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StockWatch, a computer system that searches for unusual trading patterns, alerts NYSE regulators to possible insider trading abuses or other prohibited trading practices. NYSE’s other regulatory activities include the supervision of member firms to enforce compliance with financial and operational requirements, periodic checks on broker’s sales practices, and the continuous monitoring of specialist operations.

The NASDAQ is sometimes called «screen-based» because buyers and sellers are connected only by computers over a telecommunications network. Market makers, also known as dealers, carry their own inventory of stock. They stand ready to buy and sell NASDAQ stocks, and they are required to post their bid and ask prices. Although the NYSE has a far greater total market capitalization, NASDAQ has surpassed the NYSE in the number of both listed companies and shares traded.

NASDAQ has listing and governance requirements that are similar but slightly less stringent than those of the NYSE. For example, a stock must maintain a price of $1 and the value of the public float must be at least $1.1 million. If a company does not maintain these requirements, it can be delisted to one of the OTC markets.

NASDAQ has a separate «tier» for small capitalization companies; the average market cap of the 685 companies listed in this tier at the end of 2003 was about $60. This is an excellent exchange for investors interested in smaller companies because the NASDAQ Small Cap also has listing and governance requirements.

ECNs are part of a class of exchange called alternative trading systems (ATS). ECNs trade NASDAQ-listed stocks, but they connect buyers and sellers directly. Because they allow for direct connection, ECNs bypass the market makers. You can think of them as an alternative means to trade stocks listed on the NASDAQ and, increasingly, other exchanges as well (such as the NYSE or foreign exchanges).

There are several innovative and entrepreneurial ECNs, and they are generally good for customers because they pose a competitive threat to traditional exchanges, and therefore push down transaction costs. Currently, ECNs do not really serve individual investors; they are mostly of interest to institutional investors.

OTC refers to markets other than the organized exchanges described above. OTC markets generally list small companies, and often these companies have «fallen off» to the OTC market because they were de-listed from NASDAQ. Some individual investors will not even consider buying OTC stocks due to the extra risks involved. On the other hand, some strong companies trade on the OTC. In fact, several strong companies have deliberately switched to OTC markets to avoid the administrative burden and costly fees that accompany regulatory laws such as the Sarbanes-Oxley Act.

Over-the-Counter Bulletin Board (OTCBB) is an electronic community of market makers. Companies that fall off the NASDAQ often end up here. On the OTCBB, there are no «quantitative minimums» (no minimum annual sales or assets required to list).

Companies that list on the pink sheets (i.e. less than 300 shareholders) are not required to register with the SEC. Liquidity is often minimal. Also, keep in mind that these companies are not required to submit quarterly 10Qs.

Source: Investopedia, September 24, 2004, David Harper, Contributing Editor

1.public stock – акция публичной компании

2. New York Stock Exchange (NYSE) – Нью-Йоркская фондовая биржа

3. American Stock Exchange (AMEX) – Американская фондовая биржа

4. primary market – первичный рынок

5. float n – чеки в процессе инкассации; число акций корпорации, выпущенных на рынок; банкноты и монеты в кассе

float (a company) v – организовать новую компанию и выпустить ее акции на рынок

6. a.k.a. (also known as) – также известный как

7. secondary market – вторичный рынок

8. brokerage account – брокерский счет

9. trading floor – торговый зал

10. exchange traded funds (ETC) – фонды, которыми торгуют на бирже

11. Board of Governors – Совет управляющих

12. incorporation n – инкорпорация; процесс регистрации юридического лица в качестве корпорации властями данного штата (США)

incorporate v – создать и зарегистрировать корпорацию; включать, придавать юридический статус

13. not-for-profit organization – некоммерческая организация

14. agency auction market – агентский аукционный рынок

15. maintenance requirements – минимальный уровень средств, который должен поддерживаться на маргинальном счете клиента у брокера

16. compensation committee – комитет по вознаграждению

17. audit committee – комитет по аудиту

18. floor broker – брокер в зале биржи

19. consolidated tape – консолидированная лента

20. abuse n – нарушение, злоупотребление

abuse v – нарушать, злоупотреблять

21. delisting n – лишение котировки

delist v – лишать котировки

22. small capitalization (cap) – компания, которая по уровню капитализации на данном рынке считается малой

23. Electronic Communication Network (ECN) – сеть электронных коммуникаций

24. alternative trading system (ATS) – альтернативная торговая система

25. over-the-counter (OTC) market – внебиржевой рынок ценных бумаг

26. pink sheets – список акций и их цен на внебиржевом рынке

27. 10Q form – квартальный отчет корпорации, чьи акции котируются на биржах, перед Комиссией по ценным бумагам и биржам

Exercise 1. Answer the following questions.

1. What are the functions of an exchange? 2. How did NYSE evolve over the years? 3. What are the advantages of the agency auction market? 4. What are the benefits of NYSE? 5. How are stocks bought and sold at NYSE? 6. What does market regulation mean in NYSE’s context? 7. What are the key characteristics of NASDAQ? 8. What are ECNs? 9. Why do some individual investors prefer not to buy OTC stocks?

