Primary and Secondary Markets
What is an IPO?
When an investor buys a security from another investor who is ready to sell it
Price at which the buyer is willing to pay
Bid
Certain securities are exempt from the registration and prospectus requirements of the Securities Act of 1933, bc the issuer is the federal government agency of the federal govt, or a municipal govt
True
What is the purpose of Securities Act of 1933?
To require full and fair disclosure in connection with the sale of securities to the public, (to protect investors and create transparency in the financial statements of corporations).
What is an investor?
In the primary market, investors are those who are purchasing the new issue and intending to hold the security for a period of time. They can be institutional, retail, and accredited.
What is the secondary market?
When an investor buys a security from another investor who is ready to sell it
Ask
Trading hours are 9:00 AM - 4:00 PM
False, trading hours are from 9:30 AM - 4: 00 PM and extended hours are til 6:30 PM.
SEC regulates the trading of all of the following except?
-The New York Stock Exchange
-The Chicago Board of Options Exchange
-The London Stock Exchange
-The over-the-counter market
Who are the Institutional Investors
An entity that pools money to purchase securities and other investment assets (can include banks, insurance companies, hedge funds, investment advisors, mutual funds, etc.)
Why does the issuer (corporation, government, etc.), sell security in the primary market?
To raise capital (could be to build factories, buy equipment, expand, etc.)
What does the term spread mean?
Spread is the difference between Bid and Ask price
Market Makers can guarantee the customer will get a profitable trade
False, nobody can guarantee a profit in securities trading
None
Who are the Retail Investors?
A non-professional individual who invests their own money in securities and is considered a non-expert in the market; essentially, anyone who invests their own money for their own benefit is considered a retail investor.
How many primary offerings can a corporation issue?
Unlimited
Who are the Accredited Investors?
An individual or entity that meets certain wealth or annual income thresholds, or holds relevant professional certifications like Series 7, Series 65, and Series 82.
How Many Markets are there in the secondary market?
4 Markets:
1st is Exchange Market, composed of NYSE and other listed securities are traded
2nd is the OCT trading Market such as NASDEQ
3rd operates like OCT found on exchange but for institutional investors and broker/dealers
4th is the ECN Market, aka Electronic communication network
What are the income requirements to be an Accredited Investor
Income:
-$200K (for past 2 yrs and current year)
-$300k for joint account (past 2 yrs and current yr)
OR
-Net worth of $1,000,000 or more