american stock exchange

1. AMERICAN STOCK
EXCHANGE PROJECT

2. AMERICAN STOCK
EXCHANGE
NYSE MKT LLC, formerly known as
the American Stock Exchange (AMEX),
is an American stock exchange situated
in New York City, New York. AMEX was
previously a mutual organization, owned
by its members. Until 1953, it was known
as the New York Curb Exchange.

3. New York Stock Exchange (NYSE)
 The New York Stock Exchange (NYSE),
sometimes known as the "Big Board", is an
American stock exchange located at 11 Wall
Street, Lower Manhattan, New York City, New
York.
 It is by far the world's largest stock
exchange by market capitalization of its listed
companies at US$19.69 trillion as of May 2015.
 The average daily trading value was
approximately US$169 billion in 2013.

4. HISTORY
 It is founded in March 8, 1817; 198 years ago.
 The NYSE acquires its first traded securities On May
17, 1792. Twenty four brokers signed the
Buttonwood Agreement which set a floor
commission rate charged to clients and bound the
signers to give preference to the other signers in
securities sales.
 The earliest securities traded were mostly
governmental securities such as War Bonds from the
Revolutionary War and First Bank of the United
States stock, although Bank of New York stock was a
non-governmental security traded in the early days.

5. Continued…
 The American Stock Exchange merged with the New York
Stock Exchange (NYSE Euronext) on October 1, 2008. Post-
merger, the Amex equities business was branded "NYSE
Alternext US". As part of the re-branding exercise, NYSE
Alternext US was re-branded as NYSE Amex Equities.
 On December 1, 2008, the Curb Exchange building at 86
Trinity Place was closed, and the Amex Equities trading floor
was moved to the NYSE Trading floor at 11 Wall Street.
 In March 2009, NYSE Alternext U.S. was changed to NYSE
Amex Equities. On May 10, 2012, NYSE Amex Equities
changed its name to NYSE MKT LLC.
 It is the largest stock exchange. In ranking it stands on number
1.

6. Operations
 Operated by NYSE EURO NEXT.
 NYSE is an auction-based market.

7. Trading
 The New York Stock Exchange (sometimes referred to as "the Big
Board") provides a means for buyers and sellers to trade shares of
stock in companies registered for public trading.
 The NYSE is open for trading Monday through Friday from
9:30 am – 4:00 pm ET.
 The NYSE trades in a continuous auction format, where traders
can execute stock transactions on behalf of investors.
 It’s an open outcry auction market.
 As of January 24, 2007, all NYSE stocks can be traded via its
electronic hybrid market (except for a small group of very high-
priced stocks). Customers can now send orders for immediate
electronic execution or route orders to the floor for trade in the
auction market.

8. NYSE Specialist
 Specialists are dealers or market makers assigned by the
NYSE to conduct the auction process and maintain an orderly
market on one and more designated stocks.
 Specialists may act as both a broker (agent) and a dealer
(principal).
 Broker (agent)
 It has 7 specialist firms.
 In their role as a broker, specialists represent customer orders
in their assigned stock, which arrive at their post
electronically.
 Dealer (principal)
 As a dealer or principal, specialists buy and sell shares in their
assigned stocks for their own accounts, as necessary to
maintain their orderly market. Specialists must always give
preference to public orders over trading.

9. Major corporations listing on the NYSE
include:
 Bank of America
 Ford Motor Co
 Sprint Corp
 General Electric Co
 Twitter Inc.
 Pfizer Inc.

10. Third Market OTC
 OTC (over-the-counter) of NYSE is NASDAQ.
 In 1972, NASDAQ stood for National Association of Securities Dealers
Automated Quotations.
 NASDAQ was founded in 1971 by the National Association of Securities
Dealers (NASD) with over 2500 OTC securities, which divested itself of
NASDAQ in a series of sales in 2000 and 2001.
 In 1994, NASDAQ made history and went beyond NYSE in annual share
volume.
 In 1998, NASD and American Stock Exchange (AMEX) merged.
 NASDAQ is owned and operated by The NASDAQ OMX Group, the
stocks of which were listed on its own stock exchange beginning July 2,
2002, under the ticker symbol NDAQ.
 When the NASDAQ began trading on February 8, 1971, it was the world's
first electronic stock market. At first, it was merely a quotation system and
did not provide a way to perform electronic trades.

