SIE Exam Chapters 1-5 Questions & Answers(RATED A)
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Course
FINRA SIE
Institution
FINRA SIE
Bid - ANSWER Represents a clients selling price
- This is the price at which the MM will buy
dealer to dealer markets - ANSWER NASDAQ
-Non-physical; phone and computer network
- Negotiated market
- unlimited number of registered "market makers"
-Classified as a securities exchange
OTCBB...
SIE Exam Chapters 1-5 Questions &
Answers(RATED A)
Bid - ANSWER Represents a clients selling price
- This is the price at which the MM will buy
dealer to dealer markets - ANSWER NASDAQ
-Non-physical; phone and computer network
- Negotiated market
- unlimited number of registered "market makers"
-Classified as a securities exchange
OTCBB (Bulletin Board) - ANSWER Must be reporting companies
Third Market - ANSWER - Listed securities traded otc
- Do not maintain an inventory
Issuers - ANSWER Are legal entities that raise capital by issuing securities. These
include:
Corporations
U.S. Treasury and Government Agencies
State and local governments
Banks
Foreign Governments
Equity - ANSWER Used by corporations and banks
- represents ownership
Debt - ANSWER Ex: Notes and bonds
Represent and issuers promise to pay
Broker - ANSWER -Firm acts as a agent or conduit
- Finds another party willing to take the other side of trade
- Collect commission for the service
- No risk to the firm
Dealer - ANSWER -Firm acts as a principal
- Firm takes the other side of the trade
- Entitled to markup/markdown
- Risk= Using their own money to take the other side of the trade
Investment Banking - ANSWER -Issuance
- Acts as an underwriter
- Merger and Acquisition
,- Private Equity
- Debt and equity capital markets
Research - ANSWER -Research reports on which companies should be bought or sold
Private Client - ANSWER - Retail Brokerage
Sales and Trading - ANSWER -Fixed income
-Equity
-Bonds and debt
Market-Maker - ANSWER Is a broker-dealer that chooses to display quotes to buy or
sell a specific amount of securities at specific prices
-Quotes are firm for at least 100 shares=round lots
Make Spreads
Ask or Offer - ANSWER Represents a clients purchase price
- This is the price at which the MM will sell
Investment Adviser - ANSWER Is a firm that charges customers a fee for managing
their securities portfolios.
- The fee is based on the assets under management
- An IA is considered a large or institutional customer of a broker dealer
Municipal Advisor - ANSWER Is a person or firm who advises municipalities on bond
offerings and must be registered with the SEC
- Typically advise issuers (ex: state, county or city) regarding the structure and timing of
a new offering.
institutional investor - ANSWER Customers with a large amount of assets
- Banks
- Insurance companies
- Investment companies
-corporations, partnerships
-Registered investment advisers
- public and private pension plans
-Hedge funds
Retail Investor - ANSWER - Individual Investors who are not defined as institutional
investors
Accredited Investors - ANSWER Institutional investors as well as individuals who have
met a financial test
- Net worth of $1,00,000 excluding primary residence
- Annual income of $200,000 in each of the last 2 years, $300,000 for married couples
, Qualified Institutional Buyer (QIB) - ANSWER Buyer must own and invest a minimum of
$100 of securities
- cannot be a natural person
primary market - ANSWER market for selling financial assets that can only be
redeemed by the original holder
Issuer-Underwriter-Investor
IPO - ANSWER Initial Public Offering
secondary market - ANSWER Trading markets that facilitate the exchange of existing
financial instruments among investors
Non-Exchnage Issues (OTC) - ANSWER Often low prices and thinly traded
-Two systems which offer real-time quotations:
1.OTCBB (Bulletin Board)
2. OTC Pink Markets
OTC Pink Markets - ANSWER May be non-reporting companies
Trader - ANSWER Execute trades for their firm or their firms clients
- Do not maintain an inventory
Fourth Market - ANSWER transactions made directly between large institutional buyers
and sellers of securities
Dark Pools - ANSWER Provides liquidity for large institutional investors and high-
frequency traders.
- Quotes are not disseminated to the public
- Limits impact on the market
- Anonymous
DTTC: Depository Trust and Clearing Corp - ANSWER Provides cleaning, settlement
and information services for its members
- Is parents of the National Securities Clearing Corporation
- Guarantees Settlements
- Removes counterparty risk
- Transactions among members are completed through computerized bookkeeping
entries.
omnibus - ANSWER -A single account is set up at the clearing account
- Specific client information is maintained by the introducing firm
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