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Fin220
Chapter 3: Trading Securities
32
Finance
Undergraduate 4
10/01/2008

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Term
Float
Definition
A term for selling new securities
Term
Primary Market
Definition
Where new issues of securities are sold by investment bankers
Term
Secondary Market
Definition
Purchase and sale of previously issued securities
Term
Initial Public Offering (IPO)
Definition
When private companies become public and sell stock for the first time
Term
Seasoned New Issue
Definition
Offered by a company who already has floated equity
Term
Secondary Offering
Definition
Has all the characteristics of a primary market issue but is a secondary market transaction
Term
Public Offering
Definition
Issue of bonds to general public that can be bought/sold on secondary market
Term
Private Placement
Definition
Bond issue sold to a few intitutional investors and held to maturity
Term
Underwriting
Definition
Public offerings of stocks and bonds are marketed via an underwriting by Investment Bankers
Term
Investment Bankers
Definition
Marketers of securities for large investment institutes
Term
Underwriting Syndicate
Definition
A group 0f investment bankers that share responsibility for stock issue
Term
Prospectus
Definition
When statement is approved and finalized, prices are set
Term
Direct Search Market
Definition
Buyers and sellers must seek each other out directly, sporadic participation, low priced non standard goods
Term
Brokered Market
Definition
Sufficient market activity for intermediary brokers to match buyers and sellers
Term
Block Transactions
Definition
Large trades that take place outside of regular exchanges
Term
Dealer Markets
Definition
Specialized trading in markets where a particular asset is traded frequently
Term
Auction Markets
Definition
All transactions occur at one place to bid or offer a good (Stock exchanges)
Term
Bid Price
Definition
The price buyers are willing to pay
Term
Ask Price
Definition
The price sellers are willing to sell for
Term
Stop-loss orders
Definition
Stock is automatically sold if it hits a certain price
Term
Over the Counter (OTC) Markets
Definition
Dealer markets
Term
Electronic Communication Networks (ECNs)
Definition
Private computer networks that directly link buyers to sellers
Term
Specialist (registered traders)
Definition
Each security in a stock exchange is managed by a specialist
Term
Desk Traders
Definition
Make trades for clients only
Term
Street Name
Definition
Broker holds securities registered in the firms own name on behalf of the client
Term
Stock Exchange
Definition
Facility for members to trade securities, only members can trade there
Term
Nasdaq Stock Market
Definition
Contains 3200 firms and devided into two sectors

1. Nasdaq national market
2. Nasdaq smallcap market
Term
American Stock Exchange (AMEX)
Definition
Trades younger and smaller firms than the NYSE
Term
Program Trade
Definition
Purchase or sale of an entire portfolio of stocks
Term
Discretionary Account
Definition
Brokers make all buy and sell decisions on the customers behalf
Term
Bid-asked Spread
Definition
Implicit cost of trading
Term
Short Sale
Definition
Selling first to buy back shares at a lower price later
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