Basic issues about stocks and stock market

OTC US School

is a market model

Typical OTC market, developed from

market

Maybe you are interested!

The traditional over-the-counter (OTC) market is a market that is regulated by the Securities and Exchange Commission (SEC) since the Securities and Exchange Act of 1935. The Nasdaq computer network OTC market, established in 1971, is the largest segment of the U.S. secondary market in terms of the number of securities traded, with a total of approximately $1.5 billion.

15,000 securities are traded on the NASDAQ market, much larger than the number of securities traded on the centralized exchange (which has about

4,500 securities traded on all exchanges combined, of which

NYSE has 2,600 stocks, AMEX has 800 stocks). However, the market

NASDAQ ranks second in total value of traded stocks (about 2,398 billion USD), after NYSE (3,083 billion USD). Securities traded on NASDAQ are very diverse in type and quality, mainly securities of newly established companies, small and medium-sized companies, high-tech companies to large companies with high quality such as Intel, Microsoft, bonds... These types of securities are also divided into many trading boards according to the quality of securities. This market is operated by a system of market makers and brokers, with about 500 market makers actively operating on NASDAQ, on average each market maker is responsible for creating 8 types of stocks. NASDAQ is under the two-level management of the US Securities and Exchange Commission (S~FC) and the American Association of Securities Dealers (NASD). The NASDAQ market is now globally connected to many OTC markets around the world. The criteria for securities listed on Nasdaq vary, but generally include standards for total company asset value; capital and profits; number of shares held by the public; number of shareholders; number of market makers for this type of security (at least two market makers). For the national NASDAQ market (NNM), the standards for securities listing are higher than for the regular Nasdaq market, requiring additional criteria for net profit1 year, price per share, and market price of outstanding shares. The number of securities traded on the NNM of the NASDAQ is about 6,000. The price-setting mechanism is mainly price negotiation based on centralized quotations, however, there is a part of the market (called the NASDAQ small automated order matching system - SOES) that provides centralized order matching services.

for small orders under 1,000 shares. In addition, the NASD provides electronic quotation services via the Nasdaq network for more than

Another 15,000 securities are not eligible for listing on the 'NASDAQ market (also known as OTC BB - OTC Bulletin Board), which enables securities companies participating in this market to quote securities for which they act as market makers, update quotes instantly; access information about quotes from other market makers.

2. Japanese OTC Market

There are two OTC markets in Japan. The first is the JASDAQ market (also known as the Japanese NASDAQ), which has been operating since 1991 on the basis of the development of the traditional OTC market that has been operating since February 1963 and is managed by the Japan Securities Dealers Association (JSDA), with the form of one-on-one price negotiation between securities companies and each other or between securities companies and customers. The Securities Law amended in 1983 brought the OTC market under state management, and the price negotiation mechanism was changed to a centralized auction mechanism. The market maker system associated with the price negotiation mechanism was re-applied since 1987 to compete with the centralized market and create liquidity for the OTC market. Currently on the ~ASDAQ market. There are 449 companies doing market making. II Trading system

translation and information

Online operation ~JASDAQ follows the model of US NASDAQ

Okay

The ~lasdaq was put into operation in 1991 to promote the OTC market. Currently, the system consists of two networks, the trading network and the information network. The trading network is used to automatically match trading orders, and the information network is used for market makers to centrally quote prices, notify of agreed transactions, and transmit other information. Securities traded on the OTC are securities of small and medium-sized companies, second-class companies, and high-tech companies. The criteria for listing on the ~lasdaq are mainly based on standards such as the time of establishment of the company, net assets, net profits, total market value of securities, number of shareholders, number of outstanding securities, audit opinions, and other criteria. As of September 1997, there were 800 securities traded on this market, more than double that of 1990 (300 securities). Securities not eligible for trading on

This market and the exchange market are also supported for online trading.

DASDAQ is similar to the US NASDAQ market. Second is the J-net market, which was newly launched in April 1999. This is a newly established market, directly managed by the Osaka Stock Exchange for securities not listed on the Osaka Stock Exchange, to meet the requirements of saving time and costs of market participants, and to have a method of price negotiation. Members of the Osaka Stock Exchange, investors and the management center are directly connected to each other through a multi-layer electronic network, creating conditions for these subjects to share market information. The characteristics of J-net are cheap - fast - convenient service, direct access to the market - market information, investors can make transactions anytime - anywhere - with anyone. J-net is also a network connected to other domestic and international networks. This network is assessed to have great potential for future usefulness in the domestic and foreign stock markets.

