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Exam 3: Securities Markets

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Question 21

Multiple Choice

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The NYSE has lost market share to ECNs in recent years. Part of the NYSE's response to the growth of ECNs has been to: I. Purchase Archipelago, a major ECN, and rename it NYSE Arca II. Enable automatic trade execution through its new Market Center III. Impose a tighter limit on bid-ask spreads

A) I only
B) II and III only
C) I and II only
D) I, II, and III

E) All of the above
F) A) and B)

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Question 22

Multiple Choice

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What happened to the effective spread on trades when the SEC allowed the minimum tick size to move from one-eighth of a dollar to one-sixteenth of a dollar in 1997 and from one-sixteenth of a dollar to one cent in 2001?

A) The effective spread increased in 1997 but decreased in 2001.
B) The effective spread increased in both cases.
C) The effective spread decreased in 1997 but increased in 2001.
D) The effective spread decreased in both cases.

E) B) and C)
F) All of the above

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Question 23

Multiple Choice

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The over-the-counter securities market is a good example of ________.

The average depth of the limit order book is ________.

Underwriting is one of the services provided by ________.

The ________ price is the price at which a dealer is willing to sell a security.

The ________ price is the price at which a dealer is willing to purchase a security.

The fully automated trade-execution system installed on the NYSE is called ________.

Which of the following is (are) true about dark pools? I. They allow anonymity in trading. II. They often involve large blocks of stocks. III. Trades made through them might not be reported.

Level 3 NASDAQ subscribers ________.

What was the result of high-frequency traders' leaving the market during the flash crash of 2010?

An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. In 1 year the investor has interest payable and gets a margin call. At the time of the margin call the stock's price must have been less than ________.

When a firm decides to sell securities it must first ensure ________.

The CFA Institute Standards of Professional Conduct require that members ________.

The bulk of most initial public offerings (IPOs) of equity securities goes to ________.

The inside quotes on a limit order book can be found ________.

According to multiple studies by Ritter, initial public offerings tend to exhibit ________ performance initially and ________ performance over the long term.

The term inside quotes refers to ________.

An investor buys $16,000 worth of a stock priced at $20 per share using 60% initial margin. The broker charges 8% on the margin loan and requires a 35% maintenance margin. The stock pays a $.50-per-share dividend in 1 year, and then the stock is sold at $23 per share. What was the investor's rate of return?

Consider the following limit order book of a specialist. The last trade in the stock occurred at a price of $40. If a market buy order for 100 shares comes in, at what price will it be filled?