The biggest stock market in the US
the New York Stock Exchange (NYSE); is a physical exchange
NASDAQ
a collection of dealers and brokers who are connected electronically, via telephones and computers; virtual exchange
over-the-counter (OTC) stock market
requires dealers to negotiate directly with one another to trade stocks. The stocks traded are stocks of companies that have poor credit ratings; market yes, exchange no
Trading in securities is facilitated by
brokers (like ebay) and dealers (like car dealers)
Brokers
match buyers and sellers and earn commissions on the resulting transactions
Dealers
buy inventory and then resell it. They make their money on the spread, that is, the difference between the purchase price and the sale price
Securities with maturities of more than a year (stocks and medium- to long-term debt instruments) are traded in??
capital markets
Securities that mature in a year or less (short-term debt instruments) are traded in??
money markets
The first time an issue of stocks or bonds is offered to the public, it is offered in?
the primary market.
When the initial buyers of stocks or bonds decide to sell their investments to other members of the investing public, the transactions take place in?
the secondary markets
The Securities and Exchange Commission (SEC) was created in response to??
the Great Depression; to regulate the issuance and trading of financial securities
Money is transferred from those who have money to those who need money through what three primary methods
direct transfer, Through an investment banker, Through a financial intermediary
Direct transfer
the money goes directly to the company that issues the security and the security goes directly to the investor.
Examples: A private placement of equity and a loan from a bank
Investment bankers
not bankers in the traditional sense. They don't accept deposits or make loans. Instead, they help companies raise money by helping those companies issue new securities to the public
financial intermediaries
facilitate the transfer of funds between those who have money and those who need money.
The Federal Reserve System (the Fed)
the central bank of the US.
What is the Fed responsible for?
regulating banks, S&Ls, and other depository institutions, clearing all of the paper checks and electronic payments in the US so that the monies get where they're supposed to go, holding the US Treasury's checking account, and, most importantly, conductin
conducting monetary policy
controlling the US money supply
The Fed is charged with controlling the money supply in order to?
limit inflation and promote economic growth
but these two goals conflict with one another
Since inflation and GDP move together, lowering one also lowers the other. The Fed has several tools:
Setting bank reserve requirements, setting the discount rate, conducting open market operations
Setting bank reserve requirements
This is the percentage of deposits that banks must hold in reserve to ensure there is cash available for those who want to make withdrawals.
Setting discount rate
This is the rate at which the Fed lends money to banks.
conducting open market operations
The Fed can buy or sell Treasury securities to change the money supply.
The Federal Reserve System (the Fed) It is responsible for regulating banks, S&Ls, and other depository institutions, clearing all of the paper checks and electronic payments in the US so that the monies get where they're supposed to go, holding the US Tr
the central bank of the US.