10-Security Markets

10-Security Markets - S ECURITY MARKETS 3.1-3.3 Market...

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SECURITY MARKETS 3.1-3.3
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Market Types Direct Search Market Dealer Market Brokered Market Auction Market
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3 Secondary Markets Secondary Markets The market in which securities already issued are traded Buyers and sellers are both investors
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4 Order Types Market buy: buy at best going price Market sell: sell at best going price When price does this: Sell Stop-loss (Stop-sell) Limit sell Buy Limit Buy Stop Buy
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5 Trading on OTC Market Investor places an order with broker. Broker tries to locate the dealer offering the best deal. Trades are negotiated through dealers who maintain an inventory of securities. Nasdaq initially just a computer quotation system for dealers.
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Trading on ECNs Brokers that have an affiliation with an ECN have computer access and can enter orders. Brokers can make terminals available to individual traders. Limit orders are entered in a limit order book Limit orders provide liquidity The ability to transact quickly at a fair price Eliminates the need for a dealer – the middle man. Keeps trade anonymous.
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Trading on ECNs 2006:Two largest ECNs bought by NYSE and Nasdaq NYSE bought Archipelagio Now called NYSE ARCA Nasdaq bought Instinet
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Trading on Exchanges Investor places an order with broker. Broker can either Send order to exchange electronically Send larger orders to floor brokers who “work” the order Floor broker takes order to specialist desk
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Trading on Exchanges: Specialist Desk 1) Maintains a limit order book. Record of limit sells (sell if price goes above a threshold)
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10-Security Markets - S ECURITY MARKETS 3.1-3.3 Market...

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