3_How Securities are Traded

New issues of a security are offered to public here.

Already existing securities are bought and sold on the exchanges or in the OTC market.

Stocks issued to the public for the first time by a formerly privately owned company.

Investment bankers who help companies issue their securities to the public.

A final and approved registration statement including the price at which the security issue is offered.

Private offering in which shares are sold directly to a small group of institutional investors or wealthy investors.

A market where traders specializing in particular commodities buy and sell assets for their own accounts. The OTC market is an example.

A market where traders in a good meet at one place to buy and sell an asset. The NYSE is an example.

The price at which a dealer is willing to purchase a security.

The price at which a dealer will sell a security.

The difference between a dealer's bid and asked price.

An order specifying a price at which an investor is willing to buy or sell a security.

Order to trade contingent on security price designed to limit losses if prices moves against the trader.

An informal network of brokers and dealers who negotiate sales of securities (not a formal exchange).

A computer-operated trading network offering an alternative to formal stock exchanges or dealer markets for trading securities.

A trader who makes a market in the shares of one or more firms and who maintains a "fair and orderly market" by dealing personally in the stock.

The automated quotation system for the OTC market, showing current bid-asked prices for thousands of stocks.

Secondary markets where already-issued securities are bought and sold by members.

Large transactions in which at least 10,000 shares of stock are bought or sold. Brokers or "block houses" often search directly for other large traders rather than bringing the trade to the stock exchange.

Coordinated buy orders and sell orders of entire portfolios, usually with the aid of computers, often to achieve index arbitrage objectives.

Describes securities purchase with money borrowed from a broker. Current maximum margin is 50%.

The sale of shares of not owned by the investor but borrowed through a broker and later repurchased to replace the loan. Profit is earned if the initial sale is at a higher price than the repurchase price.

Nonpublic knowledge about a corporation possessed by corporate officers, major owners, or other individuals with privileged access to information about a firm.