Merged Cap Mkt

8/3/2019 Merged Cap Mkt

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INTRODUCTION

Location: New York City, United States Founded: February 4, 1971

No of listings: 2,872

Market capitalization: US $4.72 trillion Volume: US$982 billion

Indexes: NASDAQ composite

NASDAQ-100

NASDAQ biotechnology index


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HISTORY

1971- Founded by National Association of

Securities Dealers 1987- NASDAQ replaced the old telephonic

trading system with the most efficient smallOrder Execution System(SOES)

1992- Joined the London Stock Exchange toform the 1st intercontinental linkage ofsecurities markets.

2000- Went public and was renamed asNASDAQ Stock Market Inc.

2006-Changed from stock market to licensedNational Exchange.


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TRADING SCHEDULE

7.00AM-9.30AM- Pre Market trading session

9.30AM-4.00PM- Normal trading session

4.00PM-8.00PM- Post market session


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QUOTE AVAILABILITY

NASDAQ quotes are available at three levels: Level 1 shows the highest bid and lowest

offerthe inside quote.

Level 2 shows all public quotes of marketmakers together with information of marketdealers wishing to sell or buy stock andrecently executed orders.

Level 3 is used by the market makers andallows them to enter their quotes and executeorders.


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An electronic stock exchange based in Indiathat is comprised of small- and medium-sizedfirms looking to gain access to the capital

markets. Over the counter means trading across the

counter in scrips.

The counter refers to the location of themember or dealer of the OTCEI where thedeal or trade takes place.


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The first electronic OTC stock exchange in India. OTCEIwas incorporated in October 1990 under Section 25 ofthe Companies Act, 1956. with the objective ofproviding a market for the Cos, that could not afford

the listing fees of the large exchanges and did not fulfillthe minimum capital requirement for listing

It is recognised as a stock exchange under Section 4 ofthe Securities Contracts (Regulations) Act, 1956

The promoters are as follows: UTI, ICICI, IDBI, IFCI, GIC,SBI Capital Markets, Canbank Financial Services, LIC


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Ringless and Screen-based Trading

Sponsorship

Transparency of Transactions

Liquidity through Market Making

Listing of Small and Medium-sized Companies

Technology

Nation-wide Listing

Bought-out Deals


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Need for OTCEI

Who would find OTCEI helpful?

High-technology enterprisesCompanies with high growth potential

Companies focused on new product

development.Entrepreneurs seeking finance for specific

business projects


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Benefits of getting listed on OTCEI

The OTCEI encourages entrepreneurship.

Small and medium closely-held companies can

go public.

Companies can get the money before the issue in

cases of Bought-out-deals.

It is more cost-effective to come with an issue of

OTCEI.


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Easy issue marketing by using the nation-wide OTCEI dealer network.

Nation-wide trading by listing at just one

exchange.


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Benefits of Trading on OTCEI for

Investors

The OTCEI trading counters are easily

accessible by any investors.

The OTCEI provides greater confidence to

investors because of complete transparency in

deals.


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The OTCEI ensures security, liquidity by

offering two-way quotes.

The OTCEI is an investor friendly exchange

with Single Window Clearance for all investor

requests.

At the OTCEl, the transactions are fast and

are completed quickly.


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TRADING ON OTCEI

fully computerised set-up through a network

of computers which are connected to a central

computer at OTCEI, Mumbai.

Initial allotment

Buying Process in the Secondary Market

Selling Process in the Secondary Market


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The OTCEI Composite Index:

The OTCEI composite index has been

introduced. as a broad parameter for investors

and analysts. It acts as an indicator of the

market movement. The base date for the OTCComposite Index is 23rd July, 1993 when the

index was 100. The scrips included in the

OTCEl composite index are only listed equities.


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Market Makers on OTCEI

A market maker on the OTCEI is somewhat akin to a jobber on

the regular stock exchange.

Their job is to provide two-way-buy and sell-quotes for scrip

and provide liquidity.

The market makers analyze the companies and provide

information .

The market makers are required to give quotes for a minimum

depth of three market lots.


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Bought-out-deals on the OTCEI:

Floating public issue in the primary market involves a lot of

formalities and a time lag .

In case, where a company wants to get money earlier, it can find

a member of the OTCEI, who would be interested in acting as a

Sponsor for the Company to get it listed on the OTCEI. The

member would later sell the shares of the company to the

public through an offer for sale. This method of getting listed

on OTCEI is also called a Bought-out-Deals.

Sponsors can be authorised members of the OTCEI or aMerchant Banker. Thus, sponsors act as an important

intermediary in mobilisation of savings.


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Benefits to an OTCEI Member:

Sponsor can buy the shares of the company and sell

it at a later time at a premium

At the time of the issue, the sponsor need not

appoint underwritersThe sponsor can time the issue and come in the

market

There is no restriction on the holding period.For good projects, the sponsor can help the company

to get premium in the market.


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How do I buy an over-the-counter stock?

Process differs from NASDAQ & NYSE

STEPS TO OPEN AN ACCOUNT WITH BROKER

make a market buy order for an OTC stock

the broker must contact the security's respective

market maker. The market maker then will quote the broker

the ask price

The broker, then, will transfer the necessary fundsto the market maker's account and issubsequently credited with the respectivesecurities.


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If the investor wishes to do so they canplace limit or stop orders for OTCsecurities in order to implement pricelimits.A similar process is carried out when an

investor decides to sell an OTC security.A word of caution:Although investing in OTC securitiesseems very simple, they are riskier than

stocks listed on exchanges. OTC stocks are often from companiesthat are extremely small, with marketscaps around $50 million or smaller.


