securities operations n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
SECURITIES OPERATIONS PowerPoint Presentation
Download Presentation
SECURITIES OPERATIONS

Loading in 2 Seconds...

play fullscreen
1 / 9

SECURITIES OPERATIONS - PowerPoint PPT Presentation


  • 101 Views
  • Uploaded on

SECURITIES OPERATIONS. CHAPTER 24. INVESTMENT BANKING SERVICES . Four Basic Services Origination Registering securities with SEC Underwriting (Earning the spread) Full Best Efforts Advising Timing Pricing Terms Distribution Public or private placement

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'SECURITIES OPERATIONS' - mihaly


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
securities operations

SECURITIES OPERATIONS

CHAPTER 24

Dr David P Echevarria

investment banking services
INVESTMENT BANKING SERVICES
  • Four Basic Services
    • Origination
      • Registering securities with SEC
    • Underwriting (Earning the spread)
      • Full
      • Best Efforts
    • Advising
      • Timing
      • Pricing
      • Terms
    • Distribution
      • Public or private placement
      • Function of managing underwriters
      • Function of the selling syndicate. (Earn the concession)

Dr David P Echevarria

functions of security markets
FUNCTIONS OF SECURITY MARKETS
  • Price Discovery; arriving at fair prices
    • A security represents a promise of future payment(s)
    • Security values depend on expectations of future payment amounts
      • Timing and magnitude
      • Certainty (riskiness)
    • The "Market"; the Bid-Ask Spread
      • Fair offer price; lowest price of the well informed trader to sell
      • Fair bid price; highest price of the well informed trader to buy
      • In an ideal market, all trades occur at fair prices

Dr David P Echevarria

functions of security markets1
FUNCTIONS OF SECURITY MARKETS
  • Provide Liquidity
    • Buying and selling quickly without loss
    • A function of volume or institutional arrangements
    • Transactions should not result in a price effect
  • Minimize Trading Costs:
    • Essence of security markets is trading
      • Traders agree on terms of transaction
      • Efficient execution of the transaction
      • Exchange of securities and moneys
    • Restricting access to market; authorized traders only
    • Rules of conduct for traders
    • Standardized transactions (i.e., round lots, blocks, odd lots)
    • Provide for conflict resolution. (American Arbitration Association, 1991)

Dr David P Echevarria

security markets organization
SECURITY MARKETS ORGANIZATION
  • Organized Exchanges
    • NYSE, AMEX, Tokyo (TSE), London (LSE), etc
    • Restricted participation, trading rules strictly specified
    • Traders (members) hold seats. (Specialists, Floor traders, Odd Lot traders)
    • Sale of seats must be approved (Pre-qualifications must be met.)
    • Transactions tend to be centralized; advantageous for price discovery
  • Over-The-Counter (OTC)
    • NASDAQ, Government Securities, Money Markets, Foreign Exchange
    • Transactions tend to be decentralized; price discovery less efficient
    • Liquidity more expensive in terms of bid-ask spreads

Dr David P Echevarria

security markets organization1
SECURITY MARKETS ORGANIZATION
  • Dealer Markets vs. Auction Markets
    • Dealer market;
      • Market is made by dealers who quote [trade] prices (LSE is one)
      • A double auction; simultaneous offers to buy and sell
    • Auction market; orders of traders are directly matched
      • A single auction; offer to buy or sell but not both
    • Some markets contain both; i.e., NYSE
      • Members may act as dealers (specialists) or
      • Brokers (floor traders)

Dr David P Echevarria

government regulation of securities industry
GOVERNMENT REGULATION OF SECURITIES INDUSTRY
  • Regulatory Bodies
    • Securities Exchange Commission (SEC); administer laws
    • US Treasury; oversight of the Government securities market
    • Federal Reserve; set margin requirements
  • Federal Legislation
    • Securities Act of 1934: must register new securities (exceptions)
    • Securities Exchange Act of 1934; Establishes the SEC
    • Investment Advisors Act of 1940
    • Securities Investor Protection Corporation Act of 1970
    • Securities Acts Amendments of 1975
    • Commodities Exchange Act of 1936
    • Commodity Futures Trading Commission Act of 1974
    • Financial Services Modernization Act of 1999

Dr David P Echevarria

globalization of the securities business
GLOBALIZATION OF THE SECURITIES BUSINESS
  • Some Statistics:
    • 1982, $249 Billion in international bonds, by 1991 $ 1,650 Billion
    • 1970, 7% of US Government Securities held by foreign investors, 2013, 42%
    • For China, 2013 ~ 7.6%, Japan 2103 ~ 6.7%
  • International Firms: "passing the book" to achieve round-the-clock trading
  • Lack of Uniform Regulations and Oversight an Impediment
    • Lack of confidence in foreign securities
    • Difficulties in buying/selling foreign securities
    • International Organization of Securities Commissions (IOSC) 1984

Dr David P Echevarria

homework questions
HOMEWORK QUESTIONS
  • Security markets provide three important services to investors. What are they?
  • How do dealer markets differ from auction markets? Does one offer an advantage over the other to traders?
  • What three basic services do Investment Bankers provide to issuers of securities?
  • What does "passing the book" mean and what is its significance?

Dr David P Echevarria