1. Chapter 18 COMMON STOCK MARKETS IN THE UNITED STATES

2. Characteristics of Common Stock zEquity securities represent an ownership interest in a corporation. zCommon stockholders are the residual owners. yRight to income yRight to assets zPreferred Stockholders have preference over common stockholders. yRight to fixed dividend

3. Trading Locations zStock Exchanges ytrading floors yauction system ycentral auction specialist system zOver-The-Counter Market yno trading floor ynegotiated system ymultiple market maker system zIndependent Electronic Trading Systems

4. Stock Exchanges zMajor National Stock Exchanges yNYSE or Big Board yAMEX or ASE or Curb zRegional Stock Exchanges yBoston, Chicago, Cincinnati, San Francisco, Philadelphia z OTC Market yNASDAQ yNASD

5. Securities Act of 1934 zCategories of traded stocks: yexchange listed (national and regional exchanges) yNASDAQ listed OTC stocks yNon-NASDAQ OTC stocks

6. Types of Markets zFirst Market ytrading on exchanges of stocks listed on an exchange zSecond Market ytrading in OTC market of stocks not listed on an exchange zThird Market ytrading in OTC market of stocks listed on an exchange zFourth Market yprivate transactions between institutional investors

7. Exchanges zFormal organizations approved and regulated by the SEC zMembers ycan only trade listed stocks ymust buy a seat on the exchange zListing requirements yminimum capitalization, shareholder equity, average closing share price, etc.

8. NYSE zCentralized continuous auction market zExchange participants: ysingle specialist ycommission brokers yindependent floor brokers yregistered traders z SuperDot z Major roles of NYSE- specialist yDealer yAgent yCatalyst yAuctioneer z Commissions

9. OTC Market zTrading unlisted stocks zListing requirements zNASDAQ stock market zNASDAQ market tiers yNASDAQ National Market ySmall Capitalization Market z NASDAQ market makers z Other OTC markets yOTC Bulletin Board yPink Sheets

10. Third Market zListed stocks traded in OTC market zNYSE Rule 390 zCommission zNetwork of broker-dealers

11. Fourth Market zDirect trading of stocks between two customers zCommissions zAlternative trading systems (ATS) yelectronic communications networks ycrossing networks

12. Other Types of Common Stock Trading zOffshore Trading zRule 144A Securities zAmerican Depository Receipts (ADR)

13. Role and Regulation of Dealers in Exchange and OTC Market zRegulatory Issues yfragmented market zNASDAQ Pricing Controversy zSEC Cost Study zDecimalization zRegulation FD zSuperMontage

14. Trading Mechanisms zTypes of Orders ymarket order ylimit order zShort Selling zMargin Transactions yinitial margin ymaintenance margin z Transactions Costs yexplicit costs yimplicit costs

15. Trading Arrangements for Institutional Investors zBlock Trading Trades of 10,000 shares or more of a given stock or trades with a market value of $200,000 or more. zProgram Trading Simultaneous purchase or sale of shares in a large number of different stocks, which is computer-assisted.

16. Price Limits and Collars zStock Market Crash of 1987 zTrading or Price Limits yRule 80B or Circuit Breakers yRule 80A or Trading Collar

17. Stock Market Indicators zDow Jones Industrial Average zS&P 500 zNYSE Composite zAMEX zNASDAQ Composite zValue Line Composite Average

18. Pricing Efficiency of the Stock Market zForms of Efficiency yWeak form ySemistrong form yStrong form zImplications for Investing in Common Stock yActive strategies yPassive strategies