SIE Exam Chapters 1-5(100% Correct)
Bid - ANSWERRepresents a clients selling price
- This is the price at which the MM will buy
dealer to dealer markets - ANSWERNASDAQ
-Non-physical; phone and computer network
- Negotiated market
- unlimited number of registered "market makers"
-Classified as a securities exchange
OTCBB (Bulletin Board) - ANSWERMust be reporting companies
Third Market - ANSWER- Listed securities traded otc
- Do not maintain an inventory
Issuers - ANSWERAre 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 - ANSWERUsed by corporations and banks
- represents ownership
Debt - ANSWEREx: 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 - ANSWERIs 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 - ANSWERRepresents a clients purchase price
- This is the price at which the MM will sell
Investment Adviser - ANSWERIs 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 - ANSWERIs 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 - ANSWERCustomers 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 - ANSWERInstitutional 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) - ANSWERBuyer must own and invest a minimum of $100 of
securities
- cannot be a natural person
primary market - ANSWERmarket for selling financial assets that can only be redeemed by the
original holder
Issuer-Underwriter-Investor
IPO - ANSWERInitial Public Offering
secondary market - ANSWERTrading markets that facilitate the exchange of existing financial
instruments among investors
Non-Exchnage Issues (OTC) - ANSWEROften low prices and thinly traded
-Two systems which offer real-time quotations:
1.OTCBB (Bulletin Board)
2. OTC Pink Markets
OTC Pink Markets - ANSWERMay be non-reporting companies
Trader - ANSWERExecute trades for their firm or their firms clients
- Do not maintain an inventory
Fourth Market - ANSWERtransactions made directly between large institutional buyers and sellers of
securities
Dark Pools - ANSWERProvides 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 - ANSWERProvides cleaning, settlement and information
services for its members
- Is parents of the National Securities Clearing Corporation
- Guarantees Settlements
- Removes counterparty risk
Bid - ANSWERRepresents a clients selling price
- This is the price at which the MM will buy
dealer to dealer markets - ANSWERNASDAQ
-Non-physical; phone and computer network
- Negotiated market
- unlimited number of registered "market makers"
-Classified as a securities exchange
OTCBB (Bulletin Board) - ANSWERMust be reporting companies
Third Market - ANSWER- Listed securities traded otc
- Do not maintain an inventory
Issuers - ANSWERAre 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 - ANSWERUsed by corporations and banks
- represents ownership
Debt - ANSWEREx: 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 - ANSWERIs 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 - ANSWERRepresents a clients purchase price
- This is the price at which the MM will sell
Investment Adviser - ANSWERIs 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 - ANSWERIs 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 - ANSWERCustomers 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 - ANSWERInstitutional 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) - ANSWERBuyer must own and invest a minimum of $100 of
securities
- cannot be a natural person
primary market - ANSWERmarket for selling financial assets that can only be redeemed by the
original holder
Issuer-Underwriter-Investor
IPO - ANSWERInitial Public Offering
secondary market - ANSWERTrading markets that facilitate the exchange of existing financial
instruments among investors
Non-Exchnage Issues (OTC) - ANSWEROften low prices and thinly traded
-Two systems which offer real-time quotations:
1.OTCBB (Bulletin Board)
2. OTC Pink Markets
OTC Pink Markets - ANSWERMay be non-reporting companies
Trader - ANSWERExecute trades for their firm or their firms clients
- Do not maintain an inventory
Fourth Market - ANSWERtransactions made directly between large institutional buyers and sellers of
securities
Dark Pools - ANSWERProvides 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 - ANSWERProvides cleaning, settlement and information
services for its members
- Is parents of the National Securities Clearing Corporation
- Guarantees Settlements
- Removes counterparty risk
