208 WILEY SERIES 55 Exam Review 2015

Transcription

1 Index A Access equals delivery rule, 3 Accidental withdrawal of quotes, 69 Accounts: prime brokerage, wrap, 125 Accredited investors, 9 ACES (Advanced Computerized Execution System), ACT (Automated Confirmation System), ACT/TRF Trade Scan, 59, Additional issues, 7 ADF (Alternative Display Facility), Adjustments, for stock splits, 28 Advanced Computerized Execution System (ACES), Affirmative determination, Aftermarket purchasers, 3 4 Agents: brokers as, 95 specialists/dmms as, Aggressive electronic SDGY orders, 51 AIQ (Anti Internalization Qualifier), 71 All or none (AON) orders, 24 Alternative Display Facility (ADF), Alternative trading systems, 56 Amendment, posteffective, 15 Anti Internalization Qualifier (AIQ), 71 AON (all or none) orders, 24 AQR (automatic quote refresh) feature, Asset transfers, 14 Attributable orders, 72 Automated Confirmation System (ACT), Automatic quote refresh (AQR) feature, Average weighted price (AWP) trades, 76 Awards, of issues, 8 B Backing away violations, 101 Best market, 27 Bids: competitive bid underwriting, 8 national best bid and offer, 44 penalty, stabilizing, 85 Blanket recommendations, 117 Borrowing, securities, Brochure delivery, 125 Brokers: dealers vs., prime, 124 Broker dealers: correspondent, 73 ECNs registered as, 53 quarterly reports filed by, 55 registering as market makers, Broker transactions, 11 Buy limit orders, 22 Buy stop orders, 23 C Canadian businesses, small, 13 Capping, 116 Churning, 115 Circuit breakers, Clearly erroneous reports, 121 Close outs, 122 Closing cross, 67 Collusive behavior, Commissions, for brokers vs. dealers, in dominated and controlled markets, and EBS, FINRA 5% markup policy, and firm quote rule, markups/markdowns when acting as principal, 97 for net transactions with customers, 99 and OATS, pretest, for proceeds transactions, 98 and protection of customer orders, 100 for riskless principal transactions, 98 and trade complaints between members, 102 Compensation, for firms, 95. See also Commissions Competitive bid underwriting, 8 Complaints: of backing away violations, 101 trade, between members, 102

2 208 WILEY SERIES 55 Exam Review 2015 Confirmations: Automated Confirmation System, customer, Consolidated Quotation System (CQS), 59 Consolidated tape, Controlled markets, Control securities, 11 Control stock, 11 Cooling off period, 2 Corporate securities, 1 19 awarding the issue, 8 exempt securities, 8 9 exempt transactions, 9 14 FINRA Rule 5130, 5 6 pretest, prospectuses for, 2 4 Rule 137, 14 Rule 138, 14 Rule 139, Rule 415, 15 and Securities Act of 1933, 1 2 tombstone ads for, 4 5 types of offerings, 7 underwriting, 6 7 and underwriting syndicate, 8 Correspondent broker dealers, 73 Covered securities: defined by SEC Rule 11Ac1-1, 101 in market centers, 54 CQS (Consolidated Quotation System), 59 Crossed markets, 45 Customers: established, 114 institutional, 99, 118 net transactions with, 99 Customer confirmations, Customer limit orders, Customer orders, 100 D Daily purchase limit (passive market makers ), 84 Dark pools (term), 59 Day orders, 21 DEA (designated examining authority), 108 Dealers, Deceptive devices, Delivery: access equals delivery rule, 3 of borrowed securities, of brochures, 125 Depository Trust Clearing Corporation (DTCC), 52 Designated examining authority (DEA), 108 Designated market makers (DMMs), Direct electronic access, Distribution compliance period, Dividends, selling, 118 DMMs (designated market makers), DNR (do not reduce) orders, 27 Domestic investors, Dominated markets, Do not reduce (DNR) orders, 27 Double