What type of market structure do OTC markets use instead of centralized exchanges? | Card: 1 / 82 |
Decentralized dealer networks where securities trade directly between parties through market makers. | Card: 2 / 82 |
True or False: OTC markets have a physical trading floor like traditional stock exchanges. | Card: 3 / 82 |
False. OTC markets operate electronically or via telephone with no centralized physical location. | Card: 4 / 82 |
Which OTC market tier has the highest quality standards and disclosure requirements? | Card: 7 / 82 |
C) OTCQX - requires high financial standards, ongoing disclosure, and annual verification. | Card: 8 / 82 |
Fill in the blank: Market makers profit from the _____ between bid and ask prices. | Card: 9 / 82 |
The dealer trades from their own inventory, buying into and selling from their accounts. | Card: 12 / 82 |
True or False: OTCQB companies must maintain a minimum bid price of $0.10 per share. | Card: 13 / 82 |
Which regulatory body primarily oversees broker-dealers who participate in OTC markets? | Card: 15 / 82 |
True or False: All corporate bonds trade on centralized exchanges rather than OTC markets. | Card: 23 / 82 |
False. Most corporate bonds trade OTC through dealer networks, not on exchanges. | Card: 24 / 82 |
Which type of risk occurs when market makers stop quoting prices for securities? | Card: 27 / 82 |
B) Liquidity risk - when market makers withdraw, liquidity can disappear entirely. | Card: 28 / 82 |
Fill in the blank: _____ transactions occur when broker-dealers act as agents for customers. | Card: 29 / 82 |
What information must appear on OTC trade confirmations regarding dealer capacity? | Card: 31 / 82 |
True or False: The 5% markup policy is a strict ceiling that dealers cannot exceed. | Card: 33 / 82 |
False. It's a guideline; actual fairness depends on specific transaction circumstances. | Card: 34 / 82 |
Which market has no minimum financial standards or reporting requirements? | Card: 37 / 82 |
Dealer receives customer order, immediately executes offsetting transaction, then completes customer trade. | Card: 40 / 82 |
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False. OTC Markets Group is a private company providing market infrastructure, not a regulator. | Card: 44 / 82 |
Lower liquidity, fewer market participants, and higher dealer risk from holding inventory. | Card: 46 / 82 |
Scenario: An investor wants to sell 10,000 shares of a Pink Market stock immediately. What risks do they face? | Card: 47 / 82 |
Wide spreads, limited liquidity, difficulty finding buyers, and significant price impact. | Card: 48 / 82 |
Which OTC securities are backed by the full faith and credit of the U.S. government? | Card: 51 / 82 |
C) Treasury securities - government debt obligations with the strongest credit backing. | Card: 52 / 82 |
True or False: Penny stocks are defined as securities trading below $1 per share. | Card: 55 / 82 |
False. SEC defines penny stocks as equity securities trading below $5 per share. | Card: 56 / 82 |
What additional documentation is required before executing penny stock transactions? | Card: 57 / 82 |
No market maker quotes or company information; trading occurs through case-by-case negotiation. | Card: 60 / 82 |
Which system reports OTC corporate bond transactions for transparency? | Card: 61 / 82 |
B) TRACE (Trade Reporting and Compliance Engine) for corporate bond trade reporting. | Card: 62 / 82 |
Fill in the blank: Interest rate swaps involve exchanging _____ rate payments for _____ rate payments. | Card: 63 / 82 |
True or False: Forward contracts can only settle through physical delivery of the underlying asset. | Card: 65 / 82 |
False. Forward contracts typically settle through physical delivery but cash settlement is possible. | Card: 66 / 82 |
Homeowners may refinance or pay off mortgages early, affecting expected cash flows. | Card: 68 / 82 |
Scenario: A dealer has excess inventory in a particular bond. How might this affect their quotes? | Card: 69 / 82 |
Which characteristic makes structured products like CDOs primarily trade OTC? | Card: 73 / 82 |
C) Customization - complex, non-standardized terms require OTC dealer networks for trading. | Card: 74 / 82 |
Fill in the blank: Rule _____ governs broker-dealer quotation publication and information review requirements. | Card: 75 / 82 |
True or False: Interdealer brokers trade directly with retail customers in OTC markets. | Card: 77 / 82 |
False. Interdealer brokers facilitate trades only between market makers, not with retail customers. | Card: 78 / 82 |
What happens if both parties in an OTC trade fail to meet settlement obligations? | Card: 79 / 82 |
Creates fail to deliver (seller) and fail to receive (buyer), potentially resulting in penalties. | Card: 80 / 82 |
Customized terms, infrequent trading, and institutional nature make dealer networks more suitable. | Card: 82 / 82 |






