Trading Securities

Exam Weight: ~4 questions (3% of exam)

Understanding how securities are bought and sold is essential for advising clients on investment execution. This unit covers trading terminology, the roles of market participants, trading costs, and the best execution obligation.

What You'll Learn

• Key trading terminology including order types, short sales, cash and margin accounts, principal versus agency trades, and payment for order flow
• The roles of introducing and clearing broker-dealers, custodians, market makers, and exchanges
• The costs of trading securities including commissions, markups, markdowns, and the bid-ask spread
• The best execution obligation, the factors broker-dealers must consider, and how payment for order flow creates conflicts