Chapter 4 -Securities Markets - Securities Markets Markets...

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ecurities Securities arkets Markets Chapter 4 Charles P. Jones, Investments: Analysis and Management, Tenth Edition, John Wiley & Sons Prepared by G.D. Koppenhaver, Iowa State University 4-1
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The Role of Financial Markets elp firms and governments raise cash ± Help firms and governments raise cash by selling claims against themselves rovide a place where investors can act ± Provide a place where investors can act on their beliefs elp allocate cash to where it is most ± Help allocate cash to where it is most productive elp lower the cost of exchange ± Help lower the cost of exchange 4-2
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Markets in New Securities ew securities are issued in a primary ± New securities are issued in a primary market itial public offerings versus seasoned new ¾ Initial public offerings versus seasoned new issues ± Issue facilitated by investment banker y ¾ Specialists in advice, design, and sales ¾ Intermediaries between issuer and investor 4-3
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Investment Banking lient advice includes type and features ± Client advice includes type and features of security, offer price, and timing of ale sale ± Underwriting services: Risk of selling to vestors assumed from issuer investors assumed from issuer ± Coordinates marketing by helping suer register securities issue issuer register securities, issue prospectus, and sell securities 4-4
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Investment Banking ule 415 (shelf rule) allows certain ± Rule 415 (shelf rule) allows certain issuers to sell new securities over time fter filing a single registration after filing a single registration ¾ Reduces issuance cost private placement means new ± A private placement means new securities are sold directly to investors, bypassing the open market yp g p ¾ Registration not required 4-5
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Secondary Markets arkets where investors trade ± Markets where investors trade previously issued securities uction markets involve bidding in a ± Auction markets involve bidding in a specific physical location rokers represent investors for a fee ¾ Brokers represent investors for a fee ¾ Others trade for their own account egotiated markets consist of ± Negotiated markets consist of decentralized dealer network 4-6
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Stock Exchanges YSE is a secondary auction market in ± NYSE is a secondary, auction market in equity shares ot- r- rofit organization of members ¾ Not for profit organization of members ¾ Listing requirements for traded firms pecialists” assigned to each traded equity ¾ Specialists assigned to each traded equity to make a market in that stock ± AMEX and regional exchanges list smaller firms, have less volume than NYSE 4-7
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NASDAQ etwork of competing dealers trading ± Network of competing dealers trading listed securities utomated quotation system with no ± Automated quotation system with no fixed number of participants
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This note was uploaded on 06/02/2011 for the course FINA 3331 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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Chapter 4 -Securities Markets - Securities Markets Markets...

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