SIE (Securities Industry Essentials) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the SIE (Securities Industry Essentials) Exam by studying comprehensive materials, including interactive quizzes and flashcards that cover essential industry concepts. Maximize your scoring potential with targeted practice.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

A broker-dealer filling a customer order for an NYSE stock out of inventory is known as a:

1st market transaction
2nd market transaction
3rd market transaction
4th market transaction

The correct answer is: 3rd market transaction

A 1st market transaction refers to trading on a national stock exchange, such as the NYSE or Nasdaq. This involves buying and selling of securities between sellers and buyers through a designated market maker. A 2nd market transaction refers to trading on the over-the-counter market, outside of major exchanges. A 4th market transaction refers to direct trading between large institutional investors, bypassing traditional market makers. As for the term "broker-dealer", it refers to a financial firm that acts as both a broker (matching buyers and sellers) and a dealer (buying and selling securities for its own account). Therefore, a broker-dealer filling a customer order with its own inventory is known as a 3rd market transaction. This means that the firm is buying the security from its own inventory and selling it to the customer. This type of transaction is also known as a principal transaction.