Market Organization and Structure

What the exam expects you to do

1. Explain the main functions of the financial system.
2. Describe classifications of assets and markets.
3. Describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes.
4. Describe types of financial intermediaries and services that they provide.
5. Compare positions an investor can take in an asset.
6. Calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call.
7. Compare execution, validity, and clearing instructions.
8. Compare market orders with limit orders.
9. Define primary and secondary markets and explain how secondary markets support primary markets.
10. Describe how securities, contracts, and currencies are traded in quote-driven, order-driven, and brokered markets.
11. Describe characteristics of a well-functioning financial system.
12. Describe objectives of market regulation.