券和組合課后習(xí)題答案：sm04

CHAPTER4

ORGANIZATIONANDFUNCTIONINGOFSECURITIESMARKETS

AnswerstoQuestions

1.Amarketisameanswherebybuyersandsellersarebroughttogethertoaidinthetransfer

ofgoodsand/orservices.Whileitgenerallyhasaphysicallocationitneednotnecessarily

haveone.Secondly,thereisnorequirementofownershipbythosewhoestablishand

administerthemarket-theyneedonlyprovideacheap,smoothtransferofgoodsand/or

servicesforadiverseclientele.

Agoodmarketshouldprovideaccurateinformationonthepriceandvolumeofpast

transactions,andcurrentsupplyanddemand.Clearly,thereshouldberapiddissemination

ofthisinformation.Adequateliquidityisdesirablesothatparticipantsmaybuyandsell

theirgoodsand/orservicesrapidly,atapricereflectingthesupplyanddemand.Thecosts

oftransferringownershipandmiddlemancommissionsshouldbelow.Finally,the

prevailingpriceshouldreflectallavailableinformation.

2.Thisisagooddiscussionquestionforclassbecauseyoucouldexplorewithstudentswhat

aresomeofthealternativesthatareusedbyinvestorswithregardstootherassetssuchas

artandantiques.Somepossibilitiesareadsinthepaperofyourlocalcommunityorlarge

cities.Anotherobviousalternativeisanauction.Withanadyouwouldhavetospecifya

priceorbereadytonegotiatewithabuyer.Withanauctionyouwouldbeveryuncertain

ofwhatyouwouldreceive.Inallcases,therewouldbeasubstantialtimeproblem.

3.Liquidityistheabilitytosellanassetquicklyatapricenotsubstantiallydifferentfrom

thecurrentmarketassumingnonewinformationisavailable.AshareofAT&Tisvery

liquid,whileanantiquewouldbeafairlyilliquidasset.AshareofAT&Tishighlyliquid

sinceaninvestorcouldconvertitintocashwithin1/8ofapoint(orless)ofthecurrent

marketprice.Anantiqueisilliquidsinceitisrelativelydifficulttofindabuyerandthen

youareuncertainastowhatpricetheprospectivebuyerwouldoffer.

4.Theprimarymarketinsecuritiesiswherenewissuesaresoldbycorporationstoacquire

newcapitalviathesaleofbonds,preferredstockorcommonstock.Thesaletypically

takesplacethroughaninvestmentbanker.

Thesecondarymarketissimplytradinginoutstandingsecurities.Itinvolvestransactions

betweenownersaftertheissuehasbeensoldtothepublicbythecompany.

Consequently,theproceedsfromthesaledonotgotothecompany,asisthecasewitha

primaryoffering.Thus,thepriceofthesecurityisimportanttothebuyerandseller.

Thefunctioningoftheprimarymarketwouldbeseriouslyhamperedintheabsenceofa

goodsecondarymarket.Agoodsecondarymarketprovidesliquiditytoaninvestorifhe

orshewantstoalterthecompositionofhisorherportfoliofromsecuritiestootherassets

(i.e.,house,etc.).Thus,investorswouldbereluctanttoacquiresecuritiesintheprimary

marketiftheyfelttheywouldnotsubsequentlyhavetheabilitytosellthesecurities

quicklyataknownprice.

5.Anexampleofaninitialpublicoffering(IPO)wouldbeasmallcompanyselling

companystocktothepublicforthefirsttime.Bycontrast,aseasonedequityreferstoan

establishedcompany,suchasIBM,offeringanewissueofcommonstocktoanexisting

marketforthestock.TheIPOinvolvesgreaterriskforthebuyerbecausethereisnotan

establishedsecondarymarketforthesmallfirm.Withoutanestablishedsecondary

marketthebuyerincursadditionalliquidityriskassociatedwiththeIPO.

6.StudentExercise

7.Incompetitivebidtheissuerisresponsibleforspecifyingthetypeofsecuritytobe

offered,thetiming,etc.andthensolicitingcompetitivebidsfrominvestmentbanking

firmswishingtoactasanunderwriter.Thehighbidswillbeawardedthecontracts.

Negotiatedrelationshipsarecontractualarrangementsbetweenanunderwriterandthe

issuerwhereintheunderwriterhelpstheissuerpreparethebondissuewiththe

understandingthattheyhavetheexclusiverighttoselltheissue.

