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Ch 3. Part 2. OTHER EXCHANGES. Regional exchanges. stocks may be listed on both NYSE and regional exchange 5 regional exchanges cheaper seat prices. REGIONAL EXCHANGES:. REGIONAL EXCHANGES: Boston Cincinnati Chicago Pacific Philadelphia. REGIONAL EXCHANGES:. For Options

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Ch 3

Ch 3

Part 2

Regional exchanges
Regional exchanges

  • stocks may be listed on both NYSE and regional exchange

  • 5 regional exchanges

  • cheaper seat prices

Regional exchanges1


    • Boston

    • Cincinnati

    • Chicago

    • Pacific

    • Philadelphia

Regional exchanges2

For Options

  • Chicago Board Options Exchange

    • one of the largest

  • For Futures

    • The Chicago Mercantile Exchange

      • offers interest rate, commodities, and index futures contracts

  • Ch 3

    NYSE Amex Equities, formerly known as the American

    Stock Exchange (AMEX).

    • AMEX was a mutual organization owned by its members.

    • Until 1953, it was known as the New York Curb Exchange.

    • On January 17, 2008, NYSE Euronext announced it would acquire the American Stock Exchange for $260 million in stock.

    • On October 1, 2008, NYSE Euronext completed acquisition of the American Stock Exchange.

    • Before the closing of the acquisition, NYSE Euronext announced that the Exchange would be integrated with the Alternext European small-cap exchange and renamed the NYSE Alternext U.S.

    • In March 2009, NYSE Alternext U.S. was changed to NYSE Amex Equities.

    Otc markets
    OTC markets

    • NASDAQ is an OTC market:

      It was created by the National Association of

      Securities Dealers (NASD)

    • It is an American stock Exchange

    • "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations".

    •  It is the 2nd largest stock exchange by market capitalization in the world, after NYSE

    •  As of January 13, 2011, there are 2,872 listings

    •  The NASDAQ has more trading volume than any other electronic stock exchange in the world.

    • ECNs (Electronic communication networks)

    • electronic network of dealers all over the world

    • more than one dealer per stock


    • Not the only OTC system, but the largest

    • over 4000 companies listed

      • mkt. value $2 trillion (2/28/03)

    • leader in daily share volume

    • over 500 dealers

    • listing requirements

    Tokyo stock exchange

    • Has introduced major reforms:

      • introduced CORES (Computer-Assisted Order Routing and Execution System)

      • introduced FORES (Floor Order Routing and Execution System)

      • Saitori System of Trading

      • follows IYATOSE Method at market open similar to a call market

        • Zaraba used where orders are processed continuously

    Toronto stock exchange

    • Uses CATS (Computer-Assisted Trading System)

    • Similar to IYATOSE trading in Tokyo

    Regulation of securities markets


      • The Securities Act of 1933

      • The Securities Exchange Act of 1934

      • The Investment Company Act of 1940

      • The Investment Advisors Act of 1940


    • They perform various activities at the exchange

    • The president, Chairperson and director may be out of the members

    • They are allowed to execute trade by using the facilities provided by the exchange

    Institutional trading
    Institutional trading

    • vs. retail trades

      • institutional trades are larger

      • special execution

      • over 50% of NYSE share volume

    Block trades
    block trades

    • An order/trade submitted for sale or purchase of a large quantity of securities. Also known as "Block Order".

    • large # shares in one stock

    • executed in “upstairs” market

      • other firms directly take other side of trade

    • remainder executed on trading floor or Nasdaq (downstairs)

    Upstairs market
    Upstairs Market

    • “The trading of securities, such as stocks, that occurs within a broker-dealer firm instead of at an exchange”.


    • Between two broker-dealers in the over-the-counter (OTC) market. 

    • In an upstairs market transaction, the broker-dealer typically represents both parties (buyer and seller).

