foreign stock exchanges

8/12/2019 Foreign Stock Exchanges

1/34


2/34

Common stock is a form of corporate equityownership, a type of security. It is called "common" todistinguish it from preferred stock. In the event ofbankruptcy, common stock investors receive theirfunds after preferred stock holders, bondholders,creditors, etc. On the other hand, common shares onaverage perform better than preferred shares or bondsover time


3/34

Common stock is usually voting shares, though notalways. Holders of common stock are able to influencethe corporation through votes on establishingcorporate objectives and policy, stock splits, andelecting the company's board of directors. Someholders of common stock also receive preemptiverights, which enable them to retain their proportionalownership in a company should it issue another stockoffering. There is no fixed dividend paid out to common stockholders and so their returns are uncertain, contingenton earnings, company reinvestment, efficiency of themarket to value and sell stock


4/34

A stock exchange is an entity that provides "trading"facilities for stock brokers and traders, to trade stocks,bonds, and other securities.

Stock exchanges also provide facilities for issue andredemption of securities and other financialinstruments, and capital events including the paymentof income and dividends.


5/34

Securities traded on a stockexchange include shares

issued by companies, unittrusts, derivatives, pooledinvestment products andbonds.


6/34

A security traded in some context other than on aformal exchange such as the NYSE, TSX, AMEX, etc.The phrase "over-the-counter" can be used to refer tostocks that trade via a dealer network as opposed to ona centralized exchange.It also refers to debt securities and other financialinstruments such as derivatives, which are tradedthrough a dealer network.


7/34

Over-the-counter (OTC) or off-exchange trading is totrade financial instruments such as stocks, bonds,commodities or derivatives directly between twoparties. It is contrasted with exchange trading, whichoccurs via facilities constructed for the purpose oftrading, such as futures exchanges or stock exchanges.


8/34

The New York Stock Exchange (NYSE) is a stockexchange located at 11 Wall Street in lower Manhattan ,New York City, USA. It is the world's largest stockexchange by market capitalization of its listedcompanies at US$ 11.92 trillion as of Aug 2010. Averagedaily trading value was approximately US$ 153 billionin 2008.


9/34

The origin of the NYSE can be traced to May 17, 1792,

when the Buttonwood Agreement was signed by 24stock brokers outside of 68 Wall Street in New Yorkunder a buttonwood tree on Wall Street. On March 8,1817, the organization drafted a constitution and

renamed itself the "New York Stock & Exchange Board." Anthony Stockholm was elected the Exchange's firstpresident.


10/34

The NASDAQ Stock Market , also known as theNASDAQ, is an American stock exchange . "NASDAQ"originally stood for "National Association of SecuritiesDealers Automated Quotations Systems," but theexchange's official stance is that the acronym isobsolete. It is the largest electronic screen-basedequity securities trading market in the United Statesand fourth largest by market capitalization in the world. With 2919 ticker symbols , it has more trading volumethan any other electronic stock exchange in the world.


11/34

It was founded in 1971 by the National Association ofSecurities Dealers (NASD), who divested themselves of

it in a series of sales in 2000 and 2001. It is owned andoperated by the NASDAQ OMX Group , the stock of which was listed on its own stock exchange beginning July 2, 2002, under the ticker symbol NASDAQ


12/34

Whenever someone talks about the stock market as aplace where equities are exchanged between buyers

and sellers, the first thing that comes to mind is eitherthe New York Stock Exchange (NYSE) or Nasdaq , andthere's no debate over why.These two exchanges account for the trading of a

major portion of equities in North America and worldwide. At the same time, however, the NYSE andNasdaq are very different in the way they operate andin the types of equities traded therein

Knowing these differences will help you betterunderstand the function of a stock exchange and themechanics behind the buying and selling of stocks.


13/34

The location of an exchange refers not so much to itsstreet address but the "place" where its transactionstake place. On the NYSE, all trades occur in a physicalplace, on the trading floor in New York City. So, when you see those guys waving their hands on TV orringing a bell before opening the exchange, you areseeing the people through whom stocks are transactedon the NYSE.


14/34

The Nasdaq, on the other hand, is located not on aphysical trading floor but on a telecommunications

network. People are not on a floor of the exchangematching buy and sell orders on behalf of investors.Instead, trading takes place directly between investorsand their buyers or sellers, who are the market makers

through an elaborate system of companieselectronically connected to one another.


15/34

The fundamental difference between the NYSE andNasdaq is in the way securities on the exchanges aretransacted between buyers and sellers.The Nasdaq is a dealer's market , wherein marketparticipants are not buying from and selling to oneanother directly but through a dealer, which, in thecase of the Nasdaq, is a market maker


16/34

The NYSE is an auction market , wherein individualsare typically buying and selling between one anotherand there is an auction occurring; that is, the highestbidding price will be matched with the lowest askingprice.