reporting: to ACT/TRF, avoiding, of third-market trades, 78 DTCC (Depository Trust Clearing Corporation), 52 Dual agency, 123 E Early regular hours orders, 67 EBS (Electronic Blue Sheets), ECNs, see Electronic Communication Networks ECN Display Alternative Rule, 71 Electronic access, Electronic Blue Sheets (EBS), Electronic Communication Networks (ECNs): and customer limit orders, 71 to lower spreads, 40 for OTC securities, Eligible ECNs, 71 Errors, execution, 121 Established customers, 114 Exchanges: Nasdaq as, 39 as securities marketplace, 25 UTP, 54 Excused withdrawal, of quotes, Execution errors, 121 Execution systems (Nasdaq), Exemptions: from ACT/TRF reporting, 77, 78 to FINRA Rule 5130, 5 from penny stock cold call rule, 114 to Rule 101, 82 to Rule 102, 83 to Rule 105, 87 from SEC Rule 15c2-11, 43 from TRACE reporting requirements, 87 Exempt securities, 8 9 Exempt transactions, 9 14 Extended hours (X) orders, 67 Extended hours trading, 40 F Fair dealings, with clients, Fill or kill (FOK) orders, 24 Final prospectuses, 3 Financial relief, 4 FINRA 5% markup policy, FINRA/Nasdaq Trade Reporting Facility, 79 FINRA Rule 4400A, 52 FINRA Rule 5130, 5 6 Firewalls, 113 Firm commitment underwriting, 7 Firm quotes: defined, 40 nominal vs., 45 Firm Quote Compliance System (FQCS), 101 Firm quote rule, Fixed income securities, 87 FOK (fill or kill) orders, 24 Form 1-A, 13 Form 144, 11 Form ADV part II, 125 Form S-1, 1 2 Form SB1, 13 Form SB2, 13 Fourth market, 59 FQCS (Firm Quote Compliance System), 101 Fraudulent acts, 117 Free riding and withholding rule, 5 6 Front running, 116

3 Index 209 G Good til cancel (GTC) orders: defined, 21 orders treated as, during market halts, 34 Greenshoe option, 86 GTC orders, see Good til cancel orders Guarantees, 117 H Hearing Officer, 102 Hot issues, 5 6 I Imbalance only (IO) orders, 67 Immediate or cancel (IOC) orders, 24 Indicative price, 66 Indirect electronic access, Inferior quotes, 49 Information, nonpublic material, 112 Initial public offerings (IPOs): defined, 7 pricing of, by market makers, Inside market: defined, 27 and Nasdaq quotes, 44 Insiders, 112 Insider trading, 112 Insider Trading and Securities Fraud Enforcement Act of 1988, 112 INSTINET, 59 Institutional customers: net transactions with, 99 recommendations to, 118 Intermarket Surveillance Group (ISG), 103 Intermarket sweep orders (ISOs), 50 Intermarket Trading System (ITS), 59 Interpositioning, 73 Investment Advisors Act of 1940, 125 Investors: accredited, 9 domestic, nonaccredited, 9 offshore, 12 Investor-to-investor transactions, 21 IOC (immediate or cancel) orders, 24 IO (imbalance only) orders, 67 IPOs, see Initial public offerings ISG (Intermarket Surveillance Group), 103 ISOs (intermarket sweep orders), 50 Issues: additional, 7 awarding, 8 hot, 5 6 new, 7 stabilizing, Issuers, repurchasing their own securities, ITS (Intermarket Trading System), 59 L Late regular hours orders, 67 Legend stock, 10 Lettered stock, 10 Liability orders, 101 Limit on close orders, 34 Limit orders, 24 Limit Order Display Rule, 69 Limit Up Limit Down (LULD) rule, 34 Linked ECNs, 71 Listing standards (Nasdaq), 113 Live orders, 23 Locked markets, 45 LULD (Limit Up Limit Down) rule, 34 M Manipulative devices, Manning Rule, 72 Markdowns, 97 Markets: best, 27 controlled, crossed, 45 dominated, fourth, 59 inside, 27, 44 locked, 45 negotiated, 39 Pink OTC, 58 primary, 1 secondary, 3 4, 21 third, two-sided, Market centers, Market hours day (MDAY), 49 Market hours good-till-cancelled (MGTC), 49 Market hours immediate or cancel (MIOC), 49 Market makers, 65 73, and customer limit orders, entering