1. Chapter 15 SECONDARY MARKETS

2. Function of Secondary Markets zProviding security values and required returns zProviding liquidity

3. Trading Locations zOrganized Exchanges yNYSE yAMEX yRegional Exchanges zOver-The-Counter Exchanges

4. Foreign Stock Exchanges zUnited Kingdom yLondon Stock Exchange (LSE) zGermany yFrankfurt Stock Exchange yOther regional exchanges (7) zJapan yTokyo Stock Exchange (TSE)

5. Market Structures zContinuous Market yprices are determined continuously throughout the trading day zCall Market yorders are grouped together for simultaneous execution at the same price zMixed Market yusing elements of the continuous and call market

6. Perfect Markets zLarge number of buyers and sellers zBuyers and sellers are price takers zCommodity traded is homogeneous zMarket is frictionless with no transactions costs, taxes and other impediments zAbility to sell short

7. Brokers as Match Makers zA broker acts on behalf of an investor who wishes to execute orders. zBroker functions: yReceives, transmits and executes orders yBrings together buyers and sellers yNegotiates prices zIn return, the broker receives a commission.

8. Dealers as Market Makers zThe dealer holds in inventory the financial asset traded. zDealer functions: yTakes a position (long or short) in the asset yProvides opportunity to trade immediately yOffers price information yServes as auctioneer zDealer profit is the bid-ask spread.

9. Electronic Trading zTypes of electronic trading systems for bonds: ydealer-to-customer systems yexchange systems zAdvantages of electronic trading: yliquidity yprice discovery yuse of new technologies ytrading efficiencies

10. Market Efficiency zOperational Efficiency yOffers investors reasonably priced services related to buying and selling securities. zPricing Efficiency yPrices fully reflect all available information relevant to the valuation of securities.