Exercise 2*. Which of the following statements are not correct and why?

1. A stock exchange owns shares of companies listed there. 2. The exchange tracks the flow of orders for each stock, and this flow of supply and demand sets the price of the stock. 3. In an agency auction market the share price is determined by a dealer who buys and sells out of inventory. 4. Investors trading on the NYSE have no protection against abuses. 5. Buyers and sellers at NASDAQ operate the trading floor. 6. Currently, ECNs do not really serve individual investors; they are mostly of interest to institutional investors. 7. Individual investors prefer to buy OTC stocks because of high possible returns.

Exercise 3*. Find terms in the text that match definitions given below and make sentences of your own with each term.

1. an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission

2. an individual or firm that acts as a principal or counterpart to a transaction

3. all information needed regarding the exchange and regulations for a security

4. the ability to meet obligations and if necessary convert assets into cash or its equivalent

5. an electronic quote system providing prices to participants about actively traded common stocks

6. any transaction that is not conducted over an exchange

7. securities trading market for previously issued financial instruments in the primary market

8. a federal agency that regulates the U.S. financial markets and the securities industry

9. the process by which a trade is entered into the books and records of the counterparts to a transaction

Exercise 4*. Fill in the blanks using terms given below.

Policing the Securities Market: An Overview of the SEC

Shortly after the……. crash of 1929, a……. body called the……. was born. Its goal was to restore investor confidence and faith in a financial sector that was notorious for…….. activities……. credit and……… investments. Two significant proposals by the U.S. Congress, the Securities Act of 1933 and the Securities Exchange Act of 1934, led the way to the formation of the SEC and, ultimately, a……. financial……. under government……… The aim of both of these acts was to protect investors from any indiscretions that could arise from:

Questionable……. companies.

Dishonest and unscrupulous individuals dealing in the…….. markets.

The SEC is divided into four main…….. They work together, but have specific areas in which they mandate and ensure……. These departments are Corporate Finance, Market Regulation, Investment Management and Enforcement.

Division of Corporate Finance

This division is responsible for…….. the……. documents that are required to be……. with the SEC by U.S. public companies. Meant to increase……… so that investors are able to make informed decisions, the…….. require companies to provide prudent and truthful disclosure of financial and…….. information, i.e. any information pertaining to a particular business that might be relevant to an investor’s decision to buy, sell or hold the security.

The documents that companies are required to file include the registration statements for public………, quarterly and annual filings (Forms 10-Q and 10-K), annual…….. to shareholders, documents detailing……… and…….. materials sent out to shareholders before……

Division of Market Regulation

This division establishes and maintains…. orderly and efficient markets by regulating the participants in the securities industry. These participants range from the largest clearing corporations and exchanges, which are also known as……., to the various……. firms and investment houses. In short, the Division of Market Regulation establishes the……. of the investment industry.

This division also interprets any proposed changes to existing regulations and reviews any……. over the operations of the securities industry. It maintains constant…….. of market activity to ensure that no policies are being manipulated.

Division of Investment Management

As…….. of the investment management industry, this division ensures the preservation of all rules affecting investment companies and their…….. To make certain that all rules and regulations are being upheld, the SEC requires that all investment companies and federally……… investment advisors file the appropriate documents. More specifically, this division looks at public……. and laws, and makes changes to existing rules if circumstances provide reason to do so.

Division of Enforcement

Working closely with the other three divisions, this group investigates possible……. of securities laws and provides recommendations when further action is needed. Keep in mind that the division of enforcement has only civil enforcement authority; it must cooperate with different………. agencies such as the FBI or local police to bring about…….. charges.

Common violations include………… misrepresentation, deliberate omission of significant information regarding public company filings, market manipulation, violation of……. duties and any related disturbances that affect the smooth operation of the U.S. securities market and the market’s…….

Source: October 21, 2005 (www.investopedia.com)

Terms:

M&As, fiduciary, disagreements, law-enforcement, surveillance, broker-dealer, self-regulating organizations, stock market, filings, regulator, advisors, material, SEC, fraudulent, criminal, easy, insider trading, integrity, hazardous, structured, industry, supervision, public, securities, AGMs, divisions, compliance, overseeing, disclosure, filed, offerings, reports, proxy voting, rules, overseers, registered, regulations, violations, transparency, fair

Exercise 5. Translate into English.

NYSE акционируется

Биржа станет публичной компанией

Старейшая в мире Нью-Йоркская фондовая биржа в январе должна слиться с Archipelago Holdings и стать публичной компанией. Эксперты считают, что объем торгов на объединенной бирже вырастет космически, но ждать выдающихся результатов от ее акций на первых порах не стоит.

Вчера 1366 членов NYSE голосовали за слияние с электронной Archipelago, владеющей Тихоокеанской фондовой биржей. Если сделка состоится (для одобрения необходимо набрать две трети голосов), появится публичная компания NYSE Group стоимостью $3,5 млрд, в которой 70% акций получат члены NYSE и 30% – акционеры Archipelago.