Knowledge of Capital Markets

These flashcards cover key concepts from the lecture on capital markets, including regulatory bodies, market structures, types of securities, and related terms.

Securities and Exchange Commission (SEC)

The primary regulatory body governing the securities industry, created under the Securities Exchange Act of 1934.

Broker-Dealer (BD)

An individual or firm that buys and sells securities on behalf of its customers or for its own account.

Federal Reserve Board (FRB)

The central banking system of the United States that regulates the U.S. monetary policy.

Securities Act of 1933

Requires issuers to register their securities when selling to the public and governs the new issuance market.

Self-Regulatory Organizations (SROs)

Organizations like FINRA that enforce federal securities laws and supervise securities practices under the SEC's oversight.

Financial Industry Regulatory Authority (FINRA)

SRO that regulates all matters related to investment banking, trading in financial securities, and the conduct of member firms.

Investment Company Act of 1940

Regulates the organization of investment companies and the products they offer.

Securities Investor Protection Corporation (SIPC)

A nonprofit membership organization that protects customers in the event of a broker-dealer’s bankruptcy.

Primary Market

The market in which new securities are issued and sold to investors.

Secondary Market

The market in which existing securities are bought and sold among investors.

Market Maker

A firm or individual that actively quotes two-sided markets in a given security, providing liquidity to the market.

Offerings

The issuance or sale of a security to investors, including public and private offerings.

Initial Public Offering (IPO)

The first time an issuer distributes securities to the public.

Preemptive Rights

The right of existing shareholders to purchase additional shares before the company offers them to new investors.

Cyclical Industries

Industries whose performance is highly correlated with the business cycle.

Defensive Industries

Industries that provide basic goods and services and are less sensitive to economic cycles.

Capital Markets

Financial markets for buying and selling equity and debt instruments.

Money Market

Market for short-term borrowing and lending, typically with maturities of one year or less.

Yield to Maturity (YTM)

The total return anticipated on a bond if held until it matures.

Municipal Securities

Debt securities issued by states, municipalities, or other government entities.

Options

Derivative securities that grant the right to buy or sell an underlying asset at a predetermined price.

Call Option

A financial contract that gives the holder the right to buy an asset at a specified price within a specified time.

Put Option

A financial contract that gives the holder the right to sell an asset at a specified price within a specified time.