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FinancialMarketsChap15 - Finance Chapter 15 KEY POINTS p...

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Finance Chapter 15 KEY POINTS p. 278a 1) Secondary markets help the issuer of securities to track their values and required returns 2) Secondary markets benefit investors by providing liquidity p. 278b 1) An organized exchange is a regulated market in a specific geographical location for the exchange of securities 2) A large volume of trade also occurs on a market with no fixed location and a large volume of geographically dispersed traders p. 279 1) The call method of trading is when orders are batched together for execution at the same price. At certain times of the day, a market maker will hold an auction to determine the market clearing price of the security. 2) In a continuous market, prices are determined throughout the day as buyers and sellers submit orders 3) Some markets conduct the day’s initial trades with a call method and most other trades in a continuous way p. 280 1) A market can be perfect, in the theoretical sense, only if it meets many conditions regarding number of participants (many small participants), flow of information (free and instant), freedom from regulation, and freedom from costs that hinder trading
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