Security Markets: Markets that allow buyers and sellers of securities to make financial transactions.Types of Securities Markets-Money Market; The market where short-term debt securities are bought and sold.-Capital Market:The market where long-term securities, such as stocks and bonds, are bought and sold; classified as primary or secondary.-Securities and Exchange Commission (SEC):Federal agency that regulates the securities markets.The Primary Market-Primary Market: The market in which new issues of securities are sold to investors.-Initial Public Offering (IPO):The first public sale of a company’s stock.-Public Offering:Securities offered for sale to public investors.-Rights offering;Shares are offered to existing shareholders on a pro rata basis.-Private placement:Securities sold directly to select groups of private investors-Going Public:IPO ProcessoUnderwriting:Promoting the stock and facilitating the sale of the company’s shares.oProspectus:Registration statement describing the issue and the issuer.oQuiet period:Is the time period after prospectus is filed when company must restrict what is said about the company.oRed Herring:Preliminary prospectus available during the waiting period.oRoad show:Series of presentations to potential investors.-The Investment Banker’s RoleoInvestment Banker: Financial intermediary that specializes in assisting companies in issuing new securities and advising firms with regard to major financial transactions.oFor IPOs’ their main role is underwriting.Underwriting: Purchases the security at agreed-upon price and bears risk of selling it to the public.oFor large security issues, forms an underwriting syndicate.Underwriting Syndicate: Group formed to share the financial risk of underwriting.Selling Group:Other brokerage firms that help the underwriting syndicate sell the issue to the public.oCompensation typically in the form of a discount on the sale price of the securities.Types of Securities Markets-The Secondary MarketoSecondary market (aftermarket): The market in which securities are traded after they have been issued.Role:Provide liquidity to security purchasersProvides continuous pricing mechanismMajor segments:
National Securities Exchanges:Markets in which the buyers and sellers of listed securities come together to execute trades.Over-the-counter (OTC) Market: Involves trading in smaller, unlisted securities.Securities Markets-Broker Markets and Dealer MarketsoBroker Market: Consists of national and regional securities exchanges. Trades are executed when a buyer and a seller are brought together by a broker and the trade takesplace directly between the buyer and seller.oDealer Market:Made up of the Nasdaq OMX and OTC trading venues. Trades are executed with a dealer (market maker) in the middle. Seller sell to a market maker at a stated price. The market maker then offers the securities to a buyer.