    Program trades
    Program trades

    • large # shares, different stocks

    • Usually consisting of baskets of fifteen stocks or more

    • Computerized trading used by institutional investors

    • Used by mutual funds for asset allocation

    • want

      • low commissions

      • prevent frontrunning

    What is frontrunning
    what is frontrunning?

    “It is the illegal practice of a broker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers”.

    When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage.


    • broker buys ahead of large buy order

      • broker buys first

      • large buy order pushes up price

      • broker’s holdings increase in value

    • result

      • frontrunning starts to push up price, so firm does not get best price

    London stock exchange

    • The Exchange was founded in 1801

    • As of December 2010, the Exchange had a market capitalization of US$3.6 trillion, making it the 4th largest Stock Exchange in the world by this measurement (and the largest in Europe)

    • ending fixed commissions

      • introduced SEAQ

        (Stock Exchange

        Automated Quotations)

      • attracted trading

        in non-UK stock

    Global platform for global institutional investors
    Global platform for global institutional investors


    Local market

    USA Middle East

    Asia Eastern Europe

    Europe UK

    Regional funds

    and retail investors

    US Institutional Investors

    Global institutional investor base

    London stock exchange key statistics

    London Stock Exchange

    London Stock Exchange - key statistics

    • Total companies

    • Domestic: 2,550

    • International: 675

    • Market capitalisation

    • Main Market:

    • UK listed: US$3,570bn

    • International listed: US$4,398bn

    • AIM: US$181bn

    • Turnover value (Jan-Dec 2007)

    • Main Market: US$8,054bn

    • AIM: US$150bn

    Source: London Stock Exchange statistics – December 2007

    Ch 3

    More international equity assets under management

    Equity assets under management by centre.

    In US$ billions

    London has a far bigger international presence and weight. 45% of equity assets under management are invested in international markets.

    New York is a larger but mainly domestic market.

    Source: IPREO 2007

    Ch 3

    The platform of choice for international


    Q1, 2008

    In 2006:

    London Stock Exchange - 367 new companies joined in 2006. NYSE, Nasdaq & Hong Kong Stock Exchange had 332 IPOs in 2006.

    $104bn raised on the London Stock Exchange, $40bn on NYSE, and $29bn on Nasdaq

    In 2007:

    London Stock Exchange - 252 new companies joined the London Stock Exchange, 142 new companies on Nasdaq, 67 on NYSE

    $88bn raised on the London Stock Exchange.

    Source: London Stock Exchange and WFE – December 2007

    Comparing uk and us as listing locations
    Comparing UK and US as listing locations


    • London and New York exchanges offer optimal profile

    • London has world’s highest reputation for regulation and governance

    • Principles-based (UK) versus rule-based (US) approach

    • London has the most liquid equity market in Europe

    • London has the world’s most successful growth market (AIM)

    • London Stock Exchange offers world’s only location for liquid and transparent trading of GDRs

    • London combines simple, flexible disclosure with high reputation of regulators

    • US disclosure regime more prescriptive, exacerbated by need to protect against opportunistic securities litigation

    • London offers rapid turnaround by regulators, and limits the time regulators can take to approve offer documents

    • US: SEC review periods longer, with no certainty on turnaround time

    • AIM offers potentially shorter transaction timetable




    Cost-benefit analysis favours London

    Comparison of international listing locations
    Comparison of international listing locations


    Least suitable

    Strategic financings from global companies will converge on London or New York

    An intelligent approach to regulation
    An intelligent approach to regulation

    Balance Competing Needs



    Minimise bureaucracy

    and cost




    Principles based -

    “comply or explain”

    Ranked first in corporate governance standards by GMI, Deminor and Davis Global Advisors


    Rules based -

    prescriptive and expensive

    Increased cost of compliance and risk premium (Financial Executive & Korn Ferry Surveys)

    Corporate governance overall rating by country

    Most advanced regulation and governance

    Corporate governance: overall rating by country

    Source: Governance Metrics International, 2007

    Principles-based regulation: high standard, pragmatic application

    No equivalent to Sarbanes-Oxley section 404

    An intelligent approach.