quotes, and interpositioning, 73 and IPO pricing, for OTC securities, passive, pretest, registering as, for OTC securities, and step out trades, and syndicate short positions, 86 during syndication, and trading halts, withdrawing quotes, Market making: payments for, during syndication, Market on close orders: cancelled due to market halt, 34 defined, 24 Market on open orders, 24 Market orders, 22 Market out clause, 7 Market participant identifiers (MPIDs), 41 Market peg orders, 51 Marketplace (securities), Market Regulation Committee (MRC), 52 Market Regulation Department, 101 Marking the close, 116 Marking the open, 116 Markups, 97 Material facts, omitting, 117 Material information, 112 MDAY (market hours day), 49 Mergers, 13 14

4 210 WILEY SERIES 55 Exam Review 2015 MGTC (market hours good-tillcancelled), 49 Mid point peg orders, 51 Minimum quantity orders, 50 MIOC (market hours immediate or cancel), 49 Misrepresentations: and fair dealings, 117 on prospectuses, 4 MPIDs (market participant identifiers), 41 MRC (Market Regulation Committee), 52 Municipal bond offerings, 8 N Nasdaq, as exchange, 39 execution systems for, listing standards of, 113 locked and crossed markets, 45 Nasdaq Market Center for Listed Securities, 59 order entry parameters for, order routing process for, pegged orders on, 51 pretest, 61 62, 64 quotes on, subscription levels of, Nasdaq BBO, 44 Nasdaq crossing network, 67 Nasdaq halt cross, 68 Nasdaq Inside, 44 Nasdaq international, 57 Nasdaq Level I subscription, 40 Nasdaq Level II subscription, 40 Nasdaq Level III subscription, 40 Nasdaq Market Center Execution System (NMCES): automatic execution of orders by, 66 as execution system, and locked/crossed markets, 45 quotes entered through, Nasdaq Market Center for Listed Securities, 59 Nasdaq Market Operations, 102 Nasdaq Official Opening Price (NOOP), Nasdaq quotes, Nasdaq Stock Watch, Nasdaq subscription levels, Nasdaq TotalView quotation service, Nasdaq workstation, 46 National Association of Securities Dealers Automated Quotation System, see Nasdaq National best bid and offer (NBBO), 44 National Securities Clearing Corporation (NSCC): and automatic executions through Nasdaq, 47 and threshold securities, 32 NBBO (national best bid and offer), 44 Negative consent letter, 99 Negotiated market, 39 Negotiated underwriting, 8 Net order imbalance indicator (NOII) system, 66 Net transactions, with customers, 99 New issues, 7 New York Stock Exchange (NYSE), 25 NH (not held) orders, 24 NMCES, see Nasdaq Market Center Execution System NOII (net order imbalance indicator) system, 66 Nominal Nasdaq quotes, 45 Nonaccredited investors, 9 Nonattributable orders, 72 Nondirected orders, 55 Nonequivalent securities, 14 NonNasdaq OTC Bulletin Board (BB), NonNasdaq securities, 11 Nonparticipants, 14 Nonpublic information, 112 Nonpublic material information, 112 NOOP (Nasdaq Official Opening Price), Not held (NH) orders, 24 NSCC, see National Securities Clearing Corporation NSDQ function, NYSE (New York Stock Exchange), 25 O OATS (Order Audit Trail System), OCF (Order Collector Facility), 46 ODF (Order Display Facility), 46 Offers, tender, Offerings: of corporate securities, 7 IPOs, 7, municipal bond, 8 primary, 7 Regulation A, 13 Regulation D, 9 10 Regulation S, secondary, 7 small business, 13 subsequent primary, 7 Offshore investors, 12 On open (OO) orders, 67 Opening cross, 66 Orders: aggressive electronic SDGY, 51 AON, 24 attributable, 72 buy limit, 22 buy stop, 23 customer, protection of, 100 customer limit, day, 21 DNR, 27 early regular hours, 67 FOK, 24 GTC, 21, 34 IO, 67 IOC, 24 ISOs, 50 late regular hours, 67 liability, 101 limit, 24 limit on close, 34 live, 23 market, 22 market on close, 24, 34 market on open, 24 market peg, 51 marking of, 31 mid point peg, 51 minimum quantity, 50 NH, 24 nonattributable, 72

