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Primary Market
New issues of a security are offered to public here.
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Secondary Market
Already existing securities are bought and sold on the exchanges or in the OTC market.
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Initial Public Offerings (IPOs)
Stocks issued to the public for the first time by a formerly privately owned company.
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Underwriters
Investment bankers who help companies issue their securities to the public.
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Prospectus
A final and approved registration statement including the price at which the security issue is offered.
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Private Placement
Private offering in which shares are sold directly to a small group of institutional investors or wealthy investors.
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Dealer Markets
A market where traders specializing in particular commodities buy and sell assets for their own accounts. The OTC market is an example.
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Auction Markets
A market where traders in a good meet at one place to buy and sell an asset. The NYSE is an example.
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Bid Price
The price at which a dealer is willing to purchase a security.
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Asked Price
The price at which a dealer will sell a security.
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Bid-Ask Spread
The difference between a dealer's bid and asked price.
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Limit Order
An order specifying a price at which an investor is willing to buy or sell a security.
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Stop Orders
Order to trade contingent on security price designed to limit losses if prices moves against the trader.
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over-the-counter (OTC) market
An informal network of brokers and dealers who negotiate sales of securities (not a formal exchange).
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electronic communications networks (ECNs)
A computer-operated trading network offering an alternative to formal stock exchanges or dealer markets for trading securities.
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Specialist
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.
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NASDAQ
The automated quotation system for the OTC market, showing current bid-asked prices for thousands of stocks.
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Stock Exchanges
Secondary markets where already-issued securities are bought and sold by members.
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Block Transactions
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.
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Program Trading
Coordinated buy orders and sell orders of entire portfolios, usually with the aid of computers, often to achieve index arbitrage objectives.
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Margin
Describes securities purchase with money borrowed from a broker. Current maximum margin is 50%.
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Short Sale
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.
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Inside Information
Nonpublic knowledge about a corporation possessed by corporate officers, major owners, or other individuals with privileged access to information about a firm.
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