3. Korean OTC Market

The traditional OTC market in Korea was established in April 1987 to provide an operating environment for securities not listed on the Korea Stock Exchange (KSE), under the control of the Securities Dealers Association (KSDA), established in 1953. In April 1997, the Korean government decided to reorganize and promote the development of this market by establishing the KOSDAQ electronic computer network market to facilitate venture capital companies, technology companies, hedge funds, and small and medium-sized companies that do not meet the listing standards on the centralized market to raise capital directly. This is a market built on the NASDAQ (USA) model, trading via electronic networks with central control. Organizations listed on the KOSDAQ market must meet a number of basic criteria such as minimum charter capital, public offering ratio, etc. However, the pricing is done by centralized auction method similar to the exchange. Up to now, the KOSDAQ market is very developed, competing with the market of high-quality securities KSE. The annual growth rate of this market's market share is much larger than that of the centralized market and accounts for 98% of the total bond transactions of the stock market. As of December 1999, the average trading price of KOSDAQ was about 113 compared to KSE. Then KOSDA~ is one of the

These markets are managed quite effectively. In March 2000, the third market (OTC-BB) following the NASDAQ OTC-BB model (USA) officially came into operation, creating conditions for capital mobilization for bonds and stocks that are not qualified for listing on KSE.

and KOSDAQ. This market uses the KOSDAQ electronic network to trade the futures.

similar to the US OTC-BB market. The price determination method in this market is the automatic order method (crossed matching) based on the automatic matching of 2 orders with identical price and volume. In fact, this is also the automatic price negotiation method currently applied in a part of the US NASDAQ market.

4- Malaysian OTC Market

In May 1996, the Malaysian Government began considering the possibility of establishing an OTC market to meet the capital mobilization needs of high-tech companies, small-capital companies, venture capital companies, etc. To establish this market, the Securities and Exchange Commission of Malaysia studied the organization and operation of OTC markets around the world.

world such as NASDAQ (USA), AIM (UK), Canadian Dealing Network (Canada), Le

Nouveau Marche (France), JASDAQ (Japan), ROC OTC Securities Exchange (Taiwan), Bangkok stock dea/1ng Center (Thailand)... and the plan to establish the MESDAQ market independent of the Kham Lumpur Stock Exchange. The MESDAQ market is expected to play a role for the Malaysian stock market similar to that of NASDAQ for the US market. The successful implementation of this market will facilitate the development of the high-tech sector in Malaysia. This market will facilitate small companies, high-tech companies to raise capital and further attract other companies in the world. The construction of this market is part of the economic development strategy and especially the strategy to complete the industrialization and modernization of the country by the end of 2020. MESDAQ opened its operations on April 30, 1999, with the motto in four words: fair, efficient, flexible and transparent (FELT: Fair-Efflcient- Liquid- Transparent). MESDAQ is a limited liability company owned by its members as a self-governing organization, independent of the Kham Lumpur Stock Exchange and also not affiliated with the Securities Dealers Association, operating non-profit, self-accounting through the collection of membership fees and fees.

listing. Listing standards on the market

This field includes criteria for

terrible

experience in business operations, company operating model, prospects

of the company, conflicts of interest that exist related to the company, the company's research and development program, national policies such as domestic investment. The market intermediary system includes underwriters, investment consultants, sponsors, market makers... ~ '

5. Singapore OTC Market

The SESDAQ Singapore OTC market was established at the request of the government's economic reform committee, to create a market for unlisted securities with the aim of expanding the securities market to support the capital management industry. Trading on the SESDAQ market was designed using terminals established and operational in January 1987 to facilitate capital mobilization for small and medium-sized companies to expand their operations. The SESDAQ network was linked to the US NASDAQ network, so transactions on NASDAQ were also traded on SESDAQ. Trading volume in 5 years (1989-/993) increased 10-fold (from 230 million to 2,300 million shares) and total trading value increased 8-fold (from 320 million Singapore dollars to 2,410 million Singapore dollars).

CHAPTER VI/ SECURITIES COMPANY

A. GENERAL ISSUES ABOUT SECURITIES COMPANIES

To form and develop an effective stock market, an indispensable factor is the entities participating in business in the stock market. The goal of forming a stock market is to attract long-term investment capital for economic development and create liquidity for securities. Therefore, to promote the stock market to operate in an orderly, fair and effective manner, it is necessary to have the establishment and operation of securities companies. The history of the formation and development of the stock market in the world shows that in the prehistoric period of the stock market, brokers operated independently of each other. Later, along with the development of the stock market, the functions and scale of trading activities of brokers increased, requiring the establishment of securities companies, which are organized groups of individual brokers. As a business entity, a securities company also has characteristics similar to the organization and operation of other companies in general. Therefore, we do not cover all aspects of the company's operations, but emphasize the business and financial activities -

What makes the fundamental difference between a securities company and other types of companies?

