What is a Market?
In order to function well, a securities market must have the following attributes: Information – timely, accurate information regarding volume, prices, bids and offers Liquidity – the ability to buy or...
View ArticleMargin Transactions
Investors have the option to invest borrowed money, leveraging the return on their transactions. Brokers provide margin funds for this purpose. In a margin transaction, the investor posts a portion of...
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Types of Securities Markets
Global securities markets are organized into a number of different structures. Quote Driven (Dealer) Markets These markets rely on dealers to provide liquidity by establishing firm prices at which...
View Article“Best Execution”
Part of the responsibility of any investment manager is to seek the best possible execution for clients. Best execution is the trading strategy that maximizes the value of the client’s portfolio,...
View ArticlePrimary Capital Markets
The primary market refers to trading in new issues of securities. This could be bond issues by corporations or governments, stock issues by corporations or other types of securities in which the...
View ArticleBid-Ask Spreads: Effective versus Quoted
The quoted bid/ask spread is the difference between the lowest ask price for a security and the highest bid price. For small orders, the quoted spread is a good indication of the execution cost for a...
View ArticleSecondary Capital Markets
Secondary markets are those in which securities that have already been issued trade. Transactions occur between investors, and the proceeds do not affect the issuer. Instead, one investor gives another...
View ArticleBrokers versus Dealers
Brokers and dealers play different roles in securities markets. The broker is an agent of the investor. He represents the order, finding opposite sides of the trade. Brokers also supply market...
View ArticleEvaluating Market Quality
High quality securities markets are those that supply liquidity, transparency and assured completion. Liquidity can be defined a number of ways: Tightness (low bid/ask spread) Depth (limited price...
View ArticleContinuous Markets
Continuous markets are those in which trades can occur at any time that the market is open. This can happen in one of three ways: An auction market, in which the trades are placed between investors...
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