Reading 52: Organization and ...LOS d习题精选 2010, registered, contrast, exchange

honeycfa

LOS d: Compare and contrast the structural differences among national stock exchanges, regional stock exchanges, and the over-the-counter (OTC) markets.

The trading of exchange registered securities over the counter by non-exchange member firms is called:

A) the third market.

B) the fourth market.

C) block trading.

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The third market is the portion of the Over the Counter (OTC) market in which non-member investment firms can make markets in and trade registered securities without going through the exchanges. The fourth market describes the direct trading of exchange-listed stocks between investors, for example by using electronic communications networks or electronic crossing systems. Block trades are large trades often made by institutions.

honeycfa

Which of the following statements about securities markets is least accurate?

A) A limit buy order and a stop buy order are both placed below the current market price.

B) Characteristics of a well-functioning securities market include: many buyers and sellers willing to trade at below market price, low bid-ask spreads, timely information on price and volume of past transactions, and accurate information on supply and demand.

C) Secondary markets, such as the over-the-counter (OTC) market, provide liquidity and price continuity.

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A limit buy is placed below the current market price, but a stop buy order is placed above the current market price (stop buy orders are often placed to protect a short sale from a rising market).

The other choices are true. A well-functioning securities market includes the following characteristics:

• timely and accurate information on price and volume of past transactions.
• timely and accurate information on the supply and demand for current transactions.

• liquidity (as indicated by low bid-ask spreads).

• marketability.

• price continuity.

• depth (many buyers and sellers willing to transact above and below the current price).

• internal efficiency (low transaction costs).

• informational/external efficiency (rapidly adjusting prices).

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Which of the following statements about U.S. securities markets is most accurate?

A) The U.S. OTC market is the largest U.S. secondary market in terms of the number of issues traded.

B) The U.S. OTC market is a subset of what is known as the Fourth Market.

C) To be traded on the OTC market, a security must first be approved by the National Association of Securities Dealers.

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The OTC market is the largest U.S. market in terms of number of issues traded. However, it is about sixty percent of the size of the NYSE in terms of value. Stocks listed on an exchange may also be traded in the OTC market. While a stock must meet certain minimum listing requirements to trade on the Nasdaq system, the NASD does not "approve" securities. The fourth market refers to trading of exchange-listed shares that takes place on alternative trading systems such as electronic crossing networks.

honeycfa

Stop loss sell orders are:

A) placed to protect a short position.

B) executed on an uptick only.

C) placed to protect the gains on a long position.

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Stop loss sell orders are limit sell orders that are placed below market price. When the share price drops to the designated price, a sell order is executed protecting the investor from further declines.

honeycfa

Which of the following is a securities market characterized by matching large buy and sell orders on electronic crossing networks?

A) Fourth market.

B) OTC market.

C) New York Stock Exchange.

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The fourth market refers to alternative trading systems, including electronic communications networks and electronic crossing networks.

honeycfa

Which of the following statements about securities markets is least accurate?

A) Secondary markets provide liquidity for primary market investors.

B) Internal market efficiency means transaction costs are low.

C) The third market is the direct exchange of securities between investors.

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The third market refers to over-the-counter trading of exchange-listed shares.

honeycfa

Which of the following statements about security markets is least accurate?

A) Secondary market refers to the trading of outstanding securities.

B) Primary market refers to the trading of securities on a major market such as the NYSE in the US.

C) Third market refers to OTC trading of exchange listed securities.

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Primary capital markets refer to the sale of new issues of bonds or stocks.