Lecture03 Markets and Trading

Lecture03 Markets and Trading - Markets and Trading Tyler...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Markets and Trading Tyler R. Henry 1 FINA 4310 Outline Contents 1 Market Types 1 1.1 Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 ECNs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 Order Types 4 2.1 Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.3 Stop-Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 Trading Costs 7 4 Margin Trading 8 4.1 Long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.2 Short . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1 Market Types Types of Markets Primary Market : the first time a security trades is when it is first issued, which occurs in the primary market. Otherwise knows as the New Issue market. This includes: Initial public offerings (IPOs) First time a security is issued to the public. Seasoned Equity Offerings (SEOs) Additional offering of equity from an already publicly traded company Private placements Secondary Market : after a security’s initial issuance, continued trading in that security oc- curs on the secondary market. This includes stock exchanges, over-the-counter (OTC) markets, and electronic networks (ECNs). 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Secondary Market The secondary market is where trading of already issued securities occurs. There are several organizational forms for secondary markets: Organized exchanges NYSE, Amex, regional exchanges, some bonds Over-the-counter markets (OTC) Nasdaq, bond markets Third market Trading of exchange-listed securities in OTC markets Fourth market: Electronic communication networks (ECNs) 1.1 Exchanges Exchanges Exchanges are auction-based markets, where trading takes place at a physical lo- cation . Some features of exchanges include: Centralized order flow Prices determined from interaction of buyers and sellers One dealer (the Specialist) Many types of securities are exchange traded stocks, options, futures, some (but not many) bonds Some exchanges: NYSE, Amex, regional exchanges, CBOE, CBOT 1.2 OTC Over-the-Counter Markets OTC markets are dealer-based markets, where trading takes place over computer networks. There is no physical location for an OTC market. Some properties: Dispersed order flow Many dealers ("market makers") NASDAQ: largest OTC market ( 3,200 listed firms) Nasdaq Global Market 2
Background image of page 2
Nasdaq Capital Market (small-cap firms) Lower volume securities OTC Bulletin Board Pink sheets from NASD Securities traded OTC: stocks, most bonds, some derivatives
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

Lecture03 Markets and Trading - Markets and Trading Tyler...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online