Trading Mechanisms & Market Operations Flashcards
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Read the first 7 Trading Mechanisms & Market Operations flashcards as text
What is the significance of 'trading volume' as a market indicator?
Answer: It represents the number of shares or value of securities traded during a specific period
Trading volume measures the total quantity of shares or the monetary value of securities exchanged during a given timeframe, indicating market activity and liquidity levels.
In the Saudi Exchange, what is meant by the 'pre-opening session'?
Answer: A period before the main trading session during which orders are collected to determine the opening price
The pre-opening session is a designated period before the main trading session begins, during which the exchange collects orders and calculates an equilibrium opening price through an auction mechanism.
What does 'bid-ask spread' represent in securities trading?
Answer: The difference between the highest price a buyer will pay and the lowest price a seller will accept
The bid-ask spread is the gap between the best bid price (maximum a buyer will pay) and the best ask price (minimum a seller will accept), representing the cost of immediate execution.
Under Saudi Exchange rules, which of the following describes a 'block trade'?
Answer: A large-volume transaction executed outside the normal order book at a negotiated price
A block trade is a privately negotiated, large-volume transaction conducted outside the public order book, typically between institutional counterparties, subject to exchange reporting requirements.
What is the role of a 'market maker' in a securities market?
Answer: To continuously provide buy and sell quotes for a security to ensure liquidity
A market maker stands ready to buy and sell a security at publicly quoted prices, providing continuous liquidity and facilitating price discovery in the market.
What is a 'Good-Till-Cancelled' (GTC) order?
Answer: An order that remains active until it is executed or the investor cancels it
A GTC order stays open and active in the market until it is either fully executed at the specified price or deliberately cancelled by the investor.
In the context of Saudi market operations, what is 'delivery versus payment' (DVP)?
Answer: A settlement mechanism ensuring securities are transferred only when corresponding payment is made simultaneously
DVP is a settlement principle that links the transfer of securities to the simultaneous transfer of funds, eliminating principal risk by ensuring neither party delivers without receiving their consideration.
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