International Stock Exchanges

THE GLOBALIZATION OF FINANCIAL MARKETS

The last two decades have witnessed spectacular growth in the world’s financial markets, including foreign exchange markets, Euromarkets, and international bond markets. For example, the daily volume of the foreign exchange markets is greater than one trillion dollars, which is equivalent to almost 10 times the daily volume of commercial transactions of both goods and services worldwide. This importance derives from the transactions carried out by multinational companies and, above all, from financial intermediaries (brokerage firms, banks, and exchange houses), which operate in well-established markets such as London, New York, Tokyo, etc., and in emerging markets, such as Singapore, Korea, Brazil or Mexico.

All this, along with the volatility of exchange rates, interest rates, commodity prices (including oil), and stock asset prices, implies that the main elements of international finance are increasingly relevant, not only for financial operators but also for the administrators of any public or private entity that has any contact with the outside, whether directly or indirectly. These factors are what support all financial activity and of course local markets cannot be exempt from capital movements around the world.

A) BACKGROUND

The profound changes in the international economic and political order today establish a world that would hardly have been possible to imagine just a few years ago.

The end of the cold war, the opening of the Soviet Union and Eastern Europe, German unification, and the various advances in Latin America, among others, open up new horizons for international coexistence and consequently for the possibilities of economic development. The globalization of productive and financial processes has caused a growing interdependence of domestic economies towards and with the participation of new actors in the world sphere.

Thus, global companies appear and multiply, countries classified as recently industrialized develop, and the Pacific Basin transforms from being a center of economic and financial attraction to generating one of the strongest crises that have occurred in recent years. years. On the other hand, the accelerated increase in international trade and regional integration processes, such as the case of the European economic community in 1992 and the North American Free Trade Agreement in operation since 1994, are clear evidence of the new international dynamics.

Financial globalization begins and becomes highly relevant to the extent that the economies of the countries are increasingly interrelated through the exchange of services. Technological advances in systems and communication have proven to be fundamental elements for integration. In this context, the internationalization of financial intermediation has been an integral part of the process and in practice has covered both the banking sector and the capital and debt markets, the latter better known as the bond market. Nowadays banks, brokerage houses, and investment bankers of different nationalities are identified, whose operations are concentrated in the international arena; Without a doubt, this is the characteristic phenomenon of the international financial organization.

B) GLOBAL MARKET CONCEPT

By it is understood the interaction of the main international financial centers, which makes continuous trading possible 24 hours a day and in which intermediaries, instruments, and global issuers intervene, using international information networks such as Reuters, Bloomberg, CNNFN, NBC, etc.…

In the global market, the main markets can be distinguished, made up of the money and capital markets; alternate or auxiliary markets, such as the foreign exchange and precious metals markets, and derivatives, which involve options, futures, swaps, and other hedging instruments. (Including of course structured products).

Virtually all types of operations are carried out in the global market, both nationally and internationally, and it is characterized by its high degree of liquidity and the absence of obstacles or padlocks to the free flow of capital. As a result of the growing globalization in financial markets, efficiency increased by reducing intermediation costs, while an increase in protection alternatives against risks related to the exchange rate, interest rate, and volatility was observed. in the price of securities.

Various factors have contributed to the globalization of financial markets, including technological innovation in information technology and telecommunications; the growing interest of investors to acquire foreign securities to diversify their risks and obtain a higher return on their investment; the elimination of exchange controls and obstacles to capital flows; trends of liberalization and/or deregulation of financial markets; and the appearance of new financial products, such as options, futures, currency swaps, and interest rates, as well as others that also offer greater coverage to the investor.

In the case of technological innovation, this has made it possible to have instant information regarding prices and volumes of operations through computer screens, as well as to buy or sell securities without the need for a physical place to do so, as it would be a stock exchange.