11. Continued…
 The NASDAQ helped lower the spread (the difference
between the bid price and the ask price of the stock) but was
unpopular among brokerages which made much of their
money on the spread.
 Over the years, NASDAQ became more of a stock market by
adding trade and volume reporting and automated trading
systems.
 NASDAQ was also the first stock market in the United States
to start trading online, highlighting NASDAQ-traded
companies (usually in technology) and closing with the
declaration that NASDAQ is "the stock market for the next
hundred years.
 NASDAQ has become an electronic “Virtual Trading
Floor”.
 There are more than 4700 common stocks included in the
NSDAQ system with a total market value of over $3.5 trillion.

12. Fourth Market
 It is the trading of exchange-listed securities
between institutions on a private over-the-
counter computer network, rather than over a
recognized exchange. The New York Stock
Exchange (NYSE) or NASDAQ trades
between institutions will often be made in
large blocks and without a broker, allowing
the institutions to avoid brokerage fees.

13. Common Stock Trading
SEC Rule 144 A
Rule 144A. Securities Act of 1933, as amended
(the "Securities Act") provides a safe harbor from
the registration requirements of the Securities Act
of 1933 for certain private re sales of minimum
$500,000 units of restricted securities to qualified
institutional buyers (QIBs), which generally are
large institutional investors that own at least $100
million in investable assets.

14.  When a broker or dealer is selling securities in
reliance on Rule 144A, it may make offers to non-
QIBs through general solicitations following an
amendment to the rule in 2012.
 Since 1990, the NASDAQ Stock Market offers a
compliance review process which grants Depository
Trust & Clearing Corporation (DTCC) book-entry
access to 144A securities.
 NASDAQ launched an Electronic Trading Platform
for 144A securities called PORTAL.

15. American Depositary Receipt
 An American depositary receipt (ADR and
sometimes spelled depository) is a negotiable
security that represents securities of a non-
U.S. company that trades in the U.S. financial
markets.
 Shares of many non-U.S. companies trade on
U.S. stock exchanges through ADR’s

16.  They pay dividends in U.S. dollars and may be
traded like regular shares of stock.
 ADRs are also traded during U.S. trading
hours, through U.S. broker-dealers.
 They simplify investing in foreign securities
by having the depositary bank "manage all
custody, currency and local taxes issues".

17.  The first ADR was introduced by J.P. Morgan in
1927 for the British retailer Selfridges on the
New York Curb Exchange.
 They are the domestic equivalent of a global
depository receipt (GDR).
 Securities of a foreign company that are
represented by an ADR are called American
depositary shares (ADSs).

18. The role and regulation of dealers in
exchange and OTC
 Over-the-counter (OTC) is a security traded in
some context other than on a formal exchange
such as the NYSE, TSX, AMEX, etc. The phrase
"over-the-counter" can be used to refer to stocks
that trade via a dealer network as opposed to on a
centralized exchange

19. The RoleAnd Regulation Of Dealers In
Exchange
 The Securities Exchange Act of 1934
("Exchange Act" or "Act") governs the way in
which the nation's securities markets and its
brokers and dealers operate.
 Broker
Section 3(a)(4)(A) of the Act generally defines a
"broker" broadly as:
“Any person engaged in the business of effecting
transactions in securities for the account of
others”.

20. Dealer
“Any person engaged in the business of buying and
selling securities for his own account, through a
broker or otherwise”.
 Brokers and Dealers Generally Must Register
with the SEC.
 Associated Persons" of a Broker-Dealer.
 Intrastate Broker-Dealers.
 Foreign Broker-Dealer Exemption (Rule 15a-6)

21.  Requirements Regarding Brokers and Dealers
of Government and Municipal Securities,
including Repurchase Agreements.
 Special Rules That Apply to Banks and
Similar Financial Institutions.
 Insurance Agency Networking
 Real Estate Securities and Real Estate
Brokers/Agents
 Broker-Dealer Relationships with Affinity
Groups.

