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Market microstructure and strategy, Bots and Algorithms, Program Trading,…

- - - - Order to the broker by specifying
        
        A market order
        
        Execute the transaction at the best
        possible price
        
        A limit order
        
        Limit is placed on the price at which a stock can be purchased or sold
    - - Receive orders from customers and then pass those orders on to the exchange through a telecommunications network
      - Full-service brokers
        
        Offer advice to customers on which stocks to buy
        or sell
      - Discount brokers
        
        Just execute the transactions desired by customers
    - - A particular type of limit order. In this case, the investor specifies a selling price that is below the current market price of the stock. When the stock price drops to the specified level, the stop-loss order becomes a market order.
    - - In this case, the investor specifies a purchase price that is above the current market price. When the stock price rises to the specified level, the stop-buy order becomes a market order.
    - - Some online brokerage services offer zero commission trading to investors who maintain a certain amount of money in their brokerage account. Brokers can still make a profit from these commission-free trades because they can use the money in the account to make money profits are higher than the amount they pay to investors in the form of interest.
  - - - R = (SP-INV-LOAN-D)/INV
      - They may consider purchasing the stock on margin, meaning that they make the purchase using funds borrowed from their broker along with their
        own cash
      - Imposes margin requirements, which
        represent the minimum proportion of funds that must be covered with cash
      - With margin requirements, a major decline in stock prices is less likely to cause defaults on loans from brokers and, therefore, will be less damaging
        to the financial system.
      - Over time, the market value of the stock will change. Investors are subject to a maintenance margin, which is the minimum proportion of equity that an investor must
        maintain in the account as a proportion of the market value of the stock
    - - stock prices to decline, resulting in more sales of stocks, continued downward pressure on stock prices, and additional margin calls
  - - - Short ratio equal number of shares currently short divided by the total number of shares outstanding.
      - This measure is between 0.5 and 2 percent
      - The higher the ratio, the higher the level of short sales.
    - - stop-buy order to limit their losses
      - Stop-Buy Order: pending order to buy securities at a price higher than the current market price.
    - - Morgan Stanley
      - As the 2008 credit crisis, hedge funds and other investors took large short positions on many stocks
    - - Naked Short Selling Put option
      - Short-sellers have three days to borrow the shares and deliver them to the purchasers.
      - After massive short sales of Morgan Stanley, SEC protected more than 800 firms from short sales.
- - - - ECNs focus on market orders
      - ECNs receive limit orders
    - - Direct Access Brokers: trading platform on a website allowing investors to trade stocks without brokers
      - Advantages:
        
        Match sellers and buyers without floor brokers
        
        Create global floor less exchange
        
        Investors can easily monitor
    - - Operate like private stock markets that can be used by institutional investors
      - Concern
        
        Reduce transparency
- - - - The Division of Corporation Finance
        
        Oversees the registration process for firms going public
        
        Oversees corporate filings and proxy statements.
      - The Division of Trading and Markets
        
        Ocuses on ensuring transparent disclosure of securities trades by trading facilitators
      - The Division of Enforcement
        
        Investigates potential SEC regulation violations
        
        has the power to discipline individuals and firms.
    - - Introduced in October 2000 by SEC
      - Mandates firms to share important information with all investors simultaneously
        
        Prevents firms from selectively providing information to analysts before the broader market is aware
    - - Five commissioners appointed
        
        Commissioner serves
        a five-year term
        
        The terms are staggered
        
        The president selects one to
        chair the commission
        
        Evaluate if current regulations are effectively stopping misconduct and update the regulations as necessary.
        
        When the commission adopts new regulations, they are distributed to
        the public for feedback before final approval
    - - Individuals within a publicly traded company
        
        Use non-public information to trade stocks
        
        Information to others is illegal due to its unfair advantage
      - To combat insider trading, the SEC, along with other government agencies, has taken action to prosecute and penalize individuals involved in such activities
  - - - Dividends and long-term capital gains are taxed
        at a maximum of 15% for federal taxes
    - - A tax rate of 20 percent on dividends and long-term capital gains
- - - - Besides Flash Crash
  - - - They cause injustice and unfairness to small investors as they have to receive information more slowly and cannot compete with companies, investment funds or large investors. They will lose confidence in market