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Law Outlines Securities Regulation Outlines

Securities Markets Outline

Updated Securities Markets Notes

Securities Regulation Outlines

Securities Regulation

Approximately 385 pages


The following is a more accessible plain text extract of the PDF sample above, taken from our Securities Regulation Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Securities Markets

  1. Markets and Investors

    1. The Structure of the Trading Markets

      1. Securities not listed on an exchange are a part of the over-the-counter market

      2. Exchanges

        • Can be either National or Regional

          • National: NYSE is the largest U.S. equity market followed by the Nasdaq

            • BUT approximately 60% of the orders for NYSE stocks are executed on regional exchanges or Electronic Communications Networks (ECNs) of which are outside of the exchange

          • Regional: There are six regional exchanges

        • Exchanges are Self-Regulated

      3. Over-the-Counter Market

        • Securities not listed on an exchange are referred to as over-the-counter securities

        • The core of the over-the-counter market is the "market-maker"

          • A broker who does not own the security the investor requests can purchase the security from a market-maker

          • The market-maker is an individual who maintains an inventory in the traded security

        • FINRA operates an electronic filing bulletin board (the OTCBB) for non-Nasdaq over-the-counter stocks

          • Price quotes are available

        • Where a stock is not listed on the OTCBB, the stock is traded in a paper-base market called the "Pink Sheet Market"

      4. How Exchanges Function (The Order Process)

        • Market Order: Where the customer instructs his broker to purchase or sell a security at the best available market price OR

        • Limit Order: Where the customer instructs his broker to purchase the security at a particular price.

        • The broker will first try to match the order with that of another customer in the firm

          • If not, the order will be routed to a Floor Broker who represents buyers and sellers in the crowd.

          • If the Floor Broker cannot fulfill the order, he will invoke the services of a Specialist, who can trade for his own account

            • The Specialist intervenes in order to smooth imbalances between the supply and demand for a particular security.

            • The NYSE rules require specialists to address short-term imbalances between buy and sell orders by using their own capital or inventory to fill gaps that might arise.

            • An alternative function of the Specialist is to maintain a limit order book in which unfulfilled orders are recorded and later filled by the specialist as market conditions permit.

            • Specialists make their money because of the spread between the buy price and the selling price

        • BUT Today, much of the matching of buyers and sellers is done by computers

      5. Block Trading: Trades of 10,000 or more shares customarily occurring directly between institutional investors without the use of brokers

      6. Bond Markets

        • Bond markets are almost totally dealer markets.

        • Bond dealers are linked by computers, and most of the liquidity of the bond markets is provided by a few of the trading desks of large investment banking firms.

        • Bond markets are almost exclusively an institutional investor medium.

    2. Globalization

      1. There is a major trend towards the globalization of securities markets

    3. Institutionalization

      1. Fifty years ago, individuals held 90% of U.S. equities.

      2. As of 2005, institutional investors held 61.2% of total U.S....

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