22. HOW TO REGISTERASABROKER-
DEALER
 A broker-dealer may not begin business until:
 it has properly filed Form BD, and the SEC has
granted its registration;
 it has become a member of an SRO;
 it has become a member of SIPC, the Securities
Investor Protection Corporation;
 it complies with all applicable state requirements;
and
 its "associated persons" have satisfied applicable
qualification requirement

23. Conduct Regulation of Broker-Dealers
 Antifraud Provisions
 Duty of Fair Dealing
 Suitability Requirements
 Duty of Best Execution
 Customer Confirmation Rule
 Disclosure of Credit Terms
 Restrictions on Short Sales (Regulation SHO)
 Trading During an Offering (Regulation M)

24. Financial Responsibility of Broker-
Dealers
 Net Capital Rule
 Use of Customer Balances
 Customer Protection
 Required Books, Records and Reports
 Risk Assessment Requirements

25. Other Requirements
 Examinations and Inspections
 Lost and Stolen Securities Program
 Fingerprinting Requirement
 Use of Electronic Media by Broker-Dealers
 Electronic Signatures
 Anti-Money Laundering Program
 Office of Foreign Assets Control
 Business Continuity Plans

26. Trading Mechanics
 Types Of Orders And Trading Priority
Rules
 Market Order :
A market order is an order to buy or sell a
stock at the best available price. Generally,
this type of order will be executed
immediately. However, the price at which
a market order will be executed is not
guaranteed

27. Priority Rule
 Priority rules encourage simple market and limit
orders.
 If a limit order has priority, it is the next trade
executed at the limit price.
 Simple limit orders generally get high priority,
based on a first-come-first-served rule.

28.  Public order: is the domain of police or other
policing agencies, courts, prosecution services,
and prisons—all of which make up the
criminal justice system. Understand that this
system is chain-linked—all elements need to
work together.

29.  limit order: is an order to buy a security at no
more than a specific price, or to sell a security
at no less than a specific price (called "or
better" for either direction)
 This gives the trader (customer) control over
the price at which the trade is executed.
 Limit orders are used when the trader wishes
to control price rather than certainty of
execution.

30.  Conditional Order: A conditional order is
any order other than a limit order which is
executed only when a specific condition is
satisfied.
 Buy stop Order :A buy–stop order is
typically used to limit a loss (or to protect an
existing profit) on a short sale. A buy-stop
price is always above the current market price.

31.  Sell Stop Order: A sell–stop order is an
instruction to sell at the best available price
after the price goes below the stop price.
 Market If Touched Order: A conditional
order that becomes a market order when a
security reaches a specified price.

32.  A Fill Or Kill Order: A type of time-in-force
designation used in securities trading that
instructs a brokerage to execute a transaction
immediately and completely or not at all.
 An Open Order: An order to buy or sell a
security that remains in effect until it is either
cancelled by the customer, until it is executed
or until it expires

33.  One Round Lot :A group of 100 shares of a
stock, or any group of shares that can be
evenly divided by 100, such as 500, 2,600 or
14,300.

34. Short Selling
 In finance, short selling (also known as
shorting or going short) is the practice of
selling securities or other financial instruments
that are not currently owned, and subsequently
repurchasing them ("covering").
 In the event of an interim price decline, the
short seller will profit.

35.  Conversely, the short position will be closed out
at a loss in the event that the price of a shorted
instrument should rise prior to repurchase.
 Short selling is most commonly done with
instruments traded in public securities, futures or
currency markets,
 In practical terms, going short can be considered
the opposite of the conventional practice of
"going long“.

36.  Stock exchanges such as the NYSE or the
NASDAQ typically report the "short interest"
of a stock, which gives the number of shares
that have been legally sold short as a percent
of the total float.

37. Margin Transactions
 DEFINITION :Buying on margin is borrowing
money from a broker to purchase stock.
 To trade on margin you need a margin account
 Margin trading allows you to buy more stock than
you'd be able to normally.
The Federal Reserve Board sets the initial margin
requirement (currently at 50%).

38. Setting Initial Margin Requirements
DEFINITION of Initial Margin:
The percentage of the purchase price of securities
(that can be purchased on margin) that the
investor must pay for with his or her own cash or
marginable securities

39. Initial Margin Requirements
Speculative ("Spec") /non-member initial
margin requirements for all products are set at
110% of the maintenance margin requirement
for a given product. Hedger/member initial
margin requirements for all products are set at
100% of the maintenance margin requirement
for a given product.

