The Automated Clearing House Network (ACH) is an electronic funds-transfer system run by NACHA, formerly the National Automated Clearing House Association.

The Automated Clearing House (ACH) Network is an electronic funds-transfer system run by NACHA, formerly called the National Automated Clearing House Association, since 1974. It represents more than 10,000 financial institutions and ACH transactions totaled more than $55 trillion in 2019 by enabling nearly 25 billion electronic financial transactions.
The ACH Network essentially acts as a financial hub and helps people and organizations move money from one bank account to another. ACH transactions consist of direct deposits and direct payments, including business-to-business (B2B) transactions, government transactions, and consumer transactions. NACHA rules state that average ACH debit transactions settle within one business day, and average ACH credit transactions settle within one to two business days. Changes to NACHA's operating rules will expand access to same-day ACH transactions, which will allow for same-day settlement of most, if not all, ACH transactions as of March 19, 2021.

Automated Clearing House (ACH)

The back office is the portion of a company made up of administration and support personnel who are not client-facing. Back-office functions include settlements, clearances, record maintenance, regulatory compliance, accounting, and IT services.

The back office is the portion of a company made up of administration and support personnel who are not client-facing. For example, a financial services firm is segmented into three parts: the front office (e.g., sales, marketing, and customer support), the middle office (risk management), and the back office (administrative and support services). Although back-office staff members do not interact with customers, they tend to actively interact with front-office staff. Though it varies from one firm to another, the work in the Back Office roles is significantly different from the Front Office and, with the exception of corporate credit risk roles, may not provide a Front Office hopeful with the needed experience to make such a transition. Back-office functions include settlements, clearances, record maintenance, regulatory compliance, accounting, and IT services.

Back Office

The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages because the majority of the companies act as both agents and principals.

Business Brokers in the US – Number of Businesses 2003–2027

A broker-dealer (B-D) is a person or firm in the business of buying and selling securities for its own account or on behalf of its customers. There are thousands of broker-dealers comprising two broad categories: a wirehouse, which sells its own products, or an independent broker-dealer, which sells products from outside sources
Broker-dealers fulfill several important functions in the financial industry. There are two types of broker-dealers:
1.  A wirehouse, or a firm that sells its own products to customers; and
2.  An independent broker-dealer, or a firm that sells products from outside sources. When a broker-dealer acts as an agent of the issuing company, either as a principal underwriter of the stock or bond offering, or as a member of the underwriting syndicate, they enter into a contractual arrangement, acting on a “firm commitment” with the issuer that obligates them to distribute a certain amount of the securities offered to the public in exchange for an underwriting fee. A broker-dealer is acting as a broker or agent when it executes orders on behalf of its clients, and as a dealer or principal when it trades for its own account.

Broker-Dealer

A brokerage account is an arrangement that allows an investor to deposit funds and place investment orders with a licensed brokerage firm.

A brokerage account is an arrangement in which an investor deposits money with a licensed brokerage firm, which places trades on behalf of the customer. Investors who favor a do-it-yourself investment approach should strongly consider using discount brokerage firms, which impose significantly lower fees than their full-service brokerage firm counterparts. Such investors typically consider using a medium ground between full-service brokerage firms and discount brokerage firms, companies such as Raymond James, Jefferies Group LLC, or Edward Jones. For example, an investor who signs up with a typical discount broker can expect to open a regular taxable brokerage account or retirement account at no cost, as long as they are able to fund the account with a $500 opening minimum. There are multiple types of brokerage accounts and brokerage firms, giving investors the opportunity to cherry-pick the model that best suits their financial needs.

Brokerage Account

The broker booth support system (BBSS) is an electronic system used by the NYSE to send orders between brokers and trading booths on the floor of the exchange.

NYSE Tradeworks allowed for the same functionality as the Broker Booth Support System (BBSS), but aimed to do away with any downtime and allowed for scalability, to manage ever-growing volumes of trading.
With the advent of electronic trading in the 90s, stock exchanges started to take advantage of new technology to improve how financial trading was done. The Broker Booth Support System (BBSS) was a comprehensive electronic system used by the New York Stock Exchange (NYSE) to send orders between brokers and trading booths on the floor of the exchange. The Broker Booth Support System (BBSS) was an electronic system used by the New York Stock Exchange (NYSE) to send orders between brokers and trading booths on the floor of the exchange. In 2004, the Broker Booth Support System (BBSS) was replaced by NYSE Tradeworks, a new electronic system implemented by the NYSE.

