V. STOCKS

F. Stock Markets

1. New York Stock Exchange – contains traditional (physical) trading and online trading, operates in the U.S. and Europe NYSE, New York Stock Exchange > About Us

2. NASDAQ – totally electronic market with no trading floor NASDAQ Stock Market - Stock Quotes - Stock Exchange News - NASDAQ.com

3. Regional Stock Exchanges – there are six regional exchanges listed with the Securities and Exchange Commission, including the Boston Stock Exchange, the Chicago Stock Exchange, the National Stock Exchange, the Philadelphia Stock Exchange, the Pacific Stock Exchange and the CBOE Stock ExchangeRead more: http://www.finweb.com/investing/regional-stock-exchanges.html#ixzz2fjNAdjQH

4. Over the Counter (OTC) – “Pinksheets” and NASD Bulletin Board – Bulletin Board for registered stocks that do not meet exchange listing requirements, Pinksheets are unregistered – generally small and new companies with small market volume Why Do Stock Exchanges Matter?

F. Stock Markets (Continued)

4. Each market has its own listing requirements:

F. Stock Markets (Continued)

5. Physical Trading – trading floora. Bid – the price a potential buyer is willing to pay

for a securityb. Ask – the price that a seller wants to receive for

his or her securitiesc. Spread – the difference between bid and askd. Liquidity – how “easy” it is to buy or sell a

security – depends upon average number of shares traded per day, an indicator of liquidity is the bid/ask spread

F. Stock Markets (Continued)

F. Stock Markets (Continued)

6. Electronic Market Tradinga. No physical location – trading distributed over a

telecommunications networkb. Stocks are offered for purchase and/or sale by

market makers – market makers post buy and sell prices for guaranteed lots of shares, purchasing or selling on behalf of their clients when that price is met

c. Stocks can be listed for purchase or sale on several different markets

F. Stock Markets (Continued)

F. Stock Markets (Continued)

7. Electronic Communications Networks (ECNs)a. Stocks listed directly by buyers and sellersb. Reduces cost, but generally limited to

institutional shareholders (with sufficient numbers of shares to trade)

G. The Value of a Stock

1. Pricing depends upon supply and demand2. Return on Investment

a. Price appreciation (capital gain) or depreciation (capital loss) is generally the primary component of stock gains or losses

b. Return also includes dividendsi. Dividends are declared by corporate boards of

directors, and paid quarterly – payable to holders of the stock as of the declaration date

ii. Ex-Dividend – the period between the declaration and the payment date – shares purchased when a stock is ex-dividend do not have a right to receive dividend payments