2024/3/12ofSecuritiesMarkets中文4證券市場組織與運(yùn)作圖Chapter4

OrganizationandFunctioningofSecuritiesMarketsQuestionstobeanswered:Whatisthepurposeandfunctionofamarket?Whatarethecharacteristicsthatdeterminethequalityofamarket?Whatisthedifferencebetweenaprimaryandsecondarycapitalmarketandhowdothesemarketssupporteachother?2Chapter4

OrganizationandFunctioningofSecuritiesMarketsWhatarethenationalexchangesandhowarethemajorsecuritymarketsbecominglinked(whatismeantby“passingthebook”)?Whataretheregionalstockexchangesandtheover-the-counter(OTC)market?Whatarethealternativemarket-makingarrangementsavailableontheexchangesandtheOCTmarket?3Chapter4

OrganizationandFunctioningofSecuritiesMarketsWhatarethemajortypesofordersavailabletoinvestorsandmarketmakers?WhatarethemajorfunctionsofaspecialistontheNYSEandhowdoesthespecialistdifferfromthecentralmarketmakeronotherexchanges?Whatarethemajorfactorsthathavecausedthesignificantchangesinmarketsaroundtheworldinthepast10to15years?4Chapter4

OrganizationandFunctioningofSecuritiesMarketsWhataresomeofthemajorchangesinworldcapitalmarketsexpectedoverthenextdecade?5Whatisamarket?BringsbuyersandsellerstogethertoaidinthetransferofgoodsandservicesDoesnotrequireaphysicallocationBothbuyersandsellersbenefitfromthemarket6CharacteristicsofaGoodMarketAvailabilityofpasttransactioninformationmustbetimelyandaccurateLiquiditymarketabilitypricecontinuitydepthLowTransactioncostsRapidadjustmentofpricestonewinformation7OrganizationoftheSecuritiesMarketPrimarymarketsMarketwherenewsecuritiesaresoldandfundsgotoissuingunit

SecondarymarketsMarketwhereoutstandingsecuritiesareboughtandsoldbyinvestors.Theissuingunitdoesnotreceiveanyfundsinasecondarymarkettransaction8GovernmentBondIssues1.TreasuryBills–negotiable,non-interestbearingsecuritieswithoriginalmaturitiesofoneyearorless2.TreasuryNotes–originalmaturitiesof2to10years3.TreasuryBonds–originalmaturitiesofmorethan10years9MunicipalBondIssuesSoldbythreemethodsCompetitivebidNegotiationPrivateplacementUnderwriterssellthebondstoinvestorsOriginationRisk-bearingDistribution10TheUnderwritingFunctionTheinvestmentbankerpurchasestheentireissuefromtheissuerandresellsthesecuritytotheinvestingpublic.Thefirmchargesacommissionforprovidingthisservice.Formunicipalbonds,theunderwritingfunctionisperformedbybothinvestmentbankingfirmsandcommercialbanks

