By:- SANDEEP SINGH (2403) To:- KIMTI HARISH

 Until recently, most of financial research focused on

the investment decisions. There was a missing part of investment cycle execution of investment decisions. More over, many investment optimization models assume zero execution cost. But in reality it is not true. Ignoring this fact may lead to significant mistake in estimating investment returns.

Securities Market

Equity Market

Debt Market

Derivatives Market

Government Securities Market

Corporate Debt Market

Money Market

Options Market

Futures Market

 BROKER JOBBERS BULLS OR TEJIWALA

BEARS OR MANDIWALA
STAGE LAME DUCK

The main stock exchanges in the world include: America

American Stock Exchange NASDAQ New York Stock Exchange So Paulo Stock Exchange Euronext Frankfurt Stock Exchange London Stock Exchange Madrid Stock Exchange Milan Stock Exchange Zurich Stock Exchange Stockholm Stock Exchange
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Europe

 Australia/Asia/Africa
Australian Stock Exchange Bombay Stock Exchange Hong Kong Stock Exchange Johannesburg Securities Exchange Korea Stock Exchange

Shanghai Stock Exchange

Taiwan Stock Exchange Tokyo Stock Exchange Toronto Stock Exchange

 Selection of a broker. Placing an order.

Marking the contract.

Contract note. Settlement.

 Broker an individual or firm which operates between a buyer and a seller and
usually charge a commission. For most products a licence is required.

Dealer an individual or firm which buys and sells for its own account.
Broker/dealer an individual or firm buying and selling for itself and others. A
registration is required.

Principal a role of broker/dealer when buying or selling securities for its own
account.

Market maker a brokerage or bank that maintains a firm bid and ask price in
a given security by standing ready, willing, and able to buy or sell at publicly quoted prices (called making a market). These firms display bid and offer prices for specific numbers of specific securities, and if these prices are met, they will immediately buy for or sell from their own accounts.

Specialist a stock exchange member who makes a market for certain exchangetraded securities, maintaining an inventory of those securities and standing ready to buy and sell shares as necessary to maintain an orderly market for those shares. Can be an individual, partnership, corporation or group of firms. 9

 Call (periodic) auction selling stocks by bid at intervals

throughout the day. The orders are stored for execution at a single market clearing price.

Continuous auction buyers enter competitive bids and sellers

place competitive offers simultaneously. Continuous, since orders are executed upon arrival.

Dealership market trading occur between principals buying

and selling to their own accounts. Firm price quotations are available prior to order submission.
Auction markets are concentrated and order-driven Dealership markets are fragmented and quote-driven

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 NYSE opens with a periodic auction market and then switches to a

continuous auction. Same for Tokyo Stock Exchange.

NASDAQ and International Stock Exchange (London)

are quote-driven systems (continuous dealership market).

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 Euronext Paris the market is segmented into a number of

different groups of stocks based on size and liquidity. The trading mechanisms vary depending on the segment.
Euronext 100, Next 150 ,CAC40 indices and stocks which have more

than 2,500 order book transactions per year continuous auction.

Other stocks call auction twice a day.

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 Market order immediate execution at the best price available when the order reaches the marketplace Limit order to execute a transaction only at a specified price (the limit) or better Stop order

Good till cancelled

Fill-or-kill All or None Day order

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 A register for limit buy orders and a registry for limit sell

orders. Limit orders are queued for execution against incoming market orders using price then time priority rules. Transparency: how much top orders can be viewed More transparent order book allows to see what is happening in the market and make more accurate forecasts

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is an order to buy or sell a security once the price of the security reaches a specified price, known as the stop price. When the specified price is reached, the stop order is entered as a market order. Stop orders are used to try to limit an investor's exposure in the market. With a stop order, the customer does not have to actively monitor how a stock is performing. However because the order is triggered automatically when the stop price is reached, the stop price could be activated by a short-term fluctuation in a security's price. Once the stop price is reached, the stop order becomes a market order. In a fast-moving market, the price at which the trade is executed may be much different from the stop price.
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Phone order

Internet order

Exchange

Market Maker

Electronic Communications Network

Firm Internalizes Order

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 ECN is a computer system that facilitates trading of financial products

outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies.
In order to trade with an ECN, one must be a subscriber. ECN

subscribers can enter limit orders into the ECN, usually via a custom computer terminal or a direct dial-up. The ECN will post those orders on the system for other subscribers to view. The ECN will then match contra-side orders for execution.
Generally, the buyer and seller are anonymous, with the trade

execution reports listing the ECN as the party.

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 A transaction where a broker/dealer provide an

investor with guaranteed execution of the trade list at the market prices at a specific point in time. All timing risk is transferred to broker/dealers. Investors are charged a premium for this. Blind bid investor provides only trade list statistics. Than broker/dealer defines the price.

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 Market impact is a decreasing function with time and

volume. Timing risk is an increasing function with time and volume. So, trading too aggressively will cause investors to incur high market impact cost and low timing risk. Trading too passively means having low market impact cost but high timing risk.

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Market impact is primarily caused by:

Supply-demand imbalance (liquidity needs)
Information leakage

Market impact could be Temporary occurs when the order is released but does not alter
markets long-term outlook caused by liquidity demand and immediacy requirements.

Permanent long-term change in price caused by an order.

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 Timing risk grows from the uncertainty surrounding

trading cost estimates. It includes price volatility and instability in volume profiles during a day. Opportunity risk is of not being able to implement investment decision in full. It is caused by insufficient stock liquidity or unfavourable price movement.

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 The securities market is the market for equity, debt, and derivatives.

Equity market has two segments, viz., the primary market and the secondary market. primary market: public issue, rights issue, private placement, and preferential allotment.

There are four ways in which a company may raise equity capital in the

The secondary market consists of the organised stock exchanges. The

principal stock exchanges in India are the National Stock Exchange and Bombay Stock Exchange.
The key features of stock market transaction in India are screen-based

trading, electronic delivery, and rolling settlement.

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