I. ROLE OF SECURITIES COMPANY

When a business wants to raise capital by issuing securities, they do not have to sell the securities they intend to issue themselves. They cannot do it all because they do not have a professional apparatus. They need professionals to buy and sell securities for them. These are securities companies, with professional expertise, professional experience, and a suitable organizational apparatus, that can perform the role of intermediary brokers in buying and selling, issuing securities, providing investment advice, and performing a number of other services for both investors and issuers. Securities companies are important factors promoting the development of the economy in general and the stock market in particular. Thanks to securities companies, stocks and bonds circulate and trade busily on the stock market, thereby, a huge amount of capital is invested from the collection of scattered capital sources in the public. Securities companies have three main functions in the financial market: Creating a mechanism for raising capital by connecting those who have money (investors) with those who want to raise capital (securities issuers, such as joint stock companies, governments, etc.). Providing a pricing mechanism for the value of investments Providing a mechanism for transferring cash to investors When implementing (a(' (th(') energy, ('.l(' (the species) of the company (hung khoan tung ll!t) tin Pensions, because (at: this company acts as an agent or a trust company in the process of buying and selling listed and unlisted securities, and at the same time providing investment consulting services to individual investors, joint stock companies and even the government.

1. The role of capital mobilization

Banks, securities companies and investment funds are all financial intermediaries with the role of mobilizing capital. Simply put, these organizations act as bridges and channels for capital to flow from one or several parts of the economy with excess capital (idle capital) to other parts of the economy that are lacking capital (in need of capital mobilization). Securities companies often take on this role through securities underwriting and brokerage activities.

2. The role of providing a pricing mechanism

The securities industry in general, and securities companies in particular, through stock exchanges and the OTC market, have the function of providing a pricing mechanism to help investors have a realistic and accurate assessment of the value of their investments. Stock exchanges list the stock prices of companies every day in financial newspapers. In addition, the securities of many large companies not listed on the exchange can also be published in financial newspapers. Securities companies also have an important function of intervening in the market, contributing to the regulation of stock prices. According to the regulations of each country, securities companies are required to set aside a certain percentage of their transactions to buy

stocks when stock prices on the stock market are high.

The market is falling and selling when the price is up

3. Role in providing a mechanism for cash transfer

Investors always want to have the ability to convert cash into valuable securities and vice versa in a stable investment environment. Securities companies undertake this conversion function, helping investors suffer the least loss when making investments. For example, in most investment transactions on the stock exchange and the OTC market today, an investor can convert cash into securities and vice versa on a daily basis without suffering significant loss to the value of his investment (at least not due to the securities trading mechanism). In other words, there may be some external factors that affect the value of the investment, such as rumors about a problem in the economy, but the value of the investment does not generally decrease due to the buying and selling mechanism.

4. Conduct investment consulting

Full-service securities companies not only execute orders from

clients, but also engages in various consulting services through

research the market and then provide that information to companies and individuals who invest. '

5. Create new products

In recent years, the variety of securities has developed at a very rapid pace due to a number of reasons, including the increasing market capacity and market volatility, and clearer customer awareness of the financial market.

main and effort

force in marketing

of securities companies. In addition to shares

vote

(regular and preferred) and bonds are well known, securities companies now also sell central and local government bonds, warrants, warrants, futures contracts, options contracts and other diverse hybrid products suitable to changes in the market and economic environment.

II. MODEL AND ORGANIZATION OF SECURITIES COMPANY

1 Securities company model

The activities of securities companies are very diverse and complex, quite different from normal manufacturing or trading enterprises because securities companies are a special type of financial institution, so the issue of determining its business organization model also has many differences in different countries. The business organization model of securities companies Each country has its own characteristics depending on the characteristics of the financial system and the consideration of the pros and cons of those who do state management work. However, it can be generalized into two basic models today:

1 1. Multi-purpose model of stock and currency trading

According to this model, commercial banks operate as securities, insurance and currency trading entities. This model is divided into two types: Partially multi-functional type: Banks that want to trade in securities and insurance must establish separate independent companies. Completely multi-functional type: Banks are allowed to trade in securities and insurance in addition to currency trading. The advantage of this model is that banks can combine many business areas, thereby reducing risks for general business activities and being able to withstand fluctuations in the stock market. On the other hand, banks will take advantage of their expertise and capital to trade in securities. However, the model also reveals some limitations such as not being able to develop the stock market because banks tend to be conservative and prefer lending activities to underwriting the issuance of stocks and bonds. At the same time, banks are also very susceptible to market manipulation, and fluctuations in the stock market, if any, will strongly affect the bank's monetary business activities due to the lack of separation between these two types of business. Due to such limitations, before the 1933 crisis, the US and many other countries applied the model of

Basic issues about stocks and stock market - 43

Comment