3531Week3W11 - 1 Week 3 Part 1 The Stock Market • The primary and secondary stock markets • The New York Stock Exchange • The Toronto Stock

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Unformatted text preview: 1 Week 3 Part 1 The Stock Market • The primary and secondary stock markets • The New York Stock Exchange • The Toronto Stock Exchange and TSX Venture Exchange • Nasdaq • Third and Fourth Markets • Stock Market Information McGraw-Hill Ryerson Limited 2 The Primary Stock Markets • The Primary market is the market where investors purchase newly issued securities. – Initial public offering (IPO): An initial public offer occurs when a company offers stock for sale to the public for the first time. 3 The Secondary Stock Markets • The Secondary market is the market where investors trade previously issued securities. An investor can trade: – Directly with other investors. – Indirectly through a broker who arranges transactions for others. – Directly with a dealer who buys and sells securities from inventory. McGraw-Hill Ryerson Limited 4 The Primary Market for Common Stock • An IPO involves several steps. Company appoints investment banking firm to arrange financing. – Investment banker designs the stock issue and arranges for fixed commitment or best effort underwriting . – Company prepares a prospectus and submits it to s ecurities and exchange commissions for approval. McGraw-Hill Ryerson Limited 5 The Primary Market for Common Stock – Investment banker circulates preliminary prospectus ( red herring ). • Upon obtaining approval, company finalizes prospectus. • Underwriters place announcements ( tombstones ) in newspapers and begin selling shares. McGraw-Hill Ryerson Limited 6 The Secondary Market • The bid price: – The price dealers pay investors. • The ask price: – The price dealers receive from investors. • The difference between the bid and ask prices is called the bid-ask spread , or simply spread . PRACTICE QUESTION Text Page 184: 3 7 McGraw-Hill Ryerson Limited 8 The New York Stock Exchange • The New York Stock Exchange (NYSE), popularly known as the Big Board , celebrated its bicentennial in 1992. • The NYSE has occupied its current building on Wall Street since the turn of the century • The NYSE has 1,366 exchange members. McGraw-Hill Ryerson Limited 9 NYSE-Listed Stocks • In 2003, stocks from about 2,800 companies were listed, with a collective market value of about $15 trillion. • An initial listing fee, as well as annual listing fees, is charged based on the number of shares. • In 2003, the average stock trading volume on the NYSE was just over 1 billion shares a day. McGraw-Hill Ryerson Limited 10 The Toronto Stock Exchange • The Toronto Stock Exchange started its operations in 1861 with 18 securities and 14 member firms. • The initial members paid $250 to purchase a seat at that time. In 1901, the price of a membership rose to $12,000 and trading volume became approximately 1 million shares per year. McGraw-Hill Ryerson Limited 11 The Toronto Stock Exchange • To be listed on the Toronto Stock Exchange, technology companies must have at least one million free shares with total market value of $4...
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This note was uploaded on 05/01/2011 for the course ADMS 3531 taught by Professor Profp during the Winter '10 term at York University.

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3531Week3W11 - 1 Week 3 Part 1 The Stock Market • The primary and secondary stock markets • The New York Stock Exchange • The Toronto Stock

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