8.Thethreemainfactorsthatwouldaccountforthechangesinthepriceofaseatonthe

NewYorkStockExchangearetherelativestatureoftheNYSE,thelargetradingvolume

relativetootherexchangesandthegeneralperformanceofthestockmarket.

9.Onereasonfortheexistenceofregionalexchangesisthattheyprovidetradingfacilities

forgeographicallylocalcompaniesthatdonotqualifyforlistingonanationalexchange.

Second,theylistnationalfirmsthusprovidingsmalllocalbrokeragefirmsthatarenot

membersofanationalexchangetheopportunitytotradeinsecuritiesthatarelistedona

nationalexchange.

Theessentialdifferencebetweenthenationalandregionalexchangesisthattheregional

exchangeshavelessstringentlistingrequirements,thusallowingsmallfirmstoobtain

listing.

10.TheOTCmarketislargerthanthelistedexchangesintermsofthenumberofissues

traded,almost7,000issuesaretradedontheOTCmarketcomparedto3,200stockissues

(commonandpreferred)fortheNYSE.Insharpcontrast,theNYSEhasalargertotal

valueoftrading-in2000,NYSEvalueofequitytradingwasabout$11,200billionand

NASDAQwasabout$7,400billion.

11.Level1providesacurrentquoteonNASDAQstocksforbrokeragefirmsthatarenot

regularOTCcustomers.Itisamedianquotethatisrepresentativeofthequotesofthe

severalmarketmakersintheparticularsecurity.Level2isforserioustraderswhodesire

notonlycurrenttrendsbutalsospecificquotesofdifferentmarketmakers.Thisenables

thebrokertomakeadealwiththemarketmakerofferingthebestprice.Level3isfor

investmentfirmswhodesirealltheinformationprovidedinLevel2butalsoneedthe

abilitytoentertheirownquotesorchangethemrelativetoothermarketmakers.

NASDAQisanelectronicquotationsystemthatservestheOTCmarket.Itenablesall

quotesbyallmarketmakerstobeimmediatelyavailable.

12(a).ThethirdmarketistheOTCtradingofexchange-listedsecurities.Itenablesthenon-

membersoftheexchangetotradeinexchangelistedsecurities.Mostofthelarge

institutionalfavoritesaretradedonthethirdmarket-e.g.,IBM,Xerox,GeneralMotors.

12(b).Thefourthmarketisthedirecttradingbetweentwopartieswithoutabrokerintermediary.

Institutionstradeinthefourthmarketsincethesetradesarelargevolumeand

consequentlysubstantialsavingscanbemadebytradingdirectlywithabuyer,thus

avoidingcommissions.

13(a).Amarketorderisanordertobuy/sellastockatthemostprofitableask/bidprices

prevailingatthetimetheorderhitstheexchangefloor.Amarketorderimpliesthe

investorwantsthetransactioncompletedquicklyattheprevailingprice.Example:Iread

goodreportsaboutAT&TandI'mcertainthestockwillgoupinvalue.WhenIcallmy

brokerandsubmitamarketbuyorderfor100sharesofAT&T,theprevailingasking

priceis60.Totalcostformyshareswillbe$6,000+commission.

13(b).Alimitorderspecifiesamaximumpricethattheindividualwillpaytopurchasethestock

ortheminimumhewillaccepttosellit.Example:AT&Tissellingfor$60-1wouldput

inalimitbuyorderforoneweektobuy100sharesat$59.

13(c).Ashortsaleisthesaleofstockthatisnotcurrentlyownedbythesellerwiththeintentof

purchasingitlateratalowerprice.Thisisdonebyborrowingthestockfromanother

investorthroughabroker.Example:IexpectAT&Ttogoto$48-1wouldsellitshortat

$60andexpecttoreplaceitwhenitgetsto$55.

13(d).Astop-lossorderisaconditionalorderwherebytheinvestorindicatesthathewantsto

sellthestockifthepricedropstoaspecifiedprice,thusprotectinghimselffromalarge

andrapiddeclineinprice.Example:IbuyAT&Tat$60andputinastoplossat$57that

protectsmefromamajorlossifitstartstodecline.

14.Thespecialistactsasabrokerinhandlinglimitordersplacedwithmemberbrokers.