Regarding the relief of regulations in financial markets, this has made it easier for both issuers and intermediaries to extend their operations to markets beyond national borders, expanding their distribution and marketing networks to other countries. Globalization has caused the need to standardize the financial information of issuers, through the definition of accepted accounting principles and practices, as well as the importance of establishing standards and procedures for the custody, settlement, and administration of securities, through systems such as Euroclear and Cedel. Close cooperation between authorities and self-regulatory bodies also plays a determining role in a solid and reliable global market.

It is interesting to observe that the process has not occurred autonomously. The authorities and the stock market community of the countries involved make daily efforts to promote or favor greater globalization.

C) EVOLUTION OF GLOBALIZATION IN FINANCIAL MARKETS

Globalization has been an evolutionary process that began in the 1960s in the exchange markets, as a result of the constant growth that was taking place in international trade. Subsequently, in the 70’s, banking services and debt markets were deepened, with the birth of the Euromarkets. The process accelerated in the 1980s when an important advance was observed in all markets, including capital markets. And it is in the 90s that this globalizing effect is most noticeable, first with the famous “tequila effect”, which had a decisive influence not only in Mexico but throughout the world and more recently the “dragon effect” (Asian crisis ), the “vodka effect” (Russian crisis) and the “samba effect” (Brazilian crisis);

Currently, three main financial centers make up, more clearly, a global financial market: New York, London, and Tokyo. However, there are other capital markets, especially derivative products, that participate prominently on the global scene, such as Chicago and Osaka, in Japan. For their part, well-known markets such as Zurich, Frankfurt, Hong Kong, and Singapore have achieved significant levels of development, particularly the latter, due to the speed in which they position themselves in certain niches of the global market.

In general terms, it is recognized that financial activity that goes beyond borders allows companies to attract resources at lower costs than they would obtain in their local markets. Likewise, investors, mainly institutional ones, have been able to diversify their portfolios and obtain greater advantages, derived from yields and hedging opportunities, than those they would have by limiting the investment scope of their countries of origin. The incorporation of foreign securities traded in auxiliary or derivative markets into their investment portfolios has accelerated the process of internationalization of financial assets.

In summary, the globalization of markets makes it easier for resources to focus on the optimal relationship between risk and return, fostering greater efficiency in capital flows and making resources flow more and more easily toward economies that, due to their degree of development and its potential, offer the best prospects for growth and stability.

STOCK MARKETS AND GLOBALIZATION

Stock exchanges are legally authorized establishments where commercial operations related to securities are carried out in compliance with the purchase and sale orders received by agents or stock market operators whose job is intermediation.

The function of a stock market is the establishment of an investment center and the relationship between savers and investors who seek to place their money to obtain an interesting return and companies that need capital for the development of their businesses. Therefore, the stock markets are the most important sources of long-term capital supply.

On the other hand, the stock market offers the investor the great advantage that listed titles (shares, options, warrants, etc.) allow a daily volume of transactions that can be repeated unlimitedly as an object of either purchase or sale. The stock exchanges were created to facilitate these transactions and to attest to the operations carried out by agents or stock market operators.

As far as movements and trends are concerned, the stock market is extremely sensitive, since it has great capitation power over what happens in the economic world, and it is the most sensitive parameter of economic facts: its sensitivity captures them before are visible to the investing public. In recent years it has been a “thermometer” of economic and social policies, realistically interpreting the measures, and their scope, with which the economic and political authorities influence the progress of the economy.

Securities that may be the subject of transactions on the stock markets must be previously admitted as “official listing”, not being able to be those that come from companies or corporations that do not meet the requirements established by the securities commissions of each country since for In general, these institutions are in charge of regulating the entire stock market.

Now, for there to be operations in the stock market, there must be institutions, entities, or organizations that are in charge of putting the supply and demand of securities in contact, this is where the brokerage firms appear, which are institutions belonging to the stock market, authorized to act as intermediaries before the general investing public with prior permission from a regulatory body.

