Английский язык. Практический курс для решения бизнес-задач
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In 1971, the Exchange was incorporated as a not-for-profit organization. In 1972, the members voted to replace the Board of Governors with a twenty-five member Board of Directors, comprised of a Chairman and CEO, twelve representatives of the public, and twelve representatives from the securities industry.
Subject to the approval of the Board, the Chairman may appoint a President, who would serve as a director. Additionally, at the Board’s discretion, they may elect an Executive Vice-Chairman, who would also serve as a director.
The Auction Market. The NYSE is an agency auction market. It means that trading at the NYSE takes place by open bids and offers by Exchange members, acting as agents for institutions or individual investors. Buy and sell orders meet directly on the trading floor, and prices are determined by the interplay of supply and demand.
At the NYSE, each listed stock is assigned to a single post where the specialist manages the auction process. NYSE members bring all orders for NYSE-listed stocks to the Exchange floor either electronically or by a floor broker. As a result, the flow of buy and sell orders for each stock is funneled to a single location.
This heavy stream of diverse orders is one of the great strengths of the Exchange since it provides liquidity. When an investor’s transaction is completed, the best price will have been exposed to a wide range of would-be buyers and sellers .
Benefits of NYSE. Listing on the NYSE affords companies great credibility because they must meet initial listing requirements and also comply annually with maintenance requirements. For example, to remain listed, NYSE companies must keep their price above $1 and their market capitalization above $50 million.
Furthermore, investors trading on the NYSE benefit from a set of minimum protections. Among several of the requirements that the NYSE has enacted, the following two are especially significant:
1. Companies must get shareholder approval for any equity incentive plan. In the past, companies were allowed to sidestep shareholder approval if an equity incentive plan met certain criteria; this, however, prevented shareholders from knowing how many stock options were available for future grant.
2. A majority of the members of the board of directors must be independent. Furthermore, the compensation committee must be entirely composed of independent directors, and the audit committee must include at least one person who possesses
How a Stock is Bought and Sold. This chart is a detailed explanation of how a stock is traded. It illustrates how one transaction looks from three different perspectives – the buyer, seller and the stock market professionals who execute the trade.
Market Regulation. Every transaction made at the NYSE is under continuous surveillance during the trading day. The NYSE is the most active self-regulator in the securities industry. Regulations protect the integrity of the marketplace, member firms, and, most importantly, the customer.
StockWatch, a computer system that searches for unusual trading patterns, alerts NYSE regulators to possible insider trading abuses or other prohibited trading practices. NYSE’s other regulatory activities include the supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on broker’s sales practices, and the continuous monitoring of specialist operations.
NASDAQ (an Electronic Exchange)
The NASDAQ is sometimes called
«screen-based» because buyers and sellers are connected only by computers over a telecommunications network. Market makers, also known as dealers, carry their own inventory of stock. They stand ready to buy and sell NASDAQ stocks, and they are required to post their bid and ask prices. Although the NYSE has a far greater total market capitalization, NASDAQ has surpassed the NYSE in the number of both listed companies and shares traded.NASDAQ has listing and governance requirements that are similar but slightly less stringent than those of the NYSE. For example, a stock must maintain a price of $1 and the value of the public float must be at least $1.1 million. If a company does not maintain these requirements, it can be delisted to one of the OTC markets.
NASDAQ Small Cap
NASDAQ has a separate «tier» for small capitalization companies; the average market cap of the 685 companies listed in this tier at the end of 2003 was about $60. This is an excellent exchange for investors interested in smaller companies because the NASDAQ Small Cap also has listing and governance requirements.
Electronic Communication Networks (ECNs)
ECNs are part of a class of exchange called alternative trading systems (ATS). ECNs trade NASDAQ-listed stocks, but they connect buyers and sellers directly. Because they allow for direct connection, ECNs bypass the market makers. You can think of them as an alternative means to trade stocks listed on the NASDAQ and, increasingly, other exchanges as well (such as the NYSE or foreign exchanges).
There are several innovative and entrepreneurial ECNs, and they are generally good for customers because they pose a competitive threat to traditional exchanges, and therefore push down transaction costs. Currently, ECNs do not really serve individual investors; they are mostly of interest to institutional investors.
Over-the-Counter (OTC)
OTC refers to markets other than the organized exchanges described above. OTC markets generally list small companies, and often these companies have «fallen off» to the OTC market because they were de-listed from NASDAQ. Some individual investors will not even consider buying OTC stocks due to the extra risks involved. On the other hand, some strong companies trade on the OTC. In fact, several strong companies have deliberately switched to OTC markets to avoid the administrative burden and costly fees that accompany regulatory laws such as the Sarbanes-Oxley Act.
There are two OTC markets:
Over-the-Counter Bulletin Board (OTCBB) is an electronic community of market makers. Companies that fall off the NASDAQ often end up here. On the OTCBB, there are no «quantitative minimums» (no minimum annual sales or assets required to list).
Companies that list on the pink sheets (i.e. less than 300 shareholders) are not required to register with the SEC. Liquidity is often minimal. Also, keep in mind that these companies are not required to submit quarterly 10Qs.