| A | B |
|---|
| The role of financial assets | to facilitate the exchange of financial assets by bringing buyers and sellers togethers |
| Auction market | buyers and sellers confront each other directly to bargain over price |
| Dealer market | several dealers commit capital to ther process of bringing buyers and sellers together |
| Bid price | the price at which dealers/brokers stand ready to buy |
| Ask price | the price at which dealers/brokers stand ready to sell |
| Spread price | difference between bid price and ask price |
| Spread price | the dealers reward for facitating the trade |
| Investment banks | financial institutions that specialize in underwriting the securities of private corp and of state & cities |
| Investment banks | They often band together to form a syndicate for the purpose of sharing the risks of price changes. |
| Agents | the difference between brokers and dealers is brokers only act as agents and compenstaed by charging commissions for fulfilling orders |
| Own accounts | dealers buy & sell securities for their own accounts and are compensated by the spread between the bid & asked price |
| Financial markets | priomary markets, secondary markets, organized exchanges & OTC, capital markets & money markets |
| Breadth, depth, resiliency | a market that is able to absorb trading volume w/out causing wild gyrations in transaction prices |
| Thin market | a market that lacks breadth, depth, resiliency |
| SEC | established in 1934 |
| SEC | established to prevent fraud |
| SEC | to promoteequitable & fair operations in the securities markets |
| Three type of markets | Auction, brokered, dealer markets |
| Brokered market | when there are insufficient participants in an auction market |
| A market is liquid of bid | asked spreads are narrow |
| Low spread market | large volume, low risk (treasury bond) |
| Round lot | 100 shares |
| Depth | easy for market to n=buy & sell above & below current transaction prices |
| Breadth | if orders exist in large volume (treasury market) |
| Resiliency | if new orders quickly pour in when price increase or decrease. |
| Thin market | only a small volume of trading can be absorbed without producing wide price swings |