Broker Booth Support System (BBSS)

"Cage” refers to the department of a brokerage firm that is responsible for receiving and distributing physical stock and bond certificates.

Speech by SEC Staff: International Securities Settlement Conference—The U.S. View of the Role of Regulation in Market Efficiency

Transformation & Regulation: Equities Market Structure, 1934 to 2018

In finance, “cage” is a colloquial term used to describe the department of a brokerage firm that is responsible for receiving and distributing physical stock and bond certificates. In the past, cages were widespread and heavily used, as all transactions required physical certificate transfers for settlement.
Today, the vast majority of security trading is done electronically, bypassing the need for physical transfers. To ensure that the ownership status of their clients’ securities are recorded and maintained, brokerage firms keep cages within their offices to ensure these physical certificates are secured. After all, since the advent of fully electronic trading services, it is no longer necessary to encounter any physical securities certificates in order to invest in stocks or bonds. This method of investing electronically using the street name of the brokerage firm offers many advantages over taking physical possession of the security certificates.

Cage

A custodial account is a savings account set up and managed by an adult for a minor. Discover how custodial accounts work and their pros and cons.

Publication 929 (2020), Tax Rules for Children and Dependents

Table of Contents
What Is a Custodial Account?
How a Custodial Account Works
Two Types of Custodial Accounts
Advantages and Disadvantages
Example of a Custodial Account
Custodial Account FAQs
The Bottom Line The term custodial account generally refers to a savings account at a financial institution, mutual fund company, or brokerage firm that an adult controls for a minor (a person under the age of 18 or 21 years, depending on the laws of the state of residence). In a broader sense, a custodial account can mean any account maintained by a fiduciarily responsible party on behalf of a beneficiary, such as an employer-based retirement account handled for eligible employees by a plan administrator. For example, a Merrill Edge—the digital broker platform from Merrill Lynch—UGMA/UTMA custodial account can be set up online with funds directly transferred from a checking or savings account at Bank of America, Merrill's parent company. There are specific tax advantages to a custodial account, but there are also risks, such as the possibility that the existence of the account limits the amount of financial aid a child might get.

Custodial Account

European Best Bid and Offer is a regulatory mandate that brokers provide current best prices available for buying or selling financial instruments.

Waivers from Pre-Trade Transparency Obligations Under the Markets in Financial Instruments Directive (MiFID)

Occasional Paper Series. Dark Pools in European Equity Markets: Emergence, Competition, and Implications

EBBO is the European equivalent of the National Best Bid and Offer (NBBO) found in the U.S.
The EBBO represents the best price that is available; the lowest price for a buy or the highest price for a sell. European Best Bid and Offer (EBBO) is a regulatory mandate in Europe that requires brokers to provide the current best prices available for buying or selling financial instruments. European Best Bid and Offer (EBBO) is a regulatory mandate that brokers provide current best prices available for buying or selling financial instruments. Where EBBO is supported on a trading platform, market participants' trade orders will be filled at or better than the EBBO price for a given trading instrument.

European Best Bid and Offer (EBBO)

A house maintenance requirement is the level of minimum margin account equity that is required by a brokerage firm.

Investor Bulletin: Understanding Margin Accounts

A house maintenance requirement is the level of minimum margin account equity that is required by a brokerage firm. Although Regulation T specifies the minimum maintenance requirements permitted by law,﻿﻿ brokerage firms are free to adjust their own “house” maintenance requirements provided that their standards are more rigorous—that is, higher—than the minimum requirements set out in Regulation T.
House maintenance requirements are the standards for minimum margin account equity levels chosen by brokerage firms.
They must be greater or equal than the 25% level stipulated in Regulation T. In addition to maintaining house maintenance requirements that are higher than the 25% mandated by Regulation T, brokerage firms often also have different house maintenance requirements for different account holders. According to Regulation T, margin traders must maintain equity levels of at least 25% of the value of their investments.﻿﻿ If they fail to maintain this level, they may find themselves subject to a margin call by their broker.
In this situation, the trader would be required to promptly deposit additional collateral into their account. The house maintenance requirement will often be higher than the maintenance margin set out by the Federal Reserve's Regulation T, which stipulates that an equity level of at least 25% must be maintained.

House Maintenance Requirement

An investment bank is a financial institution that acts as an intermediary in complex corporate transactions such as mergers and acquisitions.

