Stock Exchange

Examples of Stock Exchange in the following topics:

• NYSE

  • The New York Stock Exchange is the world's largest stock exchange by market capitalization at $14.242 trillion as of December 2011.
  • The New York Stock Exchange, commonly referred to as the NYSE, is a stock exchange, or a secondary market.
  • The NYSE is by far the world's largest stock exchange by market capitalization of its listed companies at $14.242 trillion as of December 2011, and most of the largest US companies are listed on the NYSE.
  • To be listed on the New York Stock Exchange, a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years.
  • They must also disclose certain information to the exchange, providing a measure of transparency that prevents insider manipulation of the stock prices.

• Secondary Market Organizations

  • The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies.
  • Exchanges such as the New York Stock Exchange, Nasdaq, and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges.
  • Over-the-counter (OTC) or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities, or derivatives directly between two parties.
  • It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges.
  • OTC stocks are not usually listed nor traded on any stock exchanges, although exchange listed stocks can be traded OTC on the third market.

• NASDAQ

  • The NASDAQ Stock Market, also known simply as the NASDAQ, is an American stock exchange.
  • "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations. " It is one of the largest stock exchanges in the world along with the New York Stock Exchange.
  • The New York Stock Exchange conducts its trading in person.
  • When the NASDAQ stock exchange began trading on February 8, 1971, it was the world's first electronic stock market.
  • NASDAQ is the second-largest stock exchange market in the world, as of 2012.

• Purchasing New Shares

  • New shares may be purchased over the same exchange mechanisms that previous stock was acquired.
  • A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities.
  • Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events, including the payment of income and dividends.
  • A stock exchange is often the most important component of a stock market.
  • Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks.

• Answers to Chapter 5 Questions

  • Brokers, investment bankers, and organized exchanges.
  • For example, the New York Stock Exchange is an organized exchange, while bond dealers buy and sell government and corporate bonds.
  • The Dow Jones Average is an average of the top, blue-chip stocks on the New York Stock Exchange.
  • Some stocks rise while other stocks fall.
  • A stock market crash occurs when stock prices reach a peak and quickly plummet.

• Preferred Stock

  • Preferred stock usually carries no voting rights, but may carry a dividend, have priority over common stock upon liquidation and/or have other benefits.
  • In other words, in the case of liquidation or bankruptcy, preferred stock will have claim to assets before common stock, but after corporate bonds or other debt instruments.
  • Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.
  • Some examples are prior preferred stock (highest priority), preference preferred stock, convertible preferred stock (exchangeable for common stock), cumulative preferred stock, exchangeable preferred stock, participating preferred stock, putable preferred stock, monthly income preferred stock, and non-cumulative preferred stock.
  • Preferred Stocks are considered a hybrid security with properties of both stocks and bonds, but are subordinate to bonds when it comes to rights of claim to company assets.

• Common Stock

  • Common stock is a form of ownership and equity, different from preferred stock, that still earns rights of ownership for its shareholders.
  • "Common stock" is used primarily in the United States.
  • It is called "common" to distinguish it from preferred stock.
  • If both types of stock exist, common stock holders cannot be paid dividends until all preferred stock dividends (including payments in arrears) are paid in full.
  • Stocks can be bought and sold on exchanges, like the New York Stock Exchange shown above.

• Stocks

  • They can achieve these goals by selling shares in the company to the general public, through a sale on a stock exchange.
  • The desire of stockholders to trade their shares has led to the establishment of stock exchanges, organizations which provide marketplaces for trading shares and other derivatives and financial products.
  • Today, stock traders are usually represented by a stockbroker who buys and sells shares of a wide range of companies on such exchanges.
  • A company may list its shares on an exchange by meeting and maintaining the listing requirements of a particular stock exchange.
  • In the United States, through the intermarket trading system, stocks listed on one exchange can often also be traded on other participating exchanges, including electronic communication networks (ECNs), such as Archipelago or Instinet.

• Common and Preferred Stock

  • Firms may raise capital by receiving funds from investors in exchange for equity stakes in the form of common and preferred stock.
  • Equity financing occurs when ownership stakes in a particular firm are exchanged for financial capital from investors.
  • Convertible preferred stock are preferred issues which holders can exchange for a predetermined number of the company's common-stock shares.
  • This exchange may occur at any time the investor chooses, regardless of the market price of the common stock.
  • It is a one-way deal, and an individual cannot convert the common stock back to preferred stock, if they have already exchanged their preferred stock with the company.

• Convertible Stock

  • This type of stock has an embedded option that allows it to be converted into a specified number of shares of common stock at a predetermined price; usually at a premium over the stock's market price.
  • Unlike common stock, preferred shares usually have no voting rights.
  • Preferred stock is reported in the stockholder's equity section as the number of shares outstanding, multiplied by the stock's market price.
  • The result is divided between the value of the shares that fall under "common stock - par value" and the excess value over par is reported as "common stock - additional paid-in-capital".
  • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.