Securities Markets

Chapter 6

Markets

• Goods

• Services

• Ownership of assets

• Risk exposure

Good Markets

• Availability of information

• Liquidity – Marketability– Depth

• Transactions costs

Primary and Secondary Markets

• Primary Markets– Market for new issues

• Secondary Markets– Trading among investors

Primary Markets

• T-bills, notes and bonds– Auctions

• Municipal bonds– Underwriting

• Competitive• Negotiated

– Private placement

• Corporate bonds– Shelf registration

Primary Markets

• Corporate stock– Seasoned equity offering– IPO

• Underwriting structure– Lead underwriter– Underwriting group– Selling group

Secondary Markets

• Exchanges and OTC

• Auction versus Dealer

• Exlcusive dealer

• Call versus continuos markets

• Third and Fourth markets

Brokers and dealers

• Specialist

• Other members– Commission brokers– Floor brokers– Registered traders

Listing requirements

• NYSE– Market cap > 100 m

• NASDAQ (NMS)– Market cap > 10 m

Types of orders

• Market order

• Limit order

• Stop order

Margin trading

• Margin = Equity

• Initial and mainatenance margins

Shortselling

• Speculating on price declines

• Call loan

• Margin requirements

• Up tick requirement