An investment bank is a financial services company that acts as an intermediary in large and complex financial transactions. The investment bank is responsible for examining a company’s financial statements for accuracy and publishing a prospectus that describes the offering in detail to investors before the securities are available for purchase.
Investment bank clients include corporations, pension funds, other financial institutions, governments, and hedge funds.
Investment banks specialize in managing complex financial transactions such as IPOs and mergers for corporate clients.
Modern investment banking is typically a division of a bigger bank institution such as Citibank and JPMorgan Chase.
A 'Chinese wall' is supposed to separate investment banking activities from the company's trading division to prevent conflicts of interest. The research division also provides investment advice to outside clients who can complete a trade through the trading desk of the bank, which would generate revenue for the bank. As a financial advisor to large institutional investors, an investment bank may provide strategic advice on a variety of financial matters. Research maintains an investment bank's institutional knowledge on credit research, fixed income research, macroeconomic research, and quantitative analysis, all of which are used internally and externally to advise clients.

Investment Bank

The Japan Association of Securities Dealers Automated Quotation (Jasdaq) is a Japanese stock exchange that is part of the Japan Exchange Group (JPX).

History: Osaka Exchange: History of Jasdaq Securities Exchange, Inc.

The Japan Association of Securities Dealers Automated Quotation (Jasdaq) is a stock exchange that forms part of the Japan Exchange Group (JPX).﻿﻿ It is focused on emerging venture companies and, like the Nasdaq exchange, is a fully electronic trading platform. The Japan Association of Securities Dealers Automated Quotation (Jasdaq) is a stock exchange that forms part of the Japan Exchange Group (JPX).﻿﻿ It is focused on emerging venture companies and, like the Nasdaq exchange, is a fully electronic trading platform. Within the JPX, there are four sections: the TSE First Section, the TSE Second Section, the Jasdaq, and the Mothers exchange. , the OSE and Tokyo Stock Exchange (TSE) merged to form the Japan Exchange Group.﻿﻿﻿﻿ The Jasdaq is a stock exchange in Japan that focuses on emerging companies.

Japan Association Of Securities Dealers Automated Quotation (Jasdaq) Defined

The term jitney refers to a broker that does not have direct access to an exchange and therefore relies on another broker to execute their trades.

In finance, the term jitney refers to a broker that does not have direct access to an exchange and therefore relies on another broker with exchange access in order to execute their trades. In finance, the term jitney refers to a broker that does not have direct access to an exchange and therefore relies on another broker with exchange access in order to execute their trades. However, some brokers have been known to collude with one-another in order to fraudulently generate commission revenues or else mislead other market participants into overestimating the level of market interest in a particular security. Other practices which the firms sometimes engage in include buying and selling thinly traded securities, such as penny stocks, repeatedly buying and selling their shares between one-another at ever-increasing prices. If the liquidity in the stock is sufficiently small, other market participants might be fooled into believing that the rising price of the shares represents genuine market interest, thereby attracting outside buyers.

Jitney Defined

The Madrid Stock Exchange Computer Assisted Trading System (MSE CATS) is an electronic trading platform that was adopted by the Madrid Stock Exchange in 1989.

The term Madrid Stock Exchange Computer Assisted Trading System (MSE CATS) refers to an electronic trading platform that was used by the Madrid Stock Exchange. The system increased efficiency and transparency, allowing market participants to see the size and price of each order entered into the market, as well as the identity of the brokers and other market intermediaries placing the orders through the MSE CATS interface. The Madrid Stock Exchange Computer Assisted Trading System (MES CATS) was developed by the Toronto Stock Exchange (TSX). By 1995, the MSE decided to further invest in its automation technology, replacing CATS with a new electronic trading system known as the Sistema de Interconexión Bursátil Español.

Madrid Stock Exchange Computer Assisted Trading System (MSE CATS)

A margin account is a brokerage account in which the broker lends the customer cash to purchase assets. When trading on margin, gains and losses are magnified.

Margin: Borrowing Money to Pay for Stocks

A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. A brokerage firm has the right to ask a customer to increase the amount of capital they have in a margin account, sell the investor’s securities if the broker feels their own funds are at risk, or sue the investor if they do not fulfill a margin call or if they are carrying a negative balance in their account.
The investor has the potential to lose more money than the funds deposited in the account. If an investor purchases securities with margin funds, and those securities appreciate in value beyond the interest rate charged on the funds, the investor will earn a better total return than if they had only purchased securities with their own cash. If a margin account’s equity drops below the maintenance margin level, the brokerage firm will make a margin call to the investor. A margin account may not be used for buying stocks on margin in an individual retirement account, a trust or other fiduciary accounts.