11CorporateBondandStockIssuesNewissuesaredividedintotwogroupsSeasonednewissues-newsharesofferedbyfirmsthatalreadyhavestockoutstandingInitialpublicofferings(IPOs)-afirmsellingitscommonstocktothepublicforthefirsttime12UnderwritingRelationshipswithInvestmentBankers1.NegotiatedMostcommonFullservicesofunderwriter2.CompetitivebidsCorporationspecifiessecuritiesofferedLowercostsReducedservicesofunderwriter3.Best-effortsInvestmentbankeractsasbroker13IntroductionofRule415AllowsfirmstoregistersecuritiesandsellthempiecemealoverthenexttwoyearsReferredtoasshelfregistrationsGreatflexibilityReducesregistrationfeesandexpensesAllowsrequestingcompetitivebidsfromseveralinvestmentbankingfirmsMostlyusedforbondsales14PrivatePlacementsandRule144AFirmssellstoasmallgroupofinstitutionalinvestorswithoutextensiveregistrationLowerissuingcoststhanpublicoffering15WhySecondaryFinancialMarketsAreImportantProvidesliquiditytoinvestorswhoacquiresecuritiesintheprimarymarketResultsinlowerrequiredreturnsthanifissuershadtocompensateforlowerliquidityHelpsdeterminemarketpricingfornewissues16SecondaryBondMarketSecondarymarketforU.S.governmentandmunicipalbondsU.S.governmentbondstradedbybonddealersBanksandinvestmentfirmsmakeupmunicipalmarketmakersSecondarycorporatebondmarketTradedthroughanOTCmarket17FinancialFuturesBondfuturesaretradedinChicagoBoardofTrade(CBOT)ChicagoMercantileExchange(CME)18SecondaryEquityMarkets1.MajornationalstockexchangesNewYork,American,Tokyo,andLondonstockexchanges2.RegionalstockexchangesChicago,SanFrancisco,Boston,Osaka,Nagoya,Dublin,Cincinnati3.Over-the-counter(OTC)marketStocksnotlistedonorganizedexchange19TradingSystemsPureauctionmarketBuyersandsellersarematchedbyabrokeratacentrallocationPrice-drivenmarketDealermarketDealersprovideliquiditybybuyingandsellingsharesDealersmaycompeteagainstotherdealers20CallVersusContinuousMarketsCallmarketstradeindividualstocksatspecifiedtimestogatherallordersanddetermineasinglepricetosatisfythemostordersUsedforopeningpricesonNYSEifordersbuildupovernightoraftertradingissuspendedInacontinuousmarket,tradesoccuratanytimethemarketisopen21NationalStockExchangesLargenumberoflistedsecuritiesPrestigeoffirmslistedWidegeographicdispersionoflistedfirmsDiverseclienteleofbuyersandsellers22NewYorkStockExchange(NYSE)LargestorganizedsecuritiesmarketinUnitedStatesEstablishedin1817,butdatesbacktothe1792ButtonwoodAgreementby24brokersOver3,000companieswithsecuritieslistedTotalmarketvalueover$13trillion23AmericanStockExchange(AMEX)StartedbyagroupwhotradedunlistedstocksatthecornerofWallandHanoverStreetsinNewYorkastheOutdoorCurbMarketEmphasisonforeignsecuritiesDoesn’ttradestockslistedonNYSEMergedwiththeNASDAQIN1998althoughtheycontinuedtooperateasseparatemarketsWarrantstradedonAMEXyearsbeforeNYSElistedany24TokyoStockExchange(TSE)LargestoftheeightexchangesinJapanDominatestheJapanesemarketEstablishedin1878andreorganizedin1943,1947,and1949Price-drivesystemDomesticandforeignstockslistedApproximately1700stockslistedwithatotalmarketvalueof$2.4trillionMostactive150stocksaretradedonfloor,othersbycomputer25LondonStockExchange(LSE)LargestsecuritiesmarketintheUnitedKingdomTradeslistedandunlistedsecuritiesMorethan2,600companieslistedLargestlistingofforeignstocksonanyexchangeTotalmarketvalueofmorethan$561billionPricingsystembycompetingdealersviacomputerssimilartoNASDAQsysteminU.S.26TrendsNewexchangesinemergingeconomiessuchasRussia,Poland,China,Hungary,Peru,SriLankaConsolidationofexistingexchangesindevelopedcountriesGlobaltwenty-four-hourmarket–madepossiblebyadvancesintechnology27RecentConsolidationsIn1995,Germany’sthreelargestexchangesmergedintotheoneinFrankfurtNASDmergedwithAMEXPhiladelphiaStockExchangemergedwithNASD/AMEXCBOEmergedwithPacificExchangeTheAmsterdam,BrusselsandParisexchangesformedanallianceTheStockholm,Copenhagen,andOsloexchangesformedanalliancecalledtheNordicCountryAlliance28TheGlobalTwenty-fourHourMarketInvestmentfirms“passthebook”aroundtheworldtomaintainnearlycontinuoustradingbyutilizingmarketsatTokyo,London,andNewYorkTHETRADINGDAY LocalTime ESTTSE 09:00-11:00 23:00-01:00 13:00-15:00 03:00-05:00LSE 08:15-16:15 02:15-10:15NYSE 09:30-16:00 09:30-16:0029RegionalExchangesStocksnotlistedonaformalexchangeListingrequirementsvaryListedstocksAllowbrokersthatarenotmembersofanationalexchangeaccesstosecuritiesRegionalExchangesinUnitedStatesChicago,Boston,Cincinnati,Pacific,Philadelphia30Over-the-Counter(OTC)MarketNotaformalorganizationLargestsegmentoftheU.S.secondarymarketUnlistedstocksandlistedstocks(thirdmarket)LenientrequirementsforlistingonOTC5,000issuesactivelytradedonNASDAQNMS(NationalAssociationofSecuritiesDealersAutomatedQuotationsNationalMarketSystem)