    The world s capital market
    The world’s capital market

    • London Listing

    • Access to global capital

    • Lower cost

    • Lower risk

    • Faster to market

    • Intelligent regulation

    • New York Listing

    • Higher cost

    • Slower to market

    • Higher risk

    • Sarbanes Oxley

    • Section 404

    • Class actions

    Ch 3


    Stock Market Investment

    Ch 3

    • Households earn income.

    • Income is payments received by a household by selling or renting productive resources.

    • Households usually spend some of their income and save some of it.

    • Saving is income not spent on consumption or taxes.

    • Some households use their savings to purchase stocks.

    • Internationally stock trading is done by household but in Pakistan?

    The stock market and stock exchanges
    The Stock Market and Stock Exchanges

    • Stock market—a network of exchanges and brokers

      • Exchange—a physical marketplace (NYSE, AMEX, regional exchanges)

      • Broker—individual whose job is to assist people in buying and selling securities

        • Work for brokerage firms

        • Members of stock exchange

    Trading the role of brokers
    Trading—The Role of Brokers

    • What brokers do…

      • An investor will open an account with a broker and place trades via telephone or online

      • Local broker will forward order to floor broker on trading floor of exchange

      • Floor broker trades on the floor of the exchange

        • Each stock is traded in a particular spot on the exchange floor using an auction-like process

          • Trading is supervised by a specialist

            • Specialists make markets in designated securities

      • Confirmation of trade is forwarded to local broker and investor

    Information about the stock market
    Information about “The Stock” Market

    Most newspaper and Online stock tables provide the following information:

    • Price (of a share)

    • Volume (number of shares sold)

    • Dividend (profits paid to stockholders)

    • Price-earnings ratio

    Online stock trading model
    Online Stock Trading Model













    Online trading in pakistan
    Online Trading in Pakistan

    • Not really online as it is partial online

      Following steps are involved on Broker end:

    • Maintain Direct connection with iKATS (Internet Karachi Automated Transaction System)

      • Backbone software of Karachi Stock Exchange controlled by SECP (Securities & Exchange Commission of Pakistan)

    • Maintain link account with Central Depository Company, controlled by SECP (Securities & Exchange Commission of Pakistan) to control online transfer of shares

    Ch 3

    • Transparent account Maintenance of clients

    • Maintain manual cash handling system

    • Secure interface to the clients

    • Efficient Support System

      Steps required on Client End:

    • As cash involvement is handled off line, so bank account is normally used

    • Send money from bank account with account opening form to the chosen broker

    Ch 3

    Online stock trading model1
    Online Stock Trading Model account with him











    Ch 3

    Ch 3

    After opening an account, you need to login through this interface

    Note the secure server presence

    Ch 3

    • The first & Basic thing is Research. All brokerage houses do conduct their own research and place them online for their users.

    • Like in AKD Securities, they make two reports, one showing the last week’s trends in general and predicting the trend for next week and other daily report, which takes one sector and explores it. Sample is something like this

    Ch 3

    Other major important resources for the research are conduct their own research and place them online for their users.

    • Contacts

    • Hard to Believe but players don’t tell everything ONLINE

    • Market Watch

    • Different TV Channels like Business Plus & Indus Plus (Few Programs are really Excellent), Geo (TeziMandi)

    • Different Newspapers & Magazines like Business Recorder, Dawn, Pakistan & Gulf Economics

    • Different Websites, Business Recorder, KSE Official Website

    • KSE Official Website has lots of material

    Ch 3

    Where as Business Recorder has lots of Organized Information conduct their own research and place them online for their users.

    Ch 3

    How to Trade? conduct their own research and place them online for their users.

    • Best option is to read NOTICES everyday before start trading because they may have something which effects you today

    Ch 3

    Trading Section conduct their own research and place them online for their users.

    • You need to place order

    Ch 3

    Ch 3