Beingconstantlyintouchwithcurrentprices,heisinabetterpositiontoexecutelimit

orderssinceitisenteredinhisbooksandexecutedassoonasappropriate.Second,he

maintainsafairandorderlymarketbytradingonhisownaccountwhenthereis

inadequatesupplyordemand.Ifthespreadbetweenthebidandaskissubstantial,hecan

placehisownbidoraskinordertonarrowthespread.Thishelpsprovideacontinuous

marketwithorderlypricechanges.

Thespecialistobtainsincomefrombothhisfunctions:commissionsasabroker,and

outperformingthemarketinhisdealerfunctionusingthemonopolisticinformationhe

hasonlimitorders.

15.TheSaitorimembersarereferredtoasintermediaryclerks.SimilartotheU.S.specialists,

theSaitorimembersdonotdealwithpubliccustomers.Theirdutiesentailmatchingbuy

andsellordersfortheregularmembersoftheTokyoExchangeandtheymaintainthe

bookforregularlimitorders.UnliketheU.S.exchangespecialist,theSaitoriarenot

allowedtobuyandsellfortheirownaccountand,thus,theydonothavethedutyor

capabilitytoensureanorderlymarket.

16.Muchofthechangeexperiencedonthesecondaryequitymarketcanbeattributedto

changesoccurringwithinthefinancialindustryasawhole.Asbanks,insurance

companies,investmentcompaniesandotherfinancialservicefirmsenterthecapital

markets,thevolumeandsizeoftransactionscontinuetogrow.Thisdominancebylarge

institutionsinthemarketplacecausedthefollowingchangesinthemarkets:

(1)theimpositionofnegotiated(competitive)commissionrates

(2)theinfluenceofblocktrades

(3)theimpactofstockpricevolatility

(4)thedevelopmentofanationalmarketsystem

Thesechangeshaveincreasedthecompetitionamongfirmsthattradelargeinstitutional

stocks.However,thereissomeconcernthattheindividualinvestorisbeing“crowded

out“andthattheequitymarketfbrsmallerfirmswillalsosuffer.Theevolving

globalizationofmarketswillalsohaveanimpact.

17.A"give-up“isthepracticeofthebrokeragefirmexecutingthetradepayingpartofthe

commissiontootherbrokerageorresearchfirmsdesignatedbytheinstitution.Typically,

theseotherbrokeragefirmsprovidedresearchorsalesservicestotheinstitution.These

commissiontransferswerereferredtoas“softdollars.^^“Give-ups“existedinthefixed

commissionworldbecausebrokersrealizedthatinstitutionswerechargedmoreforlarge

tradesthanjustifiedbythecost.

18.Ablockhouseisabrokeragefirm,eithermemberornon-memberofanexchange,which

standsreadytobuyorsellablockfbrinstitutions.Blockhousesevolvedbecause

institutionswerenotgettingwhattheyneededfromthespecialistand,hence,asked

institutionalbrokeragefirmstolocateotherinstitutionswithaninterestinbuyingor

sellinggivenblocks.

Whenaninstitutionwishestosellastockittypicallycontactsablockhouse,who

contactsprospectiveinstitutionalbuyers.Iftheblockhousedoesnotfindbuyersforthe

entireblock,itbuystheremainder(thustakingaposition)withthehopeofsellingitlater.

Naturally,theblockhouseassumessubstantialriskonthispositionbecauseofthe

uncertaintyofsubsequentpricechanges.

19(a).ThoughtheexactformoftheNationalMarketSystem(NMS)remainsnebulous,major

featuresofsuchamarketare:

(1)Centralizedreportingofalltransactionsregardlessofwherethetradetookplace.

Currently,thisexistsforallNYSEstocks.

(2)Centralizedquotationsystemthatwouldlistquotesforagivenstockfromall

market-makersonthenationalexchanges,theregionalexchanges,andtheOTC.

Thisincreasedinformationisbeneficialtotheinvestor.

(3)Centrallimitorderbook(CLOB)thatcontainsalllimitordersfromall

exchanges.

(4)Competitionamongmarket-makerswhichwouldforcedealerstoofferbetter

bidsandasks,thusnarrowingthebid-askspread.