1,000issuesonNASDAQapartfromNMS1,000issuesnotonNASDAQ31OperationoftheOTCAnystockmaybetradedaslongasithasawillingmarketmakertoactadealerOTCisanegotiatedmarket32TheNASDAQSystemAutomatedelectronicquotationsystemDealersmayelecttomakemarketsinstocksAlldealerquotesareavailableimmediatelyThreelevelsofquotationsprovidedLevel1providesasinglemedianrepresentativequoteforthestocksonNASDAQLevel2showsquotesbyallmarketmakersLevel3isforOTCmarketmakerstochangetheirquotesshown33ListingRequirementsforNASDAQTwolistsNationalMarketSystem(NMS)RegularNASDAQFoursetsofrequirementsInitiallisting-leaststringentAutomaticNMSinclusion-uptotheminuteAlternative1forprofitablecompanieswithlimitedassetsAlternative2forlargebutlessprofitable34ThirdMarketOTCtradingofshareslistedonanexchangeMostlywellknownstocksGM,IBM,AT&T,XeroxCompeteswithtradesonexchangeMaybeopenwhenexchangeisclosedortradingsuspended35FourthMarketDirecttradingofsecuritiesbetweentwopartieswithnobrokerintermediaryUsuallybothpartiesareinstitutionsCansavetransactioncostsNodataareavailableregardingitsspecificsizeandgrowth36DetailedAnalysisof

ExchangeMarketsExchangeMembershipMajorTypesofOrdersExchangeMarketMakers37ExchangeMembershipSpecialistCommissionbrokersEmployeesofamemberfirmwhobuyorsellforthecustomersofthefirmFloorbrokersIndependentmembersofanexchangewhoactasbrokerforothermembersRegisteredtradersUsetheirmembershiptobuyandsellfortheirownaccounts38MajorTypesofOrdersMarketordersBuyorsellatthebestcurrentpriceProvidesimmediateliquidityLimitordersOrderspecifiesthebuyorsellpriceTimespecificationsforordermayvaryInstantaneous-“fillorkill”,partofaday,afullday,severaldays,aweek,amonth,orgooduntilcanceled(GTC)39MajorTypesofOrdersShortsalesSelloverpricedstockthatyoudon’townandpurchaseitbacklater(atalowerprice)Borrowthestockfromanotherinvestor(throughyourbroker)CanonlybemadeonanupticktradeMustpayanydividendstolenderMarginrequirementsapply40MajorTypesofOrdersSpecialOrdersStoplossConditionalordertosellstockifitdropstoagivenpriceDoesnotguaranteepriceyouwillgetuponsaleMarketdisruptionscancancelsuchordersStopbuyorderInvestorwhosoldshortmaywanttolimitlossifstockincreasesinprice41MarginTransactionsOnanytypeorder,insteadofpaying100%cash,borrowaportionofthetransaction,usingthestockascollateralInterestrateonmargincreditmaybebelowprimerateRegulationslimitproportionborrowedMarginrequirementsarefrom50%upChangesinpriceaffectinvestor’sequity42MarginTransactionsBuy200sharesat$50=$10,000positionBorrow50%,investmentof$5,000Ifpriceincreasesto$60,positionValueis$12,000Less-$5,000borrowedLeaves$7,000equityfora$7,000/$12,000=58%equityposition43MarginTransactionsBuy200sharesat$50=$10,000positionBorrow50%,investmentof$5,000Ifpricedecreasesto$40,positionValueis$8,000Less-$5,000borrowedLeaves$3,000equityfora$3,000/$8,000=37.5%equityposition44MarginTransactionsInitialmarginrequirementatleast50%.SetupbytheFed.MaintenancemarginRequirementproportionofequitytostockProtectsbrokerifstockpricedeclinesMinimumrequirementis25%MargincallonundermarginedaccounttomeetmarginrequirementIfmargincallnotmet,stockwillbesoldtopayofftheloan45ExchangeMarketMakers

U.S.MarketsSpecialistisexchangememberassignedtohandleparticularstocksHastworoles:BrokertomatchbuyersandsellersDealertomaintainfairandorderlymarketSpecialisthastwoincomesourcesBrokercommission,withoutriskDealertradingincomefromprofit,withrisk46ExchangeMarketMakers

