Chapter 3 : How Securities are Traded. “Investments” ( Asia Global Edition )


How Firms Issue Securities 
- Primary Market
- Secondary market
- Initial public offerings (IPOs) : Stocks issued by a formerly privately owned company nay that is going public. ( Selling stock to the public for the first time.)
- In the case of bonds, there are two types of primary market issues, Public offering and a Private placement.
- Public offerings of both stocks and bonds typically are marketed by investment bankers.
- IPO : First, they generate interest among potential investors and provide information about the offering. Second, they provide information to the issuing firm and its underwriters about the price at which they will be able to market the securities.

How Securities Are Traded
- Direct search markets
- Brokered Markets
 > In the primary market, investment bankers who market a firm’s securities to the public act as brokers; they seek investors to purchase securities directly from the issuing corporation.
- Dealer Markets
- Auction Markets
 >  It does not need to search across dealers to find the best price for a good.
- Electronic Communication Networks (ECNs)
- Specialist Markets

Trading Cost
- Full service brokers, Discount brokers.
- Broker commission

Buying on Margin
- Margin = Equity in account / Value of stock



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