Retail Securities: Products, Accounts, and Order Handling
Core concepts
Retail securities work sits at the intersection of product knowledge, account mechanics, and order execution. Candidates must be fluent in the main product families: equities (common and preferred stock), fixed income (Treasury, municipal, corporate, and agency bonds), packaged products (mutual funds, ETFs, closed-end funds), and options. Know the vocabulary of each: for bonds, coupon, maturity, call features, yield to maturity versus current yield, and the inverse price/yield relationship; for funds, net asset value, expense ratio, sales loads, and the difference between intraday ETF pricing and once-daily mutual fund pricing.
Account mechanics
Understand cash versus margin accounts, settlement cycles, buying power, and the distinction between a client's order and the firm's proprietary activity. Know the sequence of an order: instruction, best-execution routing, execution, confirmation, and settlement. Be clear on principal versus agency trades, and on the meaning of a limit order versus a market order.
Traps
Exam questions love the price/yield inversion, confusing current yield with yield to maturity, treating NAV as an ETF's trading price, and mixing up settlement timing across products. Another common trap: assuming a limit order guarantees execution.
Worked example
A bond with a 5% coupon priced at $1,000 pays $50 annually, a 5% current yield. If the price falls to $800, current yield rises to 6.25% ($50 ÷ $800) even though the coupon is unchanged. Rule of thumb: price and yield always move in opposite directions; the coupon never changes.
Study approach
Build a comparison table across products for pricing, liquidity, and risk, then practice explaining each in plain language.