Introduction

Welcome to Trading Securities - the mechanics of how securities are actually bought and sold in the marketplace.

Exam Weight: Part of 30 questions

What You'll Learn

In this unit, you'll cover:

• Terminology: Bid/ask quotes, order types (market, limit, stop, stop-limit), cash and margin accounts, and principal vs. agency transactions
• Roles in Securities Trading: How broker-dealers, custodians, market makers, and exchanges each contribute to the trading process
• Costs of Trading: Commissions, markups/markdowns, the bid-ask spread, and the best execution obligation

Why This Matters

Every recommendation you make as an investment adviser representative ultimately results in a trade. Understanding how orders are placed, who facilitates execution, and what costs are involved is essential for serving clients effectively. The exam tests your ability to distinguish between order types, identify whether a transaction is principal or agency, and apply the best execution standard.

Let's start with the core terminology: the language of securities trading.