In all countries where a stock exchange operates, you cannot buy shares or any other title directly; For this, there are brokerage houses, which provide greater security within the stock market operations (terms in which the stock market is called).

Within the same brokerage houses are people called “investment advisers”, also known as brokers; who provide investors with the necessary indications to make adequate planning of their investment, according to the needs of each client. They are people who, in general terms, know the full range of investments related to the stock market.

All investment instruments can be obtained at a brokerage house and the adviser is obliged to know how each one works to later make the pertinent recommendation to the investor according to his or her needs.

THE MOST REPRESENTATIVE STOCK EXCHANGES

AMERICA

• Bogota Stock Exchange, Colombia
• Stock Exchange of Buenos Aires, Argentina
• Santiago Stock Exchange, Chile
• Stock Exchange of Montevideo, Uruguay
• National Stock Exchange, Costa Rica
• Stock Exchange of the West, Colombia
• Guayaquil Stock Exchange, Ecuador
• Lima Stock Exchange, Peru
• Stock Exchange of Quito, Ecuador
• Stock Exchange of Rio de Janeiro, Brazil
• Stock Exchange of São Paulo, Brazil
• Mexican stock exchange
• Stock Exchange of Caracas, Venezuela
• El Salvador Stock Market
• Montreal Stock Exchange, Canada
• Toronto Stock Exchange, Canada
• Vancouver Stock Exchange, Canada
• New York Stock Exchange, United States
• American Stock Exchange, United States
• Chicago Stock Exchange, United States
• NASDAQ, United States

EUROPE

• Barcelona Stock Exchange, Spain
• Bilbao Stock Exchange, Spain
• Madrid Stock Exchange, Spain
• Valencia Stock Exchange, Spain
• Bourse de Paris, France
• Lisbon Stock Exchange, Portugal
• London Stock Exchange, United Kingdom
• The Berlin Stock Exchange, Germany
• The Tel Aviv Stock Exchange, Israel
• Vienna Stock Exchange, Austria

ASIA – OCEANIA – AFRICA

• Australian Stock Exchange, Australia
• Jakarta Stock Exchange, Indonesia
• Johannesburg Stock Exchange, South Africa
• Korea Stock Exchange, Korea
• Kuala Lumpur Stock Exchange, Malaysia
• National Stock Exchange of India, India
• Philippine Stock Exchange, Philippines
• Stock Exchange of Singapore, Singapore
• Stock Exchange of Thailand, Thailand
• Taiwan Stock Exchange, Taiwan
• The Stock Exchange of Hong Kong, Hong Kong
• Tokyo Stock Exchange, Japan

INDICES, MARKETS, SHARES, AND ADR

WHAT IS AN INDEX?

An index is an abstract number that is built with different components to follow the evolution of them as a whole. Within this index, the participation of the parties in it is weighted according to different criteria. The “weight” means the relative weight of each of its components. In the case of the Argentine Merval, it is a theoretical asset portfolio that is built to monitor the evolution of the market.

An index is, then, a fictitious portfolio made up of certain assets in certain amounts, in such a way that, when its components are valued according to the market price at each moment, the total value of that portfolio, or theoretical portfolio, is the number that worth the index, or value of the index.

Naturally, there are many indices: there are different types of assets in different markets.

The Merval Index -short for Stock Market- is a theoretical portfolio of shares that is used as a representative of the behavior of the Buenos Aires stock market.

The Merval Index is made up of the species that represented 80% of the volume of money traded or traded, in the last 6 months, although the review is quarterly. The participation of each species in the Index is proportional to the volume traded: whoever has been traded the most will have more relative weight in the composition of the index. For this reason, species enter or leave the Merval Index every 3 months, while others modify their participation.

But there are also other indices on the Buenos Aires Stock Exchange. Burcap is one of them. This index is made up of the same species that make up the Merval, but where the participation of each of them is proportional to the market capitalization -the number of shares multiplied by the share price- on the day the composition is reviewed.

