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27 Cards in this Set
- Front
- Back
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Origination
Underwriting Selling |
Three main functions of investment banks
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Public Offering
Private Placement Prospectus |
Origination
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“Carrying the risk”
Best efforts Shelf registration Private placement Rights offerings |
Underwriting
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Syndicate
Tombstone Ad Aftermarket |
Selling
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The costs of issuing stocks and bonds
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Flotation costs
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Designed to meet needs of issuers/purchases
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Securities
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Commercial paper
Mergers and acquisitions Manage investment funds (e.g., company pension funds) |
Things investment banks do
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This act was designed to prevent fraud
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Securities Act of 1933
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This act restricts commercial banks from underwriting securities
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Glass-Steagall Act
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NYSE is an example of what?
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Organized exchange
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Floor brokers
Registered traders Designated market makers |
Structure of the NYSE
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Companies need to meet listing requirements, pay fees
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True that
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Bid price: offered by buyer
Ask: requested by seller Spread: a narrow difference between them implies more liquidity |
Security transactions
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To use some of your money (equity) and some borrowed funds to purchase a security
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Buying on margin
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Investor’s equity position
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Margin
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Minimum percentage of the purchase price that the investor must pay from his/her funds
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Margin requirement
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equity/market value
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Margin
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(price x # shares - $ borrowed)/
price x # shares |
Margin equation
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Front running
Negative obligation Maintaining high spreads |
Ethical issues in market making
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Liquidity (breadth and depth)
Quick, accurate trade execution Reasonable listing requirements Low costs |
Four characteristics of a “good” market:
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Type of broker
Size of trade, security price Liquidity of securities traded Ethics |
Affects on commission
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Buy shares directly from the firm
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Direct investing
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Used to track overall market and sector performance for stocks, bonds, and other investments
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Security Market Indexes
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Dow Jones Industrial Average
Based on price Standard & Poor’s (S&P) 500 Based on market value |
Well-known stock market indexes
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Liquidity
Currency differences Regulations, tax laws |
Reasons investing overseas can be difficult
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can be a corporate officer, investment banker, major shareholder
blue-collar workers, too (e.g., printing press operators) |
Possible inside traders (hold non-public information)
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Regulation FD
Churning of accounts Professional designations (CFA®, CFPTM) |
Keeping the stock market honest
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