CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Which statements are true?

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.
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