TokyoStockExchange(TSE)RegularmembersSeveralemployeesallowedontradingfloorTradingclerksforcustomersaccountsBuyandsellforownaccountsSaitorimemberHundredsofemployeesontradingfloorIntermediaryclerksBrokersamongmembersMaintainlimitorders47TSEMembershipMembershiprequirescorporatelicenseFourtypesoflicenseareavailableandmaybecombined1.Tradesecuritiesasadealer2.Tradeasabroker3.Underwritenewsecuritiesonsecondaryofferings4.HandleretaildistributionofsecuritiesCapitalrequirementsvarybylicense48LondonStockExchangeBrokerstradeonbehalfoftheircustomersJobbersbuyandsellasprincipalsMembershipbasedonexperienceandcompetenceMembershipfee1%ofgrossrevenues49ChangesintheSecuritiesMarketsSince1965,thegrowthoftradingbylargefinancialinstitutionshashadmanyeffectsNegotiated(competitive)commissionratesInfluenceonblocktradesImpactonstockpricevolatilityDevelopmentofNationalMarketSystem(NMS)50NegotiatedCommissionRatesNYSEminimumcommissionscheduleprohibitedpricecuttingsince1792NopricebreakforlargeordersInitialreactionwas“give-ups”paidtoadesignatedfirm-softdollarspaidformarketresearchThirdmarketcompetedwithflexiblecommissionsandgrewFostereddevelopmentofthefourthmarket51NegotiatedCommissionRatesIn1970SECbeganphasinginnegotiatedcommissionsCommissionrateshavefallenDiscountbrokeragefirmscompeteopenlyManybrokerageandresearchfirmshavemergedorliquidated52TheImpactofBlockTradesNumberandsizeofblocktradeshasincreasedThisstrainstheexchangespecialistsystemCapital-10,000shareorlargerblocksCommitment-largeriskwithlargeblocksContacts-Rule113prohibiteddirectcontacttoofferblockstoanotherinstitution53TheImpactofBlockTradesBlockhousesareinvestmentfirmsthathelpinstitutionslocateotherinstitutionsinterestedinbuyingorsellingblocksofstockAgoodblockhousehasThecapitalrequiredtopositionalargeblockThewillingnesstocommitthiscapitaltoablocktransaction,andContactsamonginstitutions54InstitutionsandStockPriceVolatilityEmpiricalstudieshavenotsupportedthetheorythatinstitutionaltradingincreasespricevolatilityWheretradingisdominatedbyinstitutions,activelyinvolvedinstitutionsmayprovideliquidityforoneanotherandnoninstitutionalinvestors55NationalMarketSystems(NMS)NMShasbeenadvocatedbyfinancialinstitutionstoprovidegreaterefficiency,competition,andlowercostoftransactionsNMSisexpectedtohave:1.Centralizedreportingofalltransactions2.Centralizedquotationsystem3.Centralizedlimitorderbook(CLOB)4.Competitionamongallqualifiedmarketmakers561.CentralizedReportingShouldrecordalltransactionsofastock,regardlessoflocationNYSEstartedacentraltapeinJune1975coveringallNYSEstockstradedonotherexchangesandOTC572.CentralizedQuotationSystemListquotesforastockfromallmarketmakersonthenationalexchanges,regionalexchanges,andOTCBrokerswouldcompletetradesonthemarketwiththebestquoteIntermarketTradingSystem(ITS)developedbyAmerican,Boston,Chicago,NewYork,Pacific,andPhiladelphiaStockExchangesandNASD583.CentralizedLimitOrderBookShouldcontainalllimitordersfromallmarketsShouldbevisibletoalltradersAllmarketmakersandtraderscouldfillordersonitTechnologyexists,butNYSEspecialistsfillmostlimitordersandopposeCLOBbecausetheydonotwanttosharethislucrativebusiness594.CompetitionAmongAllQualifiedMarketMakers(Rule390)MarketmakerscompeteonOTCmarketCompetitionreducesbid-askspreadNYSEopposescompetitionandarguesthatcentralauctionresultsinbestmarketandexecutionNYSERule390requiresmemberstoobtainpermissionoftheexchangebeforetradingalistedstockofftheexchange,forcingtransactionstotheexchangetocreateacentralmarket60NewTradingSystemsDailytradingvolumehasincreasedfrom5millionsharestooverabillionsharesNYSEroutinelyhandlesdayswithvolumeoverabillionsharesTechnologyhasallowedthemarketprocesstokeeppace61SuperDOTElectronicorder-routingsystemMemberfirmstransmitmarketandlimitordersinNYSEsecuritiestotradingpostsormemberfirm’sboothReportofexecutionreturnedelectronically85%ofNYSEmarketordersenterthroughSuperDOTsystem62DisplayBookElectronicworkstationthatkeepstrackofalllimitordersandincomingmarketorders,includingincomingSuperDotlimitorders63OpeningAutomatedReportService(OARS)Pre-openingmarketordersforSuperDotsystemOARSautomaticallyandcontinuouslypairsbuyandsellordersPresentsimbalancetothespecialistpriortotheopeningofastockHelpsdetermineopeningpriceandpotentialneedforpreopeningcallmarket64MarketOrderProcessingSuperDot’spostopeningmarketordersystemisdesignedtoacceptmemberfirms’postopeningmarketordersupto3millionsharesRapidexecutionandreportingofmarketordersIn2000,ordersexecutedandreportedin15-16secondsonaverage65LimitOrderProcessingElectronicallyfilesorderstobeexecutedwhenandifaspecificpriceisreachedUpdatestheSpecialist’sDisplayBookGood-until-ca