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Dealers and Brokers By Group 2

Dealers and Brokers By Group 2. Brokers. An individual who is paid a commission for executing customer orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission. Types of Brokers. Full-services brokers:

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Dealers and Brokers By Group 2

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  1. Dealers and Brokers By Group 2

  2. Brokers • An individual who is paid a commission for executing customer orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission.

  3. Types of Brokers • Full-services brokers: • It helps you pick investments and devise a financial plan. However, it will charge a higher brokerage fee • Discount brokers: • It charges far lower commissions than full service brokers. But you will get little or no investment advice

  4. Types of Brokers • Floor brokers: • execute orders on the floor of the exchange • Upstairs brokers: • handle retail customers and their orders

  5. Dealers • An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price)

  6. Comparison

  7. Specialists • Specialists make a market in the shares of one or more firms • Specialists can be either a broker or dealer

  8. Functions of the specialists • 4 main functions: • Manage the auction process - to maintain a fair and orderly market • Execute order for floor brokers - to keep the market liquid or to prevent rapid price changes • Serve as catalysts - to enable a transaction to take place • Stabilize price - to ensure that stock trading moves smoothly

  9. Big players • Schwab (e-broker) • Wachovia Securities (The fifth largest full service retail broker dealer) • Spear, Leeds & Kellogg (Specialist)

  10. Schwab • NYSE ticket symbol: SCH • The largest online broker in US • Market share • Schwab 27% • E*trade 12% • Waterhouse 12% • Fidelity 9%

  11. Schwab • 4.2 million out of 8 million clients accounts • and US$296 billion out of US$763 billion in client assets are came from the online market

  12. Schwab • The main core business areas of Schwab are options, fixed income investment, mutual fund, and stocks. • Clients can use the trading tools called StreetSmart ProTM to make these trades.

  13. Schwab • Recent News: • 25 October, 2000 • first storefront branch in Hong Kong's Central business district. • 21 January, 2001 • "Best Internet Brokerage" by Gomez

  14. Wachovia Securities • The 5th largest full service retail broker-dealer in US • 3.4 million of active retail client accounts • retail clients assets of $265 billion

  15. Wachovia Securities Business area: • discount and full-service brokerage • asset management • clearing services

  16. Wachovia Securities Exchange Membership: • New York Stock Exchange • American Stock Exchange • Pacific Stock Exchange • Chicago Stock Exchange • Philadelphia Stock Exchange • NASDAQ

  17. Wachovia Securities Financial health • 8.27% tier-1 capital (min 4%) Source: Wachovia investor midyear update 16 Sep 2002

  18. Wachovia Securities Recent News: • Create new firm with Prudential Financial Inc. • Wachovia 62%, Prudential 38% • Become third largest: $537b client base • 3,500 offices in US

  19. Spear, Leeds & Kellogg (SLK) • One of the 7 specialist in NYSE • Rank No.2 in number of common stocks • Famous stocks handled: • IBM • Boeing • AOL Time Warner • AIG • NTT DoCoMo

  20. Spear, Leeds & Kellogg (SLK) • Acquired by Goldman Sachs in late 2000 • GS paid more than $6 million, very high price Other Business: • Market makers in NASDAQ • Order management system, REDIPlus • Clearing business

  21. Spear, Leeds & Kellogg (SLK) Scandal: • In 1998, NASD fined SLK for $950,000 for delayed reports of trades • In 2003 April, under scrutiny of NYSE • Counterparts probed: • LaBranche • Van Der Moolen • Bear Wagner • FleetBoston (fined $150,000)

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