19(b).TheInter-MarketTradingSystem(ITS)isacentralizedquotationsystem,currently

available,consistingofacentralcomputerfacilitywithinterconnectedterminalsinthe

participatingmarketcenters.Brokersandmarket-makersineachmarketcentercan

indicatetothoseinothercentersspecificbuyingandsellingcommitmentsbywayofa

compositequotationdisplay.Abrokerormarket-makerinanymarketcentercanthus

exercisehisownbestjudgmentindetermining,onthebasisofcurrentquotations,where

toexecuteacustomer'sorders.WhileITSprovidesthecentralizedquotationsystemthat

isnecessaryforaNationalMarketSystem(NMS),itdoesnothavethecapabilityfor

automaticexecutionatthebestmarket;itisnecessarytocontactthemarket-makerand

indicatethatyouwanttobuyorsellathisbidorask.Also,itisnotmandatorythata

brokergotothebestmarkettoexecuteacustomer'sorders.

ThedatainExhibit4.13indicatesignificantgrowthinthenumberofissuesonthesystem

through1999,withadrop-offin2000.Thevolumeofsharestradedandthesizeofthe

tradescontinuedtogrowthrough2000.

20.StudentExercise

CHAPTER4

AnswerstoProblems

Ka).Assumeyoupaycashforthestock:Numberofsharesyoucouldpurchase=$40,000/$80

=500shares.

(1)Ifthestockislatersoldat$100ashare,thetotalsharesproceedswouldbe$100x

500shares=$50,000.Therefore,therateofreturnfrominvestinginthestockis

asfollows:

$50,000-$40,000”團(tuán)°,

---------------------------------=ZJ.UUTO

$40,000

⑵Ifstockislatersoldat$40ashare,thetotalsharesproceedswouldbe$40x$500

shares=$20,000.Therefore,therateofreturnfrominvestinginthestockwould

be:

$20,000-$40,000

=-50.00%

$40,000

1(b).Assumingyouusethemaximumamountofleverageinbuyingthestock,theleverage

factorfora60percentmarginrequirementis=1/percentagemarginrequirement=1/.60

=5/3,Thus,therateofreturnonthestockifitislatersoldat$100ashare=25.00%x

5/3=41.67%.Incontrast,therateofreturnonthestockifitissoldfor$40ashare:

=-50.00%x5/3=-83.33%.

2(a).Sincethemarginis40percentandLaurencurrentlyhas$50,000ondepositinhermargin

account,ifLaurenusesthemaximumallowablemarginher$50,000depositmust

represent40%ofhertotalinvestment.Thus,$50,000=.4xthenx=$125,000.Sincethe

sharesarepricedat$35each,Laurencanpurchase$125,000-$35=3,571shares

(rounded).

2(b).TotalProfit=TotalReturn-TotalInvestment

(1)Ifstockrisesto$45/share,Lauren'stotalreturnis:

3,571sharesx$45=$160,695.

Totalprofit=$160,695-$125,000=$35,695

(2)Ifstockfallsto$25/share,Lauren9stotalreturnis:

3,571sharesx$25=$89,275.

Totalloss=$89,275-$125,000=-$35,725.

2(c)

一Mai'ketValue-DebitBalance

Margin=

MarketValue

whereMarketValue=PricepersharexNumberofshares.

InitialLoanValue=TotalInvestment-InitialMargin.

=$125,000-$50,000=$75,000

Therefore,ifmaintenancemarginis30percent:

(3,571sharesxPrice)-$75,000

.3()=----------------------------------------------

(3,571sharesxPrice

.30(3,571xPrice)=(3,571xPrice)-$75,000.

1,071.3xPrice=(3,571xPrice)-$75,000

-2,499.7xPrice=-$75,000

Price=$30.00

3.Profit=EndingValue-BeginningValue+Dividends-TransactionCosts-Interest

BeginningValueofInvestment=$20x100shares=$2,000

YourInvestment=marginrequirement+commission.

=(.55x$2,000)+(.03x$2,000)

=$1,100+$60

=$1,160

EndingValueofInvestment=$27x100shares

=$2,700

Dividends=$.50x100shares=$50.00

TransactionCosts=(.03x$2,000)+(.03x$2,700)

(Commission)=$60+$81

=$141

Interest=.10x(.45x$2,000)=$90.00

Therefore:

Profit=$2,700-$2,000+$50-$141-$90

=$519

Therateofreturnonyourinvestmentof$1,160is: