4504c4 - Securities Market Financial Markets Chief function...

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Securities Market Financial Markets: Chief function: allocate resources optimally Allocationally efficient Channeling of funds to those who can make the best use of them Operationally efficient Lowest possible prices for transactions services Primary market Borrower issues new securities in exchange for cash Seasoned new issues sale of new common stock of a publicly traded co. that has outstanding shares Initial Public Offering (IPOs) issuer is selling securities for the first time publicly Once the original purchaser sells the security they trade in the secondary market Most new issues trade in the OTC Hot Issue---issue that opens for trading in the secondary market at a premium to the public offering price Free Riding and Withholding Policy: Certain individuals cannot purchase HOT issues at the Public Offering Price Prohibited Individuals: 1. member firms for their own account 2. officers, directors, agents or employees of member firms 3. the immediate family of those listed above 4. any person who acted in a fiduciary capacity in the underwriting capacity 5. officers of banks, insurance cos., & other institutions & employees in a position to influence buying & selling of securities Green Shoe Clause Underwriters may request up to 10% additional shares to cover overselling Sticky Issues---new shares open in the secondary market at or just below the Public Offering Price Stabilizing bids entered by the syndicate manager at or just below the POP Syndicate manager prohibited from entering a bid above the POP Syndicate penalty bid clause 7/9/11
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Investment Banker Specialize in the design and sale of securities in the primary market while operating simultaneously in the secondary market Helps in organizing mergers and acquisitions Provides important advice to their clients during the planning stage proceeding the issuance of new securities Advice is offered in 1 of 2 arrangements with the issuing company: 1. Negotiated bids--most corporate stock and bonds
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This note was uploaded on 07/09/2011 for the course FIN 4504 taught by Professor Banko during the Summer '08 term at University of Florida.

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4504c4 - Securities Market Financial Markets Chief function...

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