- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 1. Market Organization and Structure
- Subject 3. Financial Intermediaries
CFA Practice Question
Which statements are true?
II. Dark pools lack transparency.
III. Securitization is similar to a sale of a profitable business ("spinning off") into a separate entity.
I. ECNs increase competition and lower transaction costs.
II. Dark pools lack transparency.
III. Securitization is similar to a sale of a profitable business ("spinning off") into a separate entity.
Correct Answer: I, II and III
I. They give clients full access to their order books and offer order matching outside the traditional exchanges.
II. They are used by institutional investors seeking to trade large blocks of stocks without creating the price wobbles that routinely accompany such moves. The trading is done away from the traditional exchanges, offering unprecedented anonymity. The bulk of dark pool liquidity is represented by block trades facilitated away from the central exchanges.
User Contributed Comments 3
| User | Comment |
|---|---|
| johntan1979 | Don't understand how securitization is the same as selling a profitable business... |
| jonan203 | if you own 10 business each producing $100,000, you can securitize them and raise, say 7 times earnings. you get $700,000 less any fees and no longer own the income. replace the word business with, mortgages, student loans, auto loans, etc. |
| khalifa92 | plus securitization of the pooled assets provides more liquidity and investors are willing to pay more for more liquid assets. |