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DIFFERENCE BETWEEN

NASDAQ AND NYSE


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Nasdaq market maker

and a NYSE specialist


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NASDAQis determine as a high-techmarket


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Nasdaq is cost effective


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Nyse is a typical market


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NASDAQ is considered to have high

volatility.


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NASDAQ

National Association for

Securities Dealers

Automated Quotation


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ADVANTAGES OF NASDAQIt is now the largest firm in the world, as for average trades per

day.A big chunk of its stock technology related, as compared to otherstock exchanges.

It has its own sets of indices.

Various other sectors are taken care by several other indicesclubbed together by NASDAQ.A beginners to the stock trade should not be under theimpression that these indices are the guiding starts to profits.Indices just indicates; they just impel. They do not compel you toinvest in a particular share of the company.As compared to NYSE, the NASDAQ rules and regulation forlisting in stock exchange are liberal.It provides the facility of pre market trading.With NASDAQ , the need for jobbers and other market makersare eliminate as the traders can trade directly online


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DISADVANTAGES OF NASDAQ

Currency risk

Taxation

Co-relation between Nifty and Nasdaq


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MEANING

The small order execution system (SOES) was a

system to facilitates clearing trades of low

volume on NASDAQ.


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ESTABLISHMENT OF SOES

SOES was first introduced in December 1988 for 25

stocks.

The lack of liquidity after the 1987 market crash ledNASDAQ to implement a mandatory system (since June 1988) to

provide automatic order execution for individual traders with

orders less than or equal to 1000 shares. (For stocks with low

volume, it may be less than 200 shares).


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RULES

Trades may not be in excess of 1000 shares for a

particular stock.

SOES does not allow trades in stocks that are trading at

prices greater than $250 per share.

Once a trader receives an execution through SOES,they must wait 10 minutes to place a trade on the same

side of the market in the same stock.

Institutions and stock brokers are not allowed to place

orders for their own accounts through SOES, but theycan for a client's account.

Market makers must honor their advertised bid/ask

prices to SOES orders, provided that they are for the

amount that the market maker is looking for.


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INITIAL REACTION

Initially, when SOES was mandatory, it was met with heavy

pessimism from NASDAQ member firms because it forced them to

execute all SOES trades that met the market maker's advertised price.

There were also significant limitations implemented to prevent day

traders from exploiting the system and taking advantage of old prices

quoted by market makers.


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TYPES OF ORDER

1. MARKET ORDER: market order is an order to buy and sell a

stock at the current market price

2. LIMIT OEDER: A limit order is an order to buy or sell asecurities at a specific price

3. STOP ORDER: A stop order is a order to buy or sell a stock once

the price of the stock reaches a specified price (the stop price)

4. STOP-LIMIT ORDER: A stop limit order is a order to buy or sell

a stock that combines the features of a stop order or limit order.5. MARKET-ON-OPEN(MOO) ORDER:A market-on-open order is

a order to buy or sell a stock at a market opening price.

6. MARKET-ON-CLOSE(MOC) ORDER:A market-on-close order

is a order to buy or sell a stock at a market closing price.


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7. TRAILING STOP: A trailing stop order is an order that allows

a trail on your stop price

8. LOGICAL ORDER: A logical order is an order that will be

submitted based on a set of criteria you define when entering the

order, allowing for greater customization.

9. EXTENDED HOURS LIMIT ORDER: Extended Hours

Trading is available outside of market hours from 7AM9:30AM ET and from 4PM8PM ET


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THE WORKING OF NASDAQ


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The working of NASDAQ can be studied in three

stages:

1. The interface - The place where broker dealers and

market makers gain access to the system.

2. The matching engine - A computer that connects

buyers and sellers when their prices match.

3. Quote services - Data feeding the buy and sell price

quotes that NASDAQ provides.


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Matching Engines Matching Engine, on the NASDAQ exchange, is a single,

highly reliable computer. It's where the actual trading takes

place.

This machine, match buy order with a sell order from

someone else.

If it can find a match, stock trade will take place. If not, trade

will sit on the exchange waiting for a matching order.


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Example on the working of Matching

Engines

ABC company limited

Let's say three people want to sell their shares

of stock in the ABC company.

Customer 1: sell 50 shares for $15.40




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Now imagine that there are four people who

want to buy shares of the ABC company.

Customer A: buy 100 shares for $15.15

Customer B: buy 200 shares for $15.10

Customer C: buy 150 shares for $15.00

Customer D: buy 75 shares for $14.95


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Customer A: buy 100 shares for $15.15

Customer B: buy 200 shares for $15.10

Customer C: buy 150 shares for $15.00

Customer D: buy 75 shares for $14.95

The difference between the lowest selling price and the highest

buying price is called the spread.


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OVER THE COUNTER EXCHANGE OFINDIA


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Now let's imagine that Customer A wants to buy 50 shares for

$15.25.




The 100 shares available at the $15.20 sale price will be split -

50 shares will remain in the list, while the other 50 will

complete the transaction.


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Quote Services Under quote services, NASDAQ provides up-to-the-

minute price quotes through its computers

It provides Data about the buy and sell price quotes

that NASDAQ provides.


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ROLE OF NASDAQ

Location, Location, Location

Dealer vs. Auction Market

Traffic Control

Perception and Cost

Documents

Merged Cap Mkt