Summary: Equity

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• 1 Equity, READING 39 MARKET ORGANIZATION AND STRUCTURE

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• Public (publicly traded) securities

  
  
  
  Public (publicly traded) securities are traded on exchanges or through securities dealers and are subject to regulatory oversight. 

• Physical derivative contract:

  
  

  • You actually receive 100 barrels of oil when the contract expires.
    
  • You then own the physical commodity.
    

• Traditional investment markets

  
  
  
  refer to those for debt and equity. (bonds and stocks)

• To issue a security (=debt, equity or derivative)

  means to create and sell it for the first time to investors in the primary market in exchange for money (capital).

• bonds are generally .... term, whereas notes are ....... term. Commercial paper refers to ...... term debt issued by firms. 

  Long(>5) intermediate(2 to 5years), short (<2years)

• Pooled investment vehicles

  Pooled investment vehicles gather money from many investors to build a professionally managed portfolio.
  Investors share proportionally in the fund’s gains and losses, gaining diversification, expertise, and efficiency, but facing fees, less control, and sometimes low liquidity.

• Exchange-traded funds (ETFs) and exchange-traded notes (ETNs) 

  ETFs and ETNs are pooled investment vehicles that you can buy and sell on an exchange, just like a stock.
  So they trade like closed-end funds, but — and this is key — they behave like open-end funds, because built-in mechanisms keep their prices close to the actual value of the underlying assets.
  That’s what the CFA text means by “special provisions.”

• maintenance margin requirement 

  
  
  
  
  To ensure that the loan is covered by the value of the asset, an investor must maintain a minimum equity percentage 

• Securities dealers provide prices at which they will buy and sell shares. The bid price is the price at which a dealer will ...... a security. The ask or offer price is the price at which a dealer will ..... a security.

  buy, sell

• Execution instructions: market order

  A market order instructs the broker to execute the trade immediately at the best possible price.