Podcast
Questions and Answers
What is the purpose of OTC Link ATS?
What is the purpose of OTC Link ATS?
What is the primary reason why FINRA ceased operations of the OTCBB?
What is the primary reason why FINRA ceased operations of the OTCBB?
What is the primary difference between OTC Markets Group and exchanges?
What is the primary difference between OTC Markets Group and exchanges?
What do broker-dealers post on OTC Link ATS to notify other broker-dealers of their willingness to trade an OTC security?
What do broker-dealers post on OTC Link ATS to notify other broker-dealers of their willingness to trade an OTC security?
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When did FINRA officially cease operations of the OTCBB?
When did FINRA officially cease operations of the OTCBB?
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What is the primary factor that determines the weight of a stock in a market capitalization-weighted index?
What is the primary factor that determines the weight of a stock in a market capitalization-weighted index?
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What is a common use of stock market indices?
What is a common use of stock market indices?
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Which type of index gives equal weight to all component stocks regardless of their market capitalization or stock price?
Which type of index gives equal weight to all component stocks regardless of their market capitalization or stock price?
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What is the name of the index that pioneered the development of non-capitalization weighted indices in January 2003?
What is the name of the index that pioneered the development of non-capitalization weighted indices in January 2003?
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Which organization constructs indices at the national level using standardized methodology?
Which organization constructs indices at the national level using standardized methodology?
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What is another function of stock market indices besides benchmarking performance?
What is another function of stock market indices besides benchmarking performance?
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What is the primary function of OTC Link ATS?
What is the primary function of OTC Link ATS?
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What is a common risk associated with investing in OTC securities?
What is a common risk associated with investing in OTC securities?
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What is a stock market index?
What is a stock market index?
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How does a company that oversees an index typically review the security selection?
How does a company that oversees an index typically review the security selection?
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What is the weighting scheme used in a price-weighted stock index?
What is the weighting scheme used in a price-weighted stock index?
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What is the purpose of an index in a stock market?
What is the purpose of an index in a stock market?
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What is the primary reason why the TRI would be higher than the PRI?
What is the primary reason why the TRI would be higher than the PRI?
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What is the primary method of communication used on a trading floor?
What is the primary method of communication used on a trading floor?
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What is the trend that has been observed in the stock exchange industry since the 1980s and 1990s?
What is the trend that has been observed in the stock exchange industry since the 1980s and 1990s?
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What is the primary function of Designated Market Makers (DMMs) on the NYSE trading floor?
What is the primary function of Designated Market Makers (DMMs) on the NYSE trading floor?
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In an auction market, how are buy and sell orders matched and executed?
In an auction market, how are buy and sell orders matched and executed?
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What is the characteristic of the NYSE trading floor that sets it apart from other stock exchanges?
What is the characteristic of the NYSE trading floor that sets it apart from other stock exchanges?
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What is the role of a Designated Market Maker in the NYSE?
What is the role of a Designated Market Maker in the NYSE?
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What is the goal of an investor who engages in short selling?
What is the goal of an investor who engages in short selling?
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What happens during the auction process in the NYSE?
What happens during the auction process in the NYSE?
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Why do regulators impose short sale restrictions?
Why do regulators impose short sale restrictions?
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What is the last step in the short selling process?
What is the last step in the short selling process?
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What is the purpose of a DMM in an auction market?
What is the purpose of a DMM in an auction market?
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Study Notes
OTCBB and OTC Markets Group
- OTCBB is an electronic quotation service provided by FINRA.
- FINRA ceased operations of the OTCBB on November 8, 2021, due to the dominance of OTC Markets Group's platforms.
- OTC Markets Group leverages a network of broker-dealers rather than matching engine technology.
- OTC Link ATS is OTC Markets Group's electronic messaging and trade negotiation system.
Index Construction and Weighting
- Price-weighted indexes give more weight to stocks with higher prices.
- Market capitalization-weighted indexes assign weights based on company market capitalization (stock price * outstanding shares).
- Equal-weighted indexes give all component stocks equal weight regardless of market capitalization or stock price.
- The S&P 500 Equal Weighted Index pioneered the development of non-capitalization weighted indices in 2003.
Uses of Stock Market Indices
- Benchmarks for performance measurement of individual stocks, mutual funds, and portfolio managers.
- Economic indicators of the broader economy.
Trading and Investment
- Investing in OTC securities can offer opportunities but comes with risks of lower liquidity, higher price volatility, and less available information.
- Stock market indices measure and report the fluctuations of a pool of securities or a representative segment of a market.
Trading Platforms and Mechanisms
- Floor trading involves traders or stockbrokers meeting at a specific venue to buy and sell financial instruments using open outcry.
- Automated trading systems have replaced floor trading in many exchanges.
- The New York Stock Exchange Trading Floor is the last major physical trading floor in the world.
- Hybrid trading models combine electronic trading with human interaction.
- Auction markets match and execute trades based on price and time priority.
- Dealer markets involve dealers posting bid and ask quotes and providing liquidity to the market.
Short Selling
- Short selling is an investment strategy that aims to profit from an anticipated decrease in a stock's price.
- The process involves borrowing shares, selling them, repurchasing at a lower price, and returning the borrowed shares to retain the profit.
- Short sale restrictions are imposed to limit the ability of investors to short sell stocks, especially during volatile market conditions.
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Description
Test your knowledge of the OTCBB, an electronic quotation service provided by FINRA, and its relation to OTC Markets Group. Learn about the history and recent developments of these financial institutions.
