THE GLOBAL REACH - Chapter 5

Investment Banking - It goes where economic growth is

Investment Banker - Follow your clients

United States     Non-Japan Asia

China                Emerging Markets

Eurozone           BRICS

Japan                Frontier Markets

See  data.imf.org

RELATIONSHIP MANAGER - Chapter 6

Definition: This person is responsible for establishing a relationship, maintaining it  and deepening it. A good relationship manager builds so much customer loyalty that the client always gives him the first shot at any new business--and all else being equal, will ultimately award the new business to him because of that long standing relationship.

Client Demands: Consistency, Speed, Ideas (products)

Functions of Relationship manager - Front Office:

  Corporate Finance - Raising Capital / Capital Markets, Primary Market Underwriting / Issuance of Securities

  Sales and Trading /Capital Markets, Secondary Market / Market Maker / Derivatives

  Advisory Services / Research

MARKETING CONCEPTS:

  Transaction Origination:  Knowledge and Relationship manager's primary job is to develop a strong, lasting relationship that leads to generating and printing

transactions. The difference between a run-of-the-mill salesman and a relationship   manager is the length of the sales cycle and the ongoing nature of the relationship.   Whereas a salesman looks to meet an immediate need, a relationship manager looks to meet the immediate and long-term needs of a client.

   Solutions Provider:  A relationship manager has to be knowledgeable and present himself as a person who can provide solutions. Anyone can sell a television or a car, but it requires a relationship manager to solve the complex and varied needs of

clients who are planning for retirement, trying to manage their wealth or exploring    options to sell their business. Due to the long-term nature of his needs, a client must  be able to trust that his relationship manager will always be there to take care of him and help him through any changes.

  Qualifications: There are no formal qualifications for a relationship manager. All that is required is the ability to establish trust, a good rapport, and the ability to

understand a client's needs and provide solutions. Although no formal qualifications

are required, specific industry knowledge or experience is often necessary to

successfully understand a client's needs and provide a fully customized solution.

Trading and Capital Markets Activities - Chapter 7

SECONDARY MARKETS

Types of Orders:

·   Market Orders

A market order is an order to buy or sell at the prevailing market price. (note: “not help market order” – discretion of the broker to execute)

·   Limit Order

A limit order is an order to buy or sell at a specific price or better

  Stop Order (a/k Stop Loss Order)

A stop order is resting order to buy or sell that is activated when the stock trades at or through the stop price. Once triggered automatically on “the book” the order

becomes a market order. The stop order takes two steps to execute (Trigger and then Execution price –next price)

This is designed to protect the profit or prevent a loss if the stock begins to move the wrong direction.

No guaranteed execution at the stop price if triggered (like the limit order does)

  Day Order

An open order that is assumed to be valid until the close of trading on the day – cancelled after the close if not filled

  Fill-or-Kill (FOK) Orders

Broker dealer requesting to fill an entire order at a limit price or better, otherwise the entire order cancels

  Immediate-or-Cancel (IOC) Orders

Like FOK except that partial execution is acceptable.

  Limit on Close (LOC) Orders

These orders are canceled if they do not participate in the closing trade of the day.

  Trailing Stop Order

Sets stop price order at a fixed percentage or amount below the market price.

Trade Settlement: T+3 (Regular way)

MARKET CENTERS

When a member firm’s customer calls a broker to place an order to buy or sell, the firm forwards the order to the market center to be executed. The following are

market centers that are available for trade execution:

1. Exchange (NYSE, Nasdaq) or Floor broker

  The firm may direct the order to that exchange or to a competing exchange. 2. Market Maker

  A market maker is a firm that publishes quotes in a stock and stands ready to buy or sell a given number of shares on continuous basis – required to publish firm quotes.

3. Internalization

  An order maybe placed to a separate division of the member firm to be filled from inventory from the firms’ proprietary account rather than sending it to a

market maker or market.

4. Electronic Communications Network (ECN)

i. Orders may also be ordered through ECN, an electronic trading system that automatically matches buy and sell orders as specific prices

ii. ECN are SEC sanctioned alternative trading systems (ATS) that are open 24 hours

a day and match buy and sell orders. For years the trading needed to be done

between 9.30am-4pm but in the last10 years the demand trading grew to afterhours trading (note volume is low, often leading to higher volatility – care is needed)

EXCHANGE NATIONAL MARKETS

The New York Stock Exchange (NYSE)

  NYSE maintains a physical floor based trading model.

  The NYSE trading model includes several important market participants:

  Designated Market Makers (DMM) – also called specialists

  These individuals bring order and liquidity to an exchange floor.

  Each listed stock is assigned is assigned to a DMM

  Stock exchanges have controls (volume and price movements), so the DMM

knowhow much buying or selling is required, as principal, to keep the stock from running wild.

  Special Liquidity Provider (SLPs)

  Another set of individuals – electronic market maker that is permitted to compete with the DMMs.

  The requirement is different – bid or offer (one-sided).

  Their job is to add liquidity to the market. ·   Floor Brokers

  These individuals are generally employees of the member firms that have a trading license.

  Their primary function is to handle the order flow received from buy-side

customers from the upstairs trading rooms of their employers and other member firms. (Note: Two-Dollar Brokers are floor brokers who receive business from   other floor brokers when they are too busy to handle all of their firms’ orders)

NYSE trading halts and limitations:

New Rule for market halts – New Rule 80B (April 2014):

Level of Market Declines (S&P) from the Previous Trading Day - Halt Times Level 1 7% 15 min

Level 2 13% 15 min

Level 3 20% rest of the day

National Associations of Securities Dealers Automated Quotation (NASDAQ)

  In August of 2006 NASDAQ stock market began to operate as an independent national securities exchange (it used be an OTC)

  Is a screen-based, SEC registered stock exchange.

  Divided into 3 main components:

  Global Select Market (GSM) (larger companies listed)

  Global Market (GS)

  Capital Market

  Minimum listing requirements (GSM, GM) (Initial: 3 Market makers / $4,

Ongoing: 2 Market Makers / $1) - Minimum Number of shareholders owning 100 shares or more.

  Two levels of service (Level 1, 2 and 3)

a. Level 1: This is for Registered Reps and individuals investors (more info)

b. Level 2: This for OTC traders and financial institutions (firm quotes displayed:

ABCD Last $31.10

Market Maker     Bid              Ask              Size

MLCO is willing to buy up to 1,000 shares at 31 and sell up

to 2,000 shares at 31.13. MHMY is willing to buy up to

1,600 shares at 31.10 and sell up to 2,500 shares at 31.20, and so on.

c. Level 3: This is for Market makers - it provides the services of Level 2 plus the capability to enter the system to update quotes and/or display,

OTC MARKETS

OVER THE COUNTER BULLETIN BOARD (OTCBB)

  The OTCBB is an electronic interdealer quotation service for more than 3,300 issues that do not meet the listing requirements of stock

markets such as NASDAQ or NYSE.

  At least One Market Maker per security