Deck 4: Securities Markets

Question 1

Which of the following is not a primary market transaction?

A) an IPO
B) a new bond issued by the Bank of Canada
C) treasury bills auctioned by the Bank of Canada
D) All of the above are primary market transactions.

Answer 1

All of the above are primary market transactions.

Question 2

In the U.S., which exchange member is assigned to a specific trading post where they handle one or more stocks assigned to that post?

A) Commission broker
B) Floor trader
C) Specialist
D) Dealer

Answer 2

Specialist

Question 3

In an underwriting of an IPO the risk of issuing the security:

A) remains with the issuing firm.
B) is assumed by the underwriter.
C) is transferred to the commercial bankers.
D) is assumed by the institutional investors subscribing to the issue.

Answer 3

is assumed by the underwriter.

Question 4

Investment dealers are compensated by:

A) the underwriting spread.
B) commissions paid by the buyers of the security.
C) commissions paid by the sellers of the security.
D) guaranteed investment contracts.

Question 5

All public offerings regulated by the Canadian Business Corporations Act require that a(n) _____ be prepared to outline full, true, and plain disclosure of material facts relating to the securities offered.

A) indenture
B) debenture
C) prospectus
D) MOU

Question 6

The TSX is:

A) smaller than the NYSE but larger than Nasdaq.
B) smaller than the NYSE and the TSX Venture Exchange.
C) smaller than both the NYSE and Nasdaq.
D) bigger than both NYSE and the TSX Venture Exchange.

Question 7

A listed company can be cancelled or delisted for the following reasons except:

A) it no longer exists.
B) the company has no assets or is bankrupt.
C) the company cut its dividend in two successive quarters.
D) public distribution of the security is no longer sufficient.

Question 8

Trading large basket blocks of stocks to take advantage of price discrepancies between markets to earn arbitrage profits is referred to as:

A) swapping.
B) program trading.
C) day trading.
D) insider trading.

Question 9

Aside from the NYSE, the only other national organized stock exchange in the United States is:

A) American Stock Exchange (Amex).
B) Midwest Exchange.
C) Nasdaq.
D) CBOE

Question 10

Which of the following statements regarding the Nasdaq Stock Market is not true?

A) All OTC stocks trade on the Nasdaq Stock Market.
B) Dealers make a market by standing ready to buy and sell securities.
C) Nasdaq is both a national and international stock market.
D) Nasdaq's electronic trading system provides instantaneous transactions.

Question 11

The OTC stocks that trade in Canada on the NEX Board of the TSX Venture Exchange has which of the following characteristic?

A) It is dominated by blue chip companies.
B) It has companies that have a thin trading volume.
C) Because it is computerized, it is a highly liquid market.
D) All of the above represent characteristics of OTC trading in Canada.

Question 12

A computerized trading network of market makers in OTC stocks, that reports up-to-the-minute trades is the:

A) Nasdaq/National Markets System (Nasdaq/NMS).
B) Nasdaq/Electronic Communications Networks (Nasdaq/ECN).
C) Nasdaq/Internet Investment Service (Nasdaq/IIS).
D) Nasdaq/Global Investment Network (Nasdaq/GIN).

Question 13

During 2007 how many companies were listed on the Toronto Stock Exchange?

A) < 1500
B) 1500 - 2000
C) 2001 - 2500
D) > 2501

Question 14

The largest stock market in Asia is located in:

A) Hong Kong.
B) Beijing.
C) Singapore.
D) Tokyo.

Question 15

The Dow Jones Industrial Average is composed of:

A) 500 OTC stocks.
B) 100 cyclical stocks.
C) 30 blue chip stocks.
D) 100 defensive stocks.

Question 16

A major difference between the Standard & Poor's 500 Index and the Dow Jones Industrial Average is that:

A) the S&P 500 is more dominated by OTC stocks than the Dow Jones Industrial Average.
B) the S&P 500 is more difficult to calculate than the Dow Jones Industrial Average.
C) the S&P 500 is a market value index and the Dow Jones Industrial Average is not.
D) the S&P 500 is more stable than the Dow Jones Industrial Average.

Question 17

The index currently used in Canada as the basis for derivative products trading is the:

A) the S&P/TSX Composite Index.
B) the S&P/TSX 60 Index.
C) TSE 35 Index.
D) TSE 100 Index.

Question 18

All exchange traded options in Canada trade on the:

A) TSX.
B) TSX Venture Exchange.
C) Montreal Exchange.
D) NEX Board of the TSX Venture Exchange.

Question 19

Which of the following exchanges no longer exists?

A) TSX .
B) TSX Venture Exchange
C) Winnipeg Stock Exchange
D) Montreal Exchange

Question 20

The main reason for the initial emergence of the third market was:

A) to provide a market with greater liquidity than secondary market transactions.
B) to avoid minimum exchange-regulated commission fees.
C) to provide after-hours trading.
D) to provide off-shore trading.

Question 21

The fourth market refers to:

A) transactions where the broker is both the buyer and seller in the same transaction.
B) transactions made between two brokers without a client involved.
C) transactions made between large institutions and wealthy individuals bypassing brokers and dealers.
D) transactions that are low in volume and dollar amount.

Question 22

Which of the following statements is true in regard to share volume on the Amex, NYSE, and Nasdaq?

A) Volume on the NYSE is more than 4 times greater than volume on Nasdaq.
B) Daily volume on the AMEX is usually about half of the volume of the NYSE.
C) NYSE volume has been increasing at a rate of about 20 percent per year in the 1990s.
D) Total volume is now greater on the NASDAQ than on the NYSE.

Question 23

Investment dealers operate in the:

A) primary market.
B) secondary market.
C) third market.
D) fourth market.

Question 24

The Prompt Offering Qualification (POP) System:
1) is available to senior reporting issuers who are subject to continuous disclosure requirements.
2) saves a great deal of time and money.
3) has reduced the importance of bought deals.
4) generally focuses on the details of the securities such as price distribution spread, use of proceeds and security attributes.

A) 1 and 2
B) 1, 2, and 3
C) 1, 2, and 4
D) 1, 3, and 4

Question 25

Which of the following statements about the S&P/TSX 60 stock index is(are) true?
1) It is a market value weighted index.
2) It is designed to mimic the performance of the S&P/TSX Composite Index.
3) The base value of 100 was set in 1998, its inception date.
4) It is maintained by the Standard and Poor's Corporation.

A) 1 and 2
B) 1, 2, and 3
C) 1, 2, and 4
D) All of these statements are true.

Question 26

In the NYSE market, stocks are bought and sold from specialists, who are called "market makers".

Question 27

Investment dealers protect themselves during underwriting arrangements by incorporating themselves and thus reducing liability.

Question 28

The TSX is a not-for-profit corporation with over 5,000 active members.

Question 29

Smaller companies with fewer shares publicly held are more likely to meet the listing requirements of the TSX than the TSX Venture Exchange.

Question 30

Listing requirements are less stringent on Nasdaq than on the NYSE.

Question 31

The former TSE and Montreal Exchange merged to form the TSX.

Question 32

The Dow Jones Industrial Average is price-weighted and therefore more affected by changes in higher priced stocks.

Question 33

Canadian over-the-counter (OTC) trading takes place on the NEX Board of the TSX Venture Exchange.

Question 34

What are the major advantages and disadvantages of a private placement for the issuer of securities?

Question 35

What are the three temporary measures that an exchange can use to affect trading in a company's shares and why do they arise?

Question 36

What are the four Dow Jones averages?

Question 37

Why has the SEC been reluctant to have foreign stocks listed on U.S. exchanges?