Market Place

Plan

1. What is stock exchange market (general description). The purpose of participants, the difference between Stock Exchange and the Exchange.
2. The biggest Stock Exchange in the world.
3. Membership of the Stock Exchange (how to become a member).
4. The trading on the OTC market.
5. Placing and order on the Stock Exchange. (Brokerage firm, RR, telephone clerk, floor broker).
6. The categories of floor brokers. The task of stock Specialists.
7. Block trading.

Market Place

1. The stock market is the financial center of any country. It reflects any change in the economy, it has its fingers on the pulse of the entire world.

Taken in its broadest sense, the stock  market is also a control centre. It is the market place, where business and governments come to raise money so that they can continue and expand their operations.

In the narrowest sense, a stock market is a place where stocks are traded –that is bought and sold.

The Exchange is non-profit corporation run by a board of directors. The US Securities and Exchange Commission administers the Federal securities laws and supervises all securities exchanges in the country.  The Exchange merely is the marketplace where the public, acting through member brokers, can  buy and sell at prices set by supply and demand.

2. The biggest and most important stock market in the world is the New York Stock Exchange, which is as well the oldest in the US. It was founded in 1792. NYCE is located at 11 Wall Street in New York City.

3. It cost money to become an Exchange member. Before you are permitted to buy a seat you must pass a test that strictly scrutinizes your knowledge of the security industry  as well as a check of experience and character.

Apart from the NYSE and the AMEX there also “regional” exchange in the US, of which the best known are the Pacific , Midwest, Boston and Philadelphia Exchanges .

4. There is one more market place in which the volume of common stock trading begins to approach that of the NYSE. It is trading of “OTC” that is not on any organized exchange. Most securities other than common stocks are traded over-the-counter. The money market is the market in which all sorts of short-term debt obligations are traded daily in tremendous quantities.

As there is no physical trading floor, over-the-counter trading is accomplished through vast telephone  and other electronic networks.  Dealers thousands of miles apart who are complete strangers  execute traders in the thousands or even millions of dollars based on thirty seconds of telephone conversation and the knowledge that each is a securities dealer registered with the National Association of Securities Dealers, the industry self-regulatory organization that supervises OTC trading.

5. When an individual wants to place an order to buy or sell shares, he contacts a brokerage firm that is a member of the Exchange. A registered representative or RR will take his order. RR is a trained professional who has passed an examination on many matters including rules and procedures.

The individual’s order is relayed to a telephone clerk on the floor on the Exchange and by the telephone clerk to the floor broker. The floor broker actually executes the order on the trading floor.

The trading floor is dotted with locations (trading posts). The floor broker proceeds to the post where particular stock is traded and finds out which broker have orders from clients to buy or sell stock and at what prices.

6. There are 5 categories of market professionals active on the trading floor:

Commission Brokers (floor brokers) work for member firms for a commission, by using their experience, judgment, skills.

Independent Floor Brokers are individual entrepreneurs who act for a variety of clients. They execute orders for other floor brokers or other firms whose exchange members are not on the floor.

Registered Competitive Market Makers have specific obligations to trade for their own or their firm’s accounts by making a bid or offer that will narrow the existing quote spread or improve the depth of an existing quote.

Competitive Traders trade for their own accounts, under strict designed to assure that their activities contribute to market liquidity.

Stock Specialists maintain continuity in the price of special stocks. They also act as a broker, executing public orders and keeping a record of limit orders to be executed if the price reaches a specified level.

7. Over the last years, there has been a rapid growth in block trading by large brokerage firms and other firms. If an institution wants to sell a large block of stock, block traders will conduct an expert and rapid search for possible buyers or will fill the gap by buying shares itself, taking the risk of owning the shares and being able to dispose of them subsequently at a profit.

These firms are fulfilling a stabilizing functions.