17/34

Each stock market has its own traffic control policeofficer. Just as a broken traffic light needs a person tocontrol the flow of cars, each exchange requires people who are at the "intersection" where buyers and sellers"meet", or place their orders. The traffic controllers ofboth exchanges deal with specific traffic problems and,in turn, make it possible for their markets to work.


18/34

On the Nasdaq, the traffic controller isknown as the market maker, who, we alreadymentioned, transacts with buyers and sellersto keep the flow of trading going.On the NYSE, the exchange traffic controller

is known as the specialist, who is in chargeof matching up buyers and sellers.


19/34

The definitions of the role of the market maker andthat of the specialist are technically different; a marketmaker creates a market for a security, whereas aspecialist merely facilitates it.However, the duty of both the market maker andspecialist is to ensure smooth and orderly markets forclients. If too many orders get backed up, the trafficcontrollers of the exchanges will work to match thebidders with the askers to ensure the completion of asmany orders as possible. If there is nobody willing tobuy or sell, the market makers of the Nasdaq and thespecialists of the NYSE will try to see if they can findbuyers and sellers and even buy and sell from theirown inventories


20/34

Not much. Both the New York Stock Exchange (NYSE)specialist and the Nasdaq market maker try to increasethe liquidity on their respective exchanges and provide

more fluid and efficient trading.


21/34

A specialist is a dealer representing a NYSE specialistfirm - one of the main facilitators of trade on theexchange. A market maker is a broker-dealer whofacilitates the trading of shares by posting bid and askprices along with maintaining an inventory of shares. Itis important to note that a specialist is a type of marketmaker. The NYSE has seven specialist firms while theNasdaq has nearly 300 market makers. The NYSE is anauction-based market where traders meet on the floor ofthe exchange, using person-to-person, telephoneorders or electronic orders. The Nasdaq, on the otherhand, is strictly an electronic exchange.


22/34

NYSESpecialists working on the NYSE have four roles tofulfill in order to ensure a fair and orderly market:1.Auctioneer2. Agent3. Catalyst

4. PrincipalNasdaqMarket makers working on the Nasdaq exchange arenot actually at the exchange. They are large investment

companies that buy and sell securities through anelectronic network. These market makers maintaininventories and buy and sell stocks from theirinventories to individual customers and other dealers.


23/34

One thing that we can't quantify but mustacknowledge is the way in which the companies oneach of these exchanges are generally perceived byinvestorsThe Nasdaq is typically known as a high-tech market,attracting many of the firms dealing with the internetor electronics. Accordingly, the stocks on this exchangeare considered to be more volatile and growthoriented.


24/34

On the other hand, the companies on NYSE are

perceived to be more well established. Its listings includemany of the blue chip firms and industrials that werearound before our parents, and its stocks are consideredto be more stable and established.


25/34

Whether a stock trades on the Nasdaq or the NYSE isnot necessarily a critical factor for investors when theyare deciding on stocks to invest in. However, becauseboth exchanges are perceived differently, the decisionto list on a particular exchange is an important one formany companies.

A company's decision to list on a particular exchange isaffected also by the listing costs and requirements setby each individual exchange. The entry fee a companycan expect to pay on the NYSE is up to $250,000 while

on the Nasdaq, it is only $50,000-$75,000.


26/34

Yearly listing fees are also a big factor: on the NYSE,they based on the number of shares of a listed security,and are capped at $500,000, while the Nasdaq feescome in at around $27,500. So we can understand why

the growth-type stocks (companies with less initialcapital) would be found on the Nasdaq exchange


27/34

Prior to March 8, 2006, the final major differencebetween these two exchanges was their type ofownership: the Nasdaq exchange was listed as apublicly-traded corporation, while the NYSE wasprivate.his all changed in March 2006 when the NYSE wentpublic after being a not-for-profit exchange for nearly214 years


28/34

Most of the time, we think of the Nasdaq and NYSE asmarkets or exchanges, but these entities are bothactual businesses providing a service to earn a profitfor shareholders. The shares of these exchanges, likethose of any public company, can be bought and soldby investors on an exchange. As publicly traded companies, the Nasdaq and the

NYSE must follow the standard filing requirements setout by the Securities and Exchange Commission . Nowthat the NYSE has become a publicly tradedcorporation, the differences between these twoexchanges are starting to decrease, but the remainingdifferences should not affect how they function asmarketplaces for equity traders and investors.


29/34

Third market in finance, refers to the trading ofexchange-listed securities in the over-the-counter(OTC) market. These trades allow institutionalinvestors to trade blocks of securities directly, ratherthan through an exchange, providing liquidity andanonymity to buyers.


30/34

Fourth market trading is direct institution-to-institution trading without using the service of broker-dealers. It is impossible to estimate the volume offourth market activity because trades are not subject toreporting requirements. Studies have suggested thatseveral million shares are traded per day.


31/34

An electronic system that attempts to

eliminate the role of a third party in theexecution of orders entered by anexchange market maker or an over-the-

counter market maker, and permitssuch orders to be entirely or partlyexecuted.


32/34


33/34


34/34

060207007

foreign stock exchanges

Documents