Chap003HowSecuritiesAreTraded(金融工程-南开大学,

McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-1HowSecuritiesAreTradedChapter3McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-2Primaryvs.SecondarySecuritySalesPrimary-Newissue-Keyfactor:issuerreceivestheproceedsfromthesale.Secondary-Existingownersellstoanotherparty.-Issuingfirmdoesn’treceiveproceedsandisnotdirectlyinvolved.McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-3InvestmentBankingArrangementsUnderwrittenvs.“BestEfforts”-Underwritten:firmcommitmentonproceedstotheissuingfirm.-BestEfforts:nofirmcommitment.Negotiatedvs.CompetitiveBid-Negotiated:issuingfirmnegotiatestermswithinvestmentbanker.-Competitivebid:issuerstructurestheofferingandsecuresbids.McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-4PublicOfferingsPublicofferings:registeredwiththeSECandsaleismadetotheinvestingpublic.-Shelfregistration(Rule415,since1982)InitialPublicOfferings(IPOs)-Evidenceofunderpricing-PerformanceMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-5PrivatePlacementsPrivateplacement:saletoalimitednumberofsophisticatedinvestorsnotrequiringtheprotectionofregistration.Dominatedbyinstitutions.Veryactivemarketfordebtsecurities.Notactiveforstockofferings.McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-6OrganizationofSecondaryMarketsOrganizedexchangesOTCmarketThirdmarketFourthmarketMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-7OrganizedExchangesAuctionmarketswithcentralizedorderflow.Dealershipfunction:canbecompetitiveorassignedbytheexchange(Specialists).Securities:stock,futurescontracts,options,andtoalesserextent,bonds.Examples:NYSE,AMEX,Regionals,CBOE.McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-8OTCMarketDealermarketwithoutcentralizedorderflow.NASDAQ:largestorganizedstockmarketforOTCtrading;informationsystemforindividuals,brokersanddealers.Securities:stocks,bondsandsomederivatives.-MostsecondarybondstransactionsMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-9ThirdMarketTradingoflistedsecuritiesawayfromtheexchange.Institutionalmarket:tofacilitatetradesoflargerblocksofsecurities.InvolvesservicesofdealersandbrokersMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-10FourthMarketInstitutionstradingdirectlywithinstitutionsNomiddlemaninvolvedinthetransactionOrganizedinformationandtradingsystemsECNDevelopmentMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-11InternationalMarketStructuresLondonStockExchange-DealermarketsimilartoNASDAQ-StockExchangeAutomatedQuotation-GreaterAnonymityTokyoStockExchange-Nomarketmakingservice-Sartoriprovidesbookkeepingservice-FeatureafloorandelectronictradingGlobalMarketAlliancesMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-12CostsofTradingCommission:feepaidtobrokerformakingthetransactionSpread:costoftradingwithdealer-Bid:pricedealerwillbuyfromyou-Ask:pricedealerwillselltoyou-Spread:ask-bidCombination:onsometradesbotharepaidMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-13TypesofOrdersInstructionstothebrokersonhowtocompletetheorderMarketLimitStoplossMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-14Usingonlyaportionoftheproceedsforaninvestment.Borrowremainingcomponent.Marginarrangementsdifferforstocksandfutures.MarginTradingMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-15Maximummargin-Currently50%-SetbytheFedMaintenancemargin-MinimumleveltheequitymargincanbeMargincall-CallformoreequityfundsStockMarginTradingMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-16XCorp$7050%InitialMargin40%MaintenanceMargin1000SharesPurchasedInitialPositionStock$70,000Borrowed$35,000Equity$35,000MarginTrading-InitialConditionsMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-17MarginTrading-MaintenanceMarginStockpricefallsto$60pershareNewPositionStock$60,000Borrowed$35,000Equity25,000Margin%=$25,000/$60,000=41.67%McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-18MarginTrading-MarginCallHowfarcanthestockpricefallbeforeamargincall?(1000P-$35,000)*/1000P=40%P=$58.33*1000P-AmountBorrowed=EquityMcGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-19ShortSalesPurpose:toprofitfromadeclineinthepriceofastockorsecurity.MechanicsBorrowstockthroughadealer.Sellitanddepositproceedsandmargininanaccount.Closingouttheposition:buythestockandreturntothepartyfromwhichitwasborrowed.McGraw-Hill/IrwinCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.3-20ShortSale-InitialConditionsZCorp100Shares50%InitialMargin30%MaintenanceMargin$100InitialPriceSaleProceeds$10,000Margin&Equity5,000Sto