SIE (Training Consultants v3.5, 2025): Ch. 7, Securities Markets, Sec. 4 - Trading On An Exchange – Basics

0.0(0)
studied byStudied by 0 people
GameKnowt Play
learnLearn
examPractice Test
spaced repetitionSpaced Repetition
heart puzzleMatch
flashcardsFlashcards
Card Sorting

1/22

encourage image

There's no tags or description

Looks like no tags are added yet.

Study Analytics
Name
Mastery
Learn
Test
Matching
Spaced

No study sessions yet.

23 Terms

1
New cards
What is a Designated Market Maker (DMM)?
The key individual on an exchange trading floor responsible for maintaining a fair and orderly market in the securities assigned to them.
2
New cards
In what two capacities can a Designated Market Maker act?
As a broker, executing orders for other members in an agency capacity, or as a dealer, buying and selling for their own account in a principal capacity.
3
New cards
What types of orders can a DMM accept?
Market orders, Open orders, and Day orders.
4
New cards
What types of orders are not handled by a DMM?
Not held orders, since floor brokers have discretion on execution timing.
5
New cards
Can a DMM participate in the distribution of new issues?
No, DMMs do not participate in new issue distributions.
6
New cards
Who executes odd lot orders?
Designated Market Makers execute odd lot orders, though they are not reported to the tape.
7
New cards
What is “stopping stock”?
When a DMM guarantees a floor broker a specific price on a fixed number of shares for a limited period, ensuring the customer’s order price.
8
New cards
Can DMMs solicit orders for stopping stock?
No, the order must be solicited by the floor broker; DMMs cannot solicit.
9
New cards
What is the minimum spread required in a DMM’s quote?
At least 2 cents between the bid and ask price.
10
New cards
What is considered market manipulation on an exchange floor?
A member firm buying stock to cause prices to rise in anticipation of a secondary distribution is market manipulation and prohibited.
11
New cards
How many letters can exchange-traded security symbols have?
1 to 5 letters, typically 1–3 letters for most NYSE stocks (e.g., GM, KO, IBM).
12
New cards
How must a DMM bid or offer stock for their own account relative to customer orders?
The DMM must bid above any buy orders and offer below any sell orders on the book, so as not to compete directly with customer orders.
13
New cards
Designated Market Maker (DMM)
Key individual on an exchange floor who maintains a fair and orderly market in assigned securities.
14
New cards
DMM as Broker
Executes orders for other members and receives a commission (agency capacity).
15
New cards
DMM as Dealer
Buys and sells for or from the firm’s own account (principal capacity).
16
New cards
Orders accepted by DMM
Market orders, Open orders, Day orders.
17
New cards
Orders not handled by DMM
Not held orders, which allow floor brokers discretion on execution timing.
18
New cards
Odd Lot Orders
Orders smaller than standard trading units, executed by DMMs but not reported to the tape.
19
New cards
Stopping Stock
DMM guarantees a floor broker a specific price on a fixed number of shares for a limited period.
20
New cards
Minimum Spread
The bid-ask difference in a DMM quote must be at least 2 cents.
21
New cards
Market Manipulation
Purchasing stock to artificially raise price in anticipation of a secondary distribution; prohibited.
22
New cards
Exchange-Traded Security Symbol
1–5 letter symbol identifying a security; typically 1–3 letters on NYSE.
23
New cards
DMM Bidding/Offering Rules
Must bid above existing buy orders and offer below existing sell orders when trading for own account.