40.  Maintenance margin is the minimum amount of
equity that must be maintained in a margin account.
In the context of the NYSE, after an investor has
bought securities on margin , the minimum required
level of margin is 25% of the total market value of
the securities in the margin account.
 The maintenance margin requirement for Canadian
Heavy Crude (Net Energy) Futures Months 3-6 is
$1,400. The Hedge/Member initial margin
requirement is $1,400, while the Spec initial margin
requirement is $1,540 ($1,400*1.1).

41. The Process of Buying Stock on Margin
 Buying a stock on margin is essentially using
credit to purchase stock shares, much like
using a credit card. A brokerage firm lends
money to an investor to buy stocks. The
brokerage firm will charge interest on the
money it lends.

42.  The Federal Reserve Board also sets the
maintenance margin. The maintenance margin,
the amount of equity an investor needs to hold
in his account if he buys stock on margin or
sells shares short, is 25%. Keep in mind,
however, that this 25% level is the minimum
level set, brokerage firms can increase, but not
decrease this level as they desire.

43. Transaction Costs
 Transaction cost is a cost incurred in making
an economic exchange (the cost of
participating in a market)
 Explicit costs is a direct payment made to
others in the course of running a business,
such as wage, rent and materials.

44. Implicit cost
 Implicit cost, also called an imputed cost,
implied cost, or notional cost, is the
opportunity cost equal to what a firm must give
up in order to use factor of production which it
already owns and thus does not pay rent for. It is
the opposite of an explicit cost, which is borne
directly.

45. 
 Impact Costs Added expenses due to the indirect
results of a changed condition, delay,
or changes that are a consequence of the
initial event. Examples of these costs are
premium time, lost efficiency, and
extended field and home office overhead.

46.  Timing Costs that arise from price movement of
a stock during a transaction period but
attributable to other activity in the stock
 Opportunity Costs as the loss of potential gain
from other alternatives when one alternative is
chosen.

47. TradingArrangements For RetailAnd
Institutional Investors
 Block Trade : A block trade is a permissible, non
competitive, privately negotiated transaction either at
or exceeding an exchange determined minimum
threshold quantity of shares, which is executed apart
and away from the open outcry or electronic markets

48.  Major broker-dealers often provide “block
trading” services—sometimes known as
“upstairs trading desks”—to their institutional
clients
 In the United States and Canada a block trade
is usually at least 10,000 shares of a stock or
$100,000 of bonds but in practice significantly
larger.

49. Program Trades
 Program trading is a type of trading
in securities, usually consisting of baskets of
fifteen stocks or more that are executed by a
computer program simultaneously based on
predetermined conditions.
 Program trading is often used by hedge funds
and other institutional investors pursuing
index arbitrage or other arbitrage strategies.

50. Retail Stock Trading
 Retail traders, often referred to as individual
traders, buy or sell securities for personal
accounts.

51. Institutional Investors
 Institutional traders buy and sell securities for
accounts they manage for a group or
institution. Pension funds, mutual fund
families, insurance companies and exchange
traded funds (ETFs) are common institutional
traders.

52. .
Pricing Efficiency Of the Stock Market
 The premise that asset prices are efficient, to
the extent that they already factor in or
discount all available information.
 The theory of price efficiency follows from
the efficient market hypothesis, which holds
that since markets are efficient, it is nearly
impossible for investors to "beat the market"
on a consistent basis.

53. Forms Of Efficiency
 Strong-form
 Semi-strong-form
 Weak-form

54. Strong-Form
 In its strongest form, the EMH says a market
is efficient if all information relevant to the
value of a share, whether or not generally
available to existing or potential investors, is
quickly and accurately reflected in the market
price.

55. Semi-strong form
 In a slightly less rigorous form, the EMH says
a market is efficient if all relevant publicly
available information is quickly reflected in
the market price. This is called the semi-strong
form of the EMH.

56. Weak-Form
 In its third and least rigorous form (known as
the weak form), the EMH confines itself to
just one subset of public information, namely
historical information about the share price it
self.

57. Thanks….