When you buy or sell a stock, bond or any other financial instrument, there are two important dates, namely, transaction date and the settlement date. Transaction date, also known as the trade date, is the date on which the security is traded. On the other hand, settlement date is the date on which the trade […]
The Stock Market
Initial Public Offerings (IPOs) and Private Placements
A primary market refers to that segment of capital markets that deals with the new issues of securities. In this market, companies obtain funding by selling their companies shares to the investors. This process of selling new shares to investors is called underwriting, and the sale itself is referred to as initial public offer, It […]
Secondary Market: Exchanges Vs. OTC Market
Once the securities have been issued in the primary market, they become available for purchase and sale in the secondary markets. There are secondary markets for all kinds of securities, such as stocks, bonds, futures, options, etc. In the primary market, the investors purchased securities directly from the issuers. However, in the secondary market, the […]
What is NASDAQ and how it operates?
NASDAQ stands for National Association of Securities Dealers Automated Quotations. It was founded in 1971 to give dealers the ability to post their quotes electronically. This is the entity that founded NASDAQ as a way to increase the trading in over-the-counter stocks which were not able to meet the requirements to get their stocks listed […]
Introduction to SuperMontage used by NASDAQ
SuperMontage is a very powerful fully integrated order entry and execution system used by NASDAQ. It being more efficient and accurate, SuperMontage replaced the earlier systems namely, SOES and SuperSoes. SuperMontage is capable of processing more than 5,000 transactions per second. The system was approved by the regulators in 2001 and was implemented in 2002. […]
Margin Trading: Buying on Margin
Buying on margin refers to taking a loan from the broker to purchase stocks. The loan from the broker is known as broker call loan. This allows you to buy more shares than you would have normally using just your own funds, that is, an investor is able to leverage his position by investing his […]
Trading Costs Involved in Stock Trading
Trading in stocks involves certain cost with are commonly known as trading costs. These courses are made up of the commission or the brokerage fees paid to the broker, and the bid-offer spread. In case of large transactions there is an additional cost known as market impact. This is because executing a large transaction may move the price from the originally quoted price.
Short Selling and Stock Borrowing Costs
Short selling refers to the process of selling a security not owned by the investor with the intention of buying it back at a later date at a cheaper price. Since the investor doesn’t own the security, he typically borrows it from a broker/dealer and short sells it in the market. On the future date, […]