Margin Account  and Example

The National Stock Exchange, known by its abbreviation "NSX," was the first exchange in the United States to transition to 100% electronic trading.

CSE Announces Name Change to National Stock Exchange (Archived)

The National Stock Exchange Relaunches Trading Operations (Archived)

NYSE Agrees to Acquire National Stock Exchange

U.S. Equities Market Volume Summary for Dec. 16, 2016

The National Stock Exchange, better known by its abbreviation "NSX," was the first stock exchange in the United States to transition to 100% electronic trading. , the NSX merged with the NYSE, rebranding itself as the NYSE National.
Today, the NYSE National operates as part of the NYSE Pillar trading platform, which seeks to combine several NYSE-affiliated markets into a comprehensive order fulfillment system. Today, the National Stock Exchange is part of the NYSE, where it is known as the NYSE National. In 2017, the NSX was acquired by the New York Stock Exchange (NYSE) and is now known as the NYSE National. The NSX was founded in Ohio in 1885, at which time it was known as the Cincinnati Stock Exchange.﻿﻿ For much of its early history, it was known for its listings of railroad companies, banks, and insurance firms.

National Stock Exchange Defined

Order splitting refers to the practice of dividing a large order for the purchase or sale of securities into a series of smaller orders.

The term order splitting refers to the practice of dividing a large order into a series of smaller ones. This allows securities to be traded—whether they're bought or sold—with ease and can also make the order eligible for more rapid trade executions.
Order splitting can help when market liquidity may be insufficient to satisfy a large order. The term order splitting refers to the practice of dividing a large order into a series of smaller ones. In practice, though, brokers acting on behalf of large investors would often use order splitting to route their clients’ orders through the SOES. Although most markets use automated trading platforms to split orders, some exchanges continue to use human brokers to conduct order splitting.

Order Splitting

A penalty bid is an offer to partake in an initial public offering (IPO), where the buyer is disincentivized from selling shortly after the purchase.

A penalty bid is an offer to take part in an initial public offering (IPO), in which the buyer is disincentivized from selling their shares shortly after the purchase. If a sufficient number of early investors were to act in this manner, it could force the lead underwriter of the IPO to buy back the recently-allocated shares during the initial stabilization period of the IPO to prevent the share price from declining too severely from the increased selling pressure from early investors. They are designed to protect IPO investors from the selling pressure that might arise from early investors selling their shares shortly after the IPO transaction. At the very least, a broker whose client insists on selling their IPO shares within the proscribed time frame would not be pleased with that client, and they may exclude that client from future allocations to IPOs that are in high demand. Given this fact, it can be tempting for investors to seek allocations from their brokers to participate in upcoming IPOs, not because they are enthusiastic about the long-term prospects of the stock, but simply because they wish to sell the shares shortly after the IPO in order to secure a quick gain.

Penalty Bid Defined

Prime brokerage refers to a complex group of financial services that some brokers may offer to special clients such as hedge funds and large investors.

Table of Contents
What Is a Prime Brokerage?
Understanding a Prime Brokerage
Prime Brokerage Services
Prime Brokerage Accounts Example of a Prime Brokerage
Prime Brokerage FAQs
The Bottom Line
A prime brokerage is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients that need to be able to borrow securities or cash in order to engage in netting to achieve absolute returns. A prime brokerage agreement is an agreement between a prime broker and its client that stipulates all of the services that the prime broker will be contracted for. For hedge funds or other institutional clients to get the kind of services that make having a prime brokerage account worthwhile (most notably discounted fees for trading), an account size of $50 million in equity is a likely starting point. A prime broker is a large institution that provides a multitude of services, from cash management to securities lending to risk management for other large institutions.

Prime Brokerage

A specialist was a term formerly used to describe a member of an exchange who acted as the market maker to facilitate the trading of a given stock.

Wall Street and the Stock Exchanges: Historical Resources

Settlement Reached With Five Specialist Firms for Violating Federal Securities Laws and NYSE Regulations; Firms Will Pay More Than $240 Million in Penalties and Disgorgement

At one time, a specialist was the term used by the New York Stock Exchange (NYSE) to refer to a member of the exchange who acted as the market maker to facilitate the trading of a given stock. The specialist's duties in the past were very similar to the duties performed by today's designated market maker (DMM) on the New York Stock Exchange (NYSE).﻿﻿﻿ A specialist held an inventory of a particular stock, posted the bid and ask prices, managed limit orders, and executed trades. At one time, a specialist was the term used by the New York Stock Exchange (NYSE) to refer to a member of the exchange who acted as the market maker to facilitate the trading of a given stock. Floor traders, who acted on behalf of customers who bought and sold the stock, gathered around a specialist's trading post to learn the best bid and ask offers for a security or a stock. The NYSE and SEC investigated the five specialist firms and found that between 1999 and 2003 the firms had violated federal securities laws by executing dealer account orders ahead of public customer orders.

