ofSecuritiesMarkets(资产定价-上海交大,蔡明超).pptx
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1、Lec 4 Organization and Functioning of Securities Markets饭吃饭吃8分,获利分,获利8成成1Chapter 4 Organization and Functioning of Securities Marketsa)describe the characteristics of a well-functioning securities market;b)competitive bids,negotiated sales,and private placements for issuing bonds;c)compare and contr
2、ast the secondary markets for U.S.government/municipal bondswith the secondary markets for corporate bonds;d)primary and secondary capital markets,explain how secondary support primary,e)distinguish between call and continuous markets;f)compare and contrast the structural differences among national
3、stock exchanges,regional stock exchanges,and the over-the-counter(OTC)markets;2Chapter 4 Organization and Functioning of Securities Marketsg)compare and contrast major characteristics of exchange markets,includingexchange membership,types of orders,and market makers;h)process of selling a stock shor
4、t and discuss an investors motivation for short;i)discuss the technical points affecting short sales;j)describe the process of buying a stock on margin;k)compute the rate of return on a margin transaction;l)define maintenance margin and determine the stock price of a margin call;m)discuss major effe
5、cts of the institutionalization of securities markets.3LOS a:Describe the characteristics of a well-functioning securities market.1.Provide timely and accurate information on the price and volume of past transactions and on the supply of and demand for current goods and services.2.Provide liquidity.
6、Liquidity requires marketability,price continuity,and depth.3.Internal efficiency,which means getting the lowest possible transactions cost.4.Informational or external efficiency,which means prices rapidly adjust to new information so that the prevailing market price reflects all available informati
7、on regarding the asset.4LOS b:Distinguish between competitive bids,negotiated sales,and private placements for issuing bondsGovernment bond issues are sold at public auction by the Federal Reserve.Small purchasers can submit noncompetitive bids where they are guaranteed securities at the average of
8、the accepted competitive bids.Government securities include:bills 1 to 12 months;notes 2 to 10 years,and bonds 10 years and up.5LOS b:Distinguish between competitive bids,negotiated sales,and private placements for issuing bondsMunicipal bond issues are brought to market by a local government unit t
9、hrough:Competitive bidding with the underwriter.This means the underwriter will help originate the issue,bear the price risk,and sell the securities for a competitively determined fee.A negotiated underwriting.Here the underwriter helps originate the issue,bear the price risk,and distribute the issu
10、e for a negotiated fee.A private placement where the governmental unit sells the issue directly to the investor without the help of an underwriter.6LOS c:the secondary markets for U.S.government/municpal bonds with the corporate bonds.secondary market for treasuries is through the 35 major treasury
11、dealers.Agency securities and municipal bonds are traded through the major banks and investment firms.The secondary corporate bond markets are the New York Stock Exchange(NYSE),the American Stock Exchange(AMEX)and over-the-counter(OTC).You should know that the bulk of all bond trading takes place in
12、 the OTC market.7LOS d:Distinguish between primary and secondary capital markets and explain how secondary support primary.Primary capital markets relate to the sale of new issues of bonds and securities by government units,municipalities,or firms to obtain new capital.Secondary financial markets ar
13、e where securities trade after their initial offering.Secondary markets are important because they give investors liquidity.Liquidity enables investors to sell quickly.The greater the liquidity securities have,the more willing investors are to buy securities.Liquid secondary markets also provide inv
14、estors with continuous information about the market price of their securities.The better the secondary market,the easier it is for firms to raise external capital.8Service provided by underwriterUnderwriters sell the bonds to investorsOriginationRisk-bearingDistribution9The Underwriting FunctionThe
15、investment banker purchases the entire issue from the issuer and resells the security to the investing public.The firm charges a commission for providing this service.For municipal bonds,the underwriting function is performed by both investment banking firms and commercial banks 10Corporate Bond and
16、 Stock IssuesNew issues are divided into two groups1.Seasoned new issues-new shares offered by firms that already have stock outstanding2.Initial public offerings(IPOs)-a firm selling its common stock to the public for the first time11Introduction of Rule 415Allows firms to register securities and s
17、ell them piecemeal over the next two yearsReferred to as shelf registrationsGreat flexibilityReduces registration fees and expensesAllows requesting competitive bids from several investment banking firmsMostly used for bond sales12Private Placements and Rule 144AFirms sells to a small group of insti
18、tutional investors without extensive registrationLower issuing costs than public offering13LOS e:Call Versus Continuous MarketsCall markets trade individual stocks at specified times to gather all orders and determine a single price to satisfy the most ordersUsed for opening prices on NYSE if orders
19、 build up overnight or after trading is suspendedIn a continuous market,trades occur at any time the market is open,The price is set by either the auction process or by dealer bid-ask quotes.14Secondary Financial MarketsProvides liquidity to investors who acquire securities in the primary marketResu
20、lts in lower required returns than if issuers had to compensate for lower liquidityHelps determine market pricing for new issues15Secondary Bond MarketSecondary market for U.S.government and municipal bondsU.S.government bonds traded by bond dealersBanks and investment firms make up municipal market
21、 makersSecondary corporate bond marketTraded through an OTC market16Secondary Equity Markets1.Major national stock exchangesNew York,American,Tokyo,and London stock exchanges2.Regional stock exchangesChicago,San Francisco,Boston,Osaka,Nagoya,Dublin,Cincinnati3.Over-the-counter(OTC)market Stocks not
22、listed on organized exchange17LOS f:the structural differences among national stock exchanges,regional stock exchanges,and(OTC)markets.The major national exchanges trade shares for a large number of prestigious firms that are geographically dispersed to a diverse clientele.Regional exchanges serve s
23、maller local firms within various countries.The listing requirements for regional exchanges are usually much less stringent than large national exchanges.The over-the-counter(OTC)market includes the trading in all securities not listed on one of the registered exchanges.If any registered dealer is w
24、illing to make a market in a security,it can trade in the OTC market.The OTC market is a negotiated market where investors negotiate directly with the dealers.18LOS g:market structure characteristics1.When buyers and sellers submit their bid and ask prices to a central location and transactions are
25、matched by brokers who do not have a position in the stock,you have a system called a pure auction market.An auction market is a price-driven market.2.When the buyer and seller submit their orders to dealers,who either buy the stock for their own inventory or sell the stock from their own inventory,
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