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Wednesday, August 4, 2010

The New York Stock Exchange and The Nasdaq

The New York Stock Exchange
The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The "Big Board" was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-mart, is the market of choice for the largest companies in America.

The trading floor of the NYSE
The NYSE is the first type of exchange (as we referred to above), where much of the trading is done face-to-face on a trading floor. This is also referred to as a listed exchange. Orders come in through brokerage firms that are members of the exchange and flow down to floor brokers who go to a specific spot on the floor where the stock trades. At this location, known as the trading post, there is a specific person known as the specialist whose job is to match buyers and sellers. Prices are determined using an auction method: the current price is the highest amount any buyer is willing to pay and the lowest price at which someone is willing to sell. Once a trade has been made, the details are sent back to the brokerage firm, who then notifies the investor who placed the order. Although there is human contact in this process, don't think that the NYSE is still in the stone age: computers play a huge role in the process.



The Nasdaq
The second type of exchange is the virtual sort called an over-the-counter (OTC) market, of which the Nasdaq is the most popular. These markets have no central location or floor brokers whatsoever. Trading is done through a computer and telecommunications network of dealers. It used to be that the largest companies were listed only on the NYSE while all other second tier stocks traded on the other exchanges. The tech boom of the late '90s changed all this; now the Nasdaq is home to several big technology companies such as Microsoft, Cisco, Intel, Dell and Oracle. This has resulted in the Nasdaq becoming a serious competitor to the NYSE.
The Nasdaq market site in Times Square


On the Nasdaq brokerages act as market makers for various stocks. A market maker provides continuous bid and ask prices within a prescribed percentage spread for shares for which they are designated to make a market. They may match up buyers and sellers directly but usually they will maintain an inventory of shares to meet demands of investors.

Quarterly Results

Lupin Q3 net up 38 pct, in line with forecast

Tata Steel Q3 net up 155% to Rs 1,191.75 cr

Canara Bank Q3 profit zooms 50 pct

Dena Bank Q3 net dips 4 pct to Rs 134 cr

Lanco Infratech Q3 net up 34 pct at Rs 106 cr

Motherson Sumi Q3 net nearly triples as sales surge

BPCL Q3 net down by more than half

Stock Terms and jargons

Active Share: An active share is the one which has a volume in trade (it has changed hands in many), these are the shares which are easy to buy or sell. which also may have some news sticked along with it.

Advance-Decline ration: It is also known as advanced decline ratio. This ratio is used to find whether market is in bullish trend or in the bearish trend, in other words whether the market is in advacing or declining. It is found by dividing the total number of advanced shares to the total number of declined shares. For instance: there are a total of 10000 stocks listed in the market of them 800 advances and 200 declines then the Advance Decline ratio would be 4 and since the ratio. Any value more than 1 would indicate a rising trend (bullish trend) and any value which is less than 1 would indicate a declining trend (bearish trend).

ADR: American Depository Receipt is a negotiable receipt issued by the US banks stating that the number of shares have been deposited with them. This can be directly traded in the stock market. This in turn eases an American investor to buy ADR than to buy an foreign stock in a foreign market. The rate of an ADR is close to the rate of the stock in the home market.

After-Tax:

Aging Schedule

AGM or Annual General Meeting

Amortization

Annual Report

Application-Money

Asset

Asset Coverage

Asset Financing

Auction Market

Auctioning of an Issue

Automated Screen Trading (AST)

Average

Averaging

Averaging In/Averaging Out.