Specialist

A stockbroker is an agent or firm that charges a fee or commission for executing buy and sell orders for an investor.

Licensing Examination for Securities and Futures Intermediaries

A stockbroker is a financial professional who executes orders in the market on behalf of clients. Most online brokers are discount brokers, at least at their basic levels of service, in which trades are executed for free or for a small set-price commission. Traditionally, a discount broker would only engage in buying and selling on behalf of customers, while a full-service broker would provide a broader breadth of financial services such as research, advice, portfolio management, and so on. Brokers who are employed by discount broker firms may work as over-the-phone agents (known as voice brokers) available to answer brief questions, or as branch officers in a physical location. These include both full-service brokers and discount brokers, who execute trades but do not offer individualized investing advice.

Stockbroker

In finance, the term "tape shredding" refers to the practice of executing a single purchase or sale order using a series of smaller transactions.

Self-Regulatory Organizations; National Stock Exchange; Order Granting Approval to Proposed Rule Change to Prohibit Tape Shredding

In finance, the term "tape shredding" refers to the practice of executing a single purchase or sale order using a series of smaller transactions. The term originates from before the adoption of fully computerized trading platforms when brokers used to receive their trade orders on printed composite tape, also known as ticker tape. Before electronic trade execution became commonplace, human brokers would receive their clients' orders on physical machines that would print those orders on composite tape. Although tape shredding by human brokers is now a rarity, the underlying concept of tape shredding continues to be widely used. Because brokers are often compensated for each order they fill, unethical brokers would sometimes split up large orders into several smaller orders, simply for the sake of generating additional commissions.

Tape Shredding

Third market makers deal in a market segment in which exchange-traded securities are exchanged over-the-counter (OTC) by institutional investors.

Jefferies Group, Inc. - Company Profile, Information, Business Description, History, Background Information on Jefferies Group, Inc

A third market maker is a type of market maker that deals in the third market, which is a segment of the financial markets in which exchange-traded securities are exchanged over-the-counter (OTC) by institutional investors. A third market maker is a type of market maker that deals in the third market, which is a segment of the financial markets in which exchange-traded securities are exchanged over-the-counter (OTC) by institutional investors. As with all market makers, the market makers that operate in the third market provide liquidity to the marketplace by facilitating the purchase and sale of securities. For this reason, market makers assume some of the inventory risk of the marketplace; if demand for their inventory diminishes before it can be resold, market makers may realize a loss upon the sale of that inventory. Third market makers are market makers operating in the third market of the financial world.

Third Market Maker

A transfer agent keeps records of who owns a publicly traded company's stocks and bonds. They also ensure investors receive dividends on time.

A transfer agent is a trust company, bank, or similar institution assigned by a corporation for the purposes of maintaining an investor's financial records and tracking each investor's account balance. Mutual fund transfer agents differ from stock transfer agents in that the former never issue physical certificates, where the latter must do so, on shareholder request. However, mutual fund transfer agents perform many other important tasks, like maintaining records of shareholders' accounts, overseeing dividend payments, and responding to shareholder requests for account statements, income tax forms, and transaction confirmations. And at year-end, transfer agents and registrars jointly send federal tax information to investors, including dividends information and interest paid, along with data on security trades executed during the year. Similarly, transfer agents send cash dividend payments to stock investors, once the companies they invest in generate sufficient earnings.

Transfer Agent

A wirehouse is a term describing a full-service brokerage firm. 

A wirehouse is a term used to describe a full-service broker-dealer. This network connection enabled branches to have instantaneous access to the same market information as the head office, thereby allowing brokers to provide up-to-date stock quotes and market news to clients. Although the proliferation of discount brokerages and online quotes has eroded the edge in market information that the wirehouses formerly possessed, their diversified activities in capital markets continue to make them very profitable entities. Most present-day wirehouses are full-service brokerages that provide a comprehensive range of services, such as investment banking, research, trading, and wealth management. Although traditionally used to describe broker-dealers, the term also described some banks and insurance companies that connected to their head office by wired telecommunication networks.

Stock Brokers

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