5 Index 211 nondirected, 55 OO, 67 pegged, 51 price to comply, 50 primary peg, 51 proprietary, 72 protection of, by Nasdaq, 47 reactive electronic STGY, 51 SCAN, in securities marketplace, sell limit, 22 sell stop, 23 stop, stop limit, 24 stop loss, system, undisplayed customer limit, X, 67 Order Audit Trail System (OATS), Order Collector Facility (OCF), 46 Order Display Facility (ODF), 46 Order entry parameters (Nasdaq), Order imbalances, 66 Order marking, 31 Order protection feature, 47 Order protection rule, 55 Order routing process (Nasdaq), Order shredding, 46 OTC Bulletin Board (BB), OTC market maker, Over-the-counter (OTC) securities, 39 46, ACES, ADF, ECNs, fourth market for, 59 market centers for, market makers for, nonnasdaq OTC BB for, payments for market making, piggybacking quotes for, Pink Sheets, 58 pretest, 61, 63 registering as market makers for, third market for, TRACS, 52 and UTP, 54 P Painting the tape, 116 Partial tenders, Passive market makers, Passive market makers daily purchase limit, 84 Payment dates, 120 Pegged orders, 51 Pegging, 116 Penalty bids, Penny stocks, 58, Penny stock cold call rule, Piggybacking quotes, Pink OTC Market, 58 Pink Sheets, 58 Posteffective amendment, 15 Preliminary prospectuses, 2 Price: AWP, 76 indicative, 66 of IPOs, NOOP, protected, 55 VWAP, 34 Price to comply orders, 50 Primary market, 1 Primary offerings, 7 Primary peg orders, 51 Prime broker, 124 Prime brokerage accounts, Principals, 26 Private placement, 9 10 Proceeds transactions, 98 Proprietary orders, 72 Proprietary trading systems, 59 Prospectuses, 2 4 Protected price, 55 Protected quotes, 55 Purchasers, aftermarket, 3 4 Purchaser representatives, 10 Q Qualified Institutional Buyers (QIBs), Qualifiers, for consolidated tape, 35 Qualifying ECNs, 71 Quotes: entered by market makers, entered through NMCES, firm, 40, 45, inferior, 49 on Nasdaq, nominal Nasdaq, 45 on OTC BB, piggybacking, protected, 55 two-sided, 40 withdrawing, by market makers, R Reactive electronic STGY orders, 51 Reclassification, 14 Recommendations: blanket, 117 to institutional customers, 118 and short sales, 118 Red herring, 2 Registration: posteffective amendment to, 15 shelf, 15 Registration statement, 1 2 Regulation A offerings, 13 Regulation D offerings, 9 10 Regulation Filing Application (RFA), 33 Regulation M, Regulation SHO, 30 Regulation S offerings, Relief, financial, 4 Reorganization, Reports: clearly erroneous, 121 double, to ACT/TRF, research, third-market, 78 TRACE, 88 of trades, see Trade reporting UARs, Research reports, Restricted period, 82 Restricted securities, 11 Restricted stock, 10, 11 RFA (Regulation Filing Application), 33 Riskless principal transactions, 98

6 212 WILEY SERIES 55 Exam Review 2015 Round lots, 35 Rule 80B, Rule 101 (Regulation M), 82 Rule 102 (Regulation M), 83 Rule 103 (Regulation M), Rule 104 (Regulation M), Rule 105 (Regulation M), Rule 137, 14 Rule 138, 14 Rule 139, Rule 144, Rule 144A, Rule 145, Rule 200, Rule 203, Rule 415, 15 S Safe harbor guidelines, Sales: of dividends, 118 short, 29 34, 118 SCAN orders, SEC (Securities and Exchange Commission), SEC disclaimer, 4 Secondary market, 3 4 Secondary market transactions, 21 Secondary offerings, 7 SEC Regulation ATS, 56 SEC Regulation NMS, SEC Rule 10b-18, SEC Rule 11Ac1-1, SEC Rule 11Ac1-5, 54 SEC Rule 11Ac1-6, 55 SEC Rule 15c2-11, SEC Rules 15g-2 15g-9, SEC Rule 134, 4 SEC Rule 201, 33 Securities: