronic service that provides last sale and trade data for issues listed on the NYSE, Amex, and U.S. regional stock exchanges and was introduced in April 1976.

To the investor, the disadvantage of the agency program trade is that, while commissions may be the lowest, the execution price may not be the best because of impact costs and the potential frontrunning by the brokerage firms that were solicited to submit a commission bid.

An investor shorts (borrows and sells) 100 shares of a stock at $50 for a total stock value of $5,000. With an initial margin of 50%, the investor must deposit $2,500 (in addition to leaving the $5,000 from the sale in the account). This leaves the investor with a credit balance of $7,000 (which does not change with the stock price since it is in cash).

________ may be sent to the broker-dealer's floor broker, and ________ orders may be transacted with another broker-dealer or internalized at a competitive bid or offer.

What type of trades requires require the execution of a trade of a large number of shares of a given stock?

Comment on the following statement: "institutions can use program trade arrangements to minimize frontrunning."

Some indexes represent a broad segment of the stock market while on a particular sector such as technology, oil and gas, and financial.

Which of the below statements is FALSE?

________ is the minimum proportion of (1) the equity in the investor's margin account to (2) the total market value.

The institutional arrangement that has evolved to accommodate these needs is the upstairs market, which is a network of trading desks of the major securities firms and institutional investors that communicate with each other by means of electronic display systems and telephones.

Which of the below statements is TRUE?

Empirical evidence on insider trading argues against the notion that the market is efficient in the ________ sense.

________ important because of the interrelationship between the stock market, stock index futures market, and stock index options markets.

A large single-day decline in the stock market occurred on Monday, October 19, 1987, popularly referred to as "Black Monday." On this day,the Dow Jones Industrial Average (DJIA), declined by 23%, and other market indexes declined by roughly the same amount. While several potential reasons for the crash were identified, no unambiguous conclusions resulted. One clear dynamic for the price decline, however, did exist. Describe this dynamic and what stock market policy resulted.

________ is the "cost" of securities not traded.

________ are the direct costs of trading, such as broker commissions, fees, and taxes.

________ means that the price of the security fully reflects all public information (which includes but is not limited to historical price and trading patterns).

A ________ is a temporary halting of trading during a severe market decline.

Investors often choose their ________ based on who will give them the best execution at the ________ on a specific transaction, and also based on who will provide ________ over a period of time.

Implicit transaction costs are commissions, custodial fees, and transfer fees.