SIE 12 - Orders and Trading Strategies

  1. Compare broker and dealer
    • Brokers: ABC (Agency trades executed by Brokers and they charge Commissions) [e.g. Schwab]
    • Brokers: don't assume risk
    • Dealers: PDM (principal trades are executed by Dealers and they charge Markup/downs) [e.g. Citadel]
    • Dealers do assume risk
  2. What are markups and markdowns?
    A certain increase/decrease to the bid/offer at which the dealer will buy/sell with the retail client.
  3. What is the FINRA 5% policy?
    • The policy is a guideline that limits commissions, markups, and markdown (limit to 5%)
    • Liquidity, amount of money, price, type of security may warrant more or less
    • The type of client or the firm's profit will not
  4. What are the 3 types of transactions?
    • Purchase (pay in full or on margin)
    • Long sale (sale of securities that are owned by the customer)
    • Short sale (borrow, deposit margin) which includes uncovered options sales
  5. What are the types of orders?
    • Market order: order executed immediately at the customer's quantity
    • Limit order: Order only executed if the customer's size and price can be met
    • Stop order: May be used to limit a lsos or protect a gain. Doesn't guarantee a specific price
Card Set
SIE 12 - Orders and Trading Strategies
SIE 12 - Orders and Trading Strategies