CHAPTER 3. Stocks. What are we going to learn in this chapter ?. Stocks. What does a stock represent ? What does it mean i f you are a stockholder ? How do you gain wealth when you own a stock ? Common Stock s. Stocks. I ncome S tocks B lue - chip S tocks G rowth S tocks
Koray decides to invest in the stock market.
Berna decides to sell 300 shares of Fenerbahce stock to help pay for a new car, eventhoughshe has a richhusband.
Koray has been thinking of investing in the Fenerbahce. He calls his broker, who is a member of the Borsa Istanbul, to get a quote on Fenerbahce.
Berna checks theprices at Borsa Istanbul online.
Koray’s broker and Berna find out the current quote and price for Fenerbahce from an electronic data system that continually updates information directly from the Floor of the Borsa Istanbul.
Taking into account what he already knows about Fenerbahce, Koray instructs his broker to purchase 300 shares of Fenerbahce at the current market price.
Berna logs into her online brokerage account, which is linked to a brokerage firm that is a member of the Borsa Istanbul, and places an order to sell her 300 shares at the current market price.
Both orders are sent electronically to the Borsa Istanbul Trading Floor.
A Designated Market Maker (DMM) uses enhanced technology to bring together buyers and sellers, improve prices and serve as a point of accountability.
Borsa Istanbultrading engine automatically executes any market or limit order that is marketable against the exchange quote up to 1 million shares. This is called auto-execution.
Both orders are represented as auction market orders in order to have the opportunity for price improvement. The DMM oversees all orders to make sure the transactions are executed fairly and in an orderly manner.
After the transaction is executed, notices are sent to the firms originating the orders and to the consolidated tape so that a written record is made of every transaction.
The transaction is reported by computers and appears on the consolidated tape displays across the country and around the world
The transaction is processed electronically, crediting Koray’s brokerage firm and debiting the account of Berna’s brokerage firm. Koray’s broker calls him and tells him at what price he bought 300 shares of XYZ. In a couple of days, Koray receives a written confirmation.
Berna receives confirmation from her brokerage firm electronically on her computer within seconds. These confirmations describe the tradeanditsdetails.
Koray settles his account within three business days after the transaction by submitting payment to his brokerage firm for the 300 shares of Fenerbahce, plus any applicable commissions.
Berna’s trade is also settled in three business days. Her account will be credited with the proceeds of the sale of stock, minus any applicable commissions.