borrowing, control, 11 corporate, 1 19 covered, 54, 101 exempt, 8 9 fixed income, 87 industry rules and regulations for, issuers repurchasing their own, nonequivalent, 14 nonnasdaq, 11 OTC, 39 46, restricted, 11 subject, 101 threshold, when-issued, 121 Securities Act of 1933, 1 2 Securities and Exchange Commission (SEC), Securities Exchange Act of 1934, Securities industries rules and regulations, for brochure delivery, 125 fair dealings with clients, for firewalls, 113 Insider Trading and Securities Fraud Enforcement Act of 1988, 112 Investment Advisors Act of 1940, 125 for issuers repurchasing their own securities, penny stock cold call rule, pretest, for prime brokerage accounts, and SEC, Securities Exchange Act of 1934, for tender offers, for trading suspensions, 109 uniform practice code, for wrap accounts, 125 Securities marketplace, and consolidated tape, exchanges as, 25 order types in, pretest, role of specialists/dmms in, short sales, Self regulatory organizations (SROs): defined, 108 and threshold securities, 32 Selling concession, 8 Selling group, 8 Sell limit orders, 22 Sell stop orders, 23 Settlement dates, 120 SGTC (system hours good-tillcancelled), 50 Shelf registration, 15 SHEX (system hours expire time), 50 Short positions: maintenance of records of, 33 syndicate, 86 Short sales: and recommendations, 118 in securities marketplace, Short tendering, 111 SIOC (system hours immediate or cancel), 50 Small businesses, 13 Small business offerings, 13 Specialists, Specialist bill, 27 Spreads, 40 SROs, see Self regulatory organizations Stabilization, of new issues, Stabilizing bids, 85 Step out trades: interpositioning vs., 73 and market makers, Stocks: control, 11 legend, 10 lettered, 10 penny, 58, restricted, 10, 11 stopping, Stock splits, 28 Stop limit orders, 24 Stop loss orders, Stop orders, Stopping stock, Subject securities, 101 Subscription levels (Nasdaq), Subsequent primary offerings, 7 Suspensions, trading, 109 Syndicate short positions, 86 Syndication, System hours expire time (SHEX), 50

7 Index 213 System hours good-till-cancelled (SGTC), 50 System hours immediate or cancel (SIOC), 50 System orders, T Tenders, partial, Tender offers, Third market, Third-market reports, 78 Threshold securities, Tombstone ads, 4 5 TRACE (Trade Reporting and Compliance Engine), TRACS (Trade Reporting and Comparison Service), 52 Trades: AWP, 76 step out, 73, Trade complaints, between members, 102 Trade dates, 120 Trade reporting, 73 79, ACT/TRF, pretest, TRACE, Trade Reporting and Comparison Service (TRACS), 52 Trade Reporting and Compliance Engine (TRACE), Trade Reporting Facility (TRF), Trading: extended hours, 40 insider, 112 unauthorized, 116 Trading ahead, 116 Trading halts, Trading suspensions, 109 Transactions: broker, 11 exempt, 9 14 fourth market, 59 investor-to-investor, 21 net, 99 on primary market, 1 proceeds, 98 riskless principal, 98 secondary market, 21 third market, Transfers, asset, 14 TRF (Trade Reporting Facility), Two-sided market, Two-sided quotes, 40 U UARs (underwriting activity reports), Unauthorized trading, 116 Underwriting: competitive bid, 8 for corporate securities, 6 7 negotiated, 8 Underwriting activity reports (UARs), Underwriting commitments, 6 7 Underwriting syndicate, 8 Undisplayed customer limit orders, Uniform practice code, Unlisted trading privileges (UTP), 54 UPC Rule 11830, 122 V Violations: backing away, 101 of Regulation T, Volume limitation, 11 Volume weighted average price (VWAP), 34 Voluntary withdrawal, of quotes, 68 W When-issued securities, 121 Withdrawal, of quotes, Wrap accounts, 125 X X (extended hours) orders, 67