Download - CHAPT18 Commo Stock Market
-
8/2/2019 CHAPT18 Commo Stock Market
1/19
Chapter 18COMMON
STOCK
MARKETS: THEUS &
BANGLADESH
-
8/2/2019 CHAPT18 Commo Stock Market
2/19
Characteristics of Common Stock
Equity securities represent an ownership
interest in a corporation.Common stockholders are the residual owners.
Right to income
Right to assets
Preferred Stockholders have preference overcommon stockholders. Right to fixed dividend
-
8/2/2019 CHAPT18 Commo Stock Market
3/19
Trading Locations
Stock Exchanges Electronic auction system
Trading floors auction system Central auction specialist system
Over-The-Counter Market
no trading floor negotiated system
multiple market maker system
Independent Electronic Network Trading
Systems
-
8/2/2019 CHAPT18 Commo Stock Market
4/19
Stock Exchanges
In USA
l
Major Stock Exchanges NYSE or Big Board AMEX or ASE or Curb
Regional Stock Exchanges Boston, Chicago, Cincinnati,
San Francisco, Philadelphia
OTC Market NASDAQ
In Bangladesh
Dhaka Stock Exchange
Chittagong Stock Exchange
-
8/2/2019 CHAPT18 Commo Stock Market
5/19
Major Governing Rules
Securities Act of 1920 and Securities
Exchange Ord, 1969Public Issue Rule 2006
Companies Act 1994
Dhaka Stock Exchange Listing RegulationsDirect Listing Regulation 2006
-
8/2/2019 CHAPT18 Commo Stock Market
6/19
Categories of traded securities:
exchange listed common stocks,
bonds, debentures T Bonds. listed mutual funds .
Stock and Index based future contracts
special types of derivatives now very popularin India and Pakistan, Hopefully it will be
introduced by the end of 2008 in
Bangladesh.
-
8/2/2019 CHAPT18 Commo Stock Market
7/19
Types of Markets in USA
First Market trading on exchanges of stocks listed on an exchange
Second Market trading in OTC market of stocks not listed on an exchange
Third Market trading in OTC market of stocks listed on an exchange
Fourth Market private transactions between institutional investors
-
8/2/2019 CHAPT18 Commo Stock Market
8/19
Stock Exchanges
Types of Formal organizations approved andregulated by the SEC (regulators) to providetrading facilities for eligible securities at auction
Members/Shareholders can only trade listed stocks
must buy a seat on the exchange Listing requirements
minimum capitalization, shareholder equity, averageclosing share price, etc.
-
8/2/2019 CHAPT18 Commo Stock Market
9/19
US Market: NYSE
Centralized continuousauction market
Exchange participants: single specialist
commission brokers
independent floor brokers
registered traders
SuperDot
Major roles of NYSE-specialist Dealer
Agent
Catalyst
Auctioneer
Commissions
-
8/2/2019 CHAPT18 Commo Stock Market
10/19
US Market: OTC Market
Trading unlisted stocks
Listing requirements
NASDAQ stock market
NASDAQ market tiers NASDAQ National Market
Small CapitalizationMarket
NASDAQ market makers
Other OTC markets OTC Bulletin Board
Pink Sheets
-
8/2/2019 CHAPT18 Commo Stock Market
11/19
US Market: Third Market
Listed stocks traded in OTC market
NYSE Rule 390Commission
Network of broker-dealers
-
8/2/2019 CHAPT18 Commo Stock Market
12/19
US Market: Fourth Market
Direct trading of stocks between two customers
CommissionsAlternative trading systems (ATS)
electronic communications networks
crossing networks
-
8/2/2019 CHAPT18 Commo Stock Market
13/19
Other Types of Common Stock
Trading in USA
Offshore Trading
US Rule 144A Securities
American Depository Receipts (ADR)
-
8/2/2019 CHAPT18 Commo Stock Market
14/19
US Market: Role and Regulation ofDealers in Exchange and OTC Market
Regulatory Issues
fragmented marketNASDAQ Pricing Controversy
SEC Cost Study
Decimalization
Regulation FD
SuperMontage
-
8/2/2019 CHAPT18 Commo Stock Market
15/19
US Market: Trading Mechanisms
Types of Orders market order
limit order
Short Selling
Margin Transactions initial margin
maintenance margin
Transactions Costs explicit costs
implicit costs
-
8/2/2019 CHAPT18 Commo Stock Market
16/19
US Market: Trading Arrangements
for Institutional Investors
Block Trading
Trades of 10,000 shares or more of a givenstock or trades with a market value of $200,000or more.
Program Trading
Simultaneous purchase or sale of shares in alarge number of different stocks, which iscomputer-assisted.
-
8/2/2019 CHAPT18 Commo Stock Market
17/19
US Market: Price Limits and Collars
Stock Market Crash of 1987
Trading or Price Limits
Rule 80B or Circuit Breakers
Rule 80A or Trading Collar
-
8/2/2019 CHAPT18 Commo Stock Market
18/19
US Market: Stock Market Indicators
Dow Jones Industrial Average
S&P 500NYSE Composite
AMEX
NASDAQ CompositeValue Line Composite Average
-
8/2/2019 CHAPT18 Commo Stock Market
19/19
Pricing Efficiency of the Stock
Market
Forms of Efficiency
Weak form Semistrong form
Strong form
Implications for Investing in Common Stock Active strategies Passive strategies