The last one is the General Index, also a theoretical portfolio that reflects the variation of all the species in the market.

Like the Merval for Buenos Aires, the Ibovespa is a representative index of the Sao Paulo Stock Exchange, the IPSA of the Santiago Stock Exchange, the IPC of Mexico, Dow Jones and S&P500, among others, of the United States market, Nikkei of Japan, or the FTSE in London. Each one has its composition methodology: the Ibovespa uses the same criteria as the Merval but with quarterly reviews based on the volume of the last 12 months. The IPC is reviewed bimonthly based on market capitalization; the Dow Jones represents the variation of 30 industrial companies in the United States, while the S&P500 captures the evolution of the 500 largest companies in the US stock market, including 400 industrial companies, 20 in the transportation sector, 40 services, and 40 financial companies.

In short, all the indices are theoretical portfolios that aim to capture the evolution of a specific market with a certain representativeness, or what is the same, as a “benchmark” of a type of asset in a certain market. Their fame is the product of the representativeness they have regarding the behavior of the shares. Those that most faithfully reflect the behavior of each share are usually the most representative. In this sense, over the years, the famous Dow Jones Industrial Average, owned by the Wall Street Journal, has been the one that has won the best awards.

The best-known indices are from world stock markets such as the NYSE, Nasdaq, Dow jones, SP&500, Merval, and Nikkei, which represent shares. Other indices represent bonds, such as JP’s EMBI. Morgan (from the famous country risk) or commodities with the CRB. Let’s see the Merval.

MAIN INDICES

Ibovespa: Representative index of the São Paulo stock market, Brazil. It is a theoretical portfolio made up of the shares that represented 80% of the volume traded during the last 12 months. The composition of the index is reviewed quarterly.

Merval: Representative index of the stock market of Buenos Aires, Argentina. It is a theoretical portfolio made up of the shares that represented 80% of the volume traded during the last 6 months. The composition of the index is reviewed quarterly.

Lima General: General Index of the Lima Stock Exchange (IGBVL), Peru. It reflects the average trend of the prices of the main shares listed on the Stock Exchange, based on a selected portfolio, which currently represents the 29 most traded shares on the market. Its calculation considers price variations and dividends or bonus shares distributed, as well as the subscription of shares. Its base date is December 30, 1991, = 100.

IPSA: The IPSA is the Selective Stock Price Index of the Chilean Stock Exchange, which measures the price variations of the 40 companies with the largest stock market presence (they are the shares with the highest liquidity or flow in the market).

IPC: The Price and Quotation Index is the main indicator of the Mexican Stock Exchange, it expresses the performance of the stock market, based on price variations of a balanced, weighted, and representative sample of the set of shares listed on the Stock Exchange. The sample size is currently 36 stocks (it has ranged from 35 to 50). This indicator applied in its current structure since 1978, reliably expresses the situation of the stock market and its operational dynamism.

IBC: The Caracas Stock Market Index (IBC) is the arithmetic average of the capitalization of the 15 most liquid titles in the stock market of the Caracas Stock Market, Venezuela. The index level is equal to the sum of the capitalizations of all the shares included in a basket. The price of each share is its market capitalization (number of shares multiplied by the price). In this way, the price movements of the largest titles cause large movements in the index.

Ibex-35: Official index of the Spanish Stock Market made up of the 35 most liquid and highest capitalization values.

Nikkei 225: Index of the Tokyo Stock Exchange. Its name comes from the largest economic daily in the world, the “Nihon Keizai Shimbun”. The Nikkey 225 index includes the 225 largest Japanese companies, listed on the first market of the Tokyo Stock Exchange. The Nikkey was first published on May 16, 1949.

S&P 500: The S&P 500 is the most followed index to get an idea of ​​the overall performance of US stocks. This index consists of the shares of 500 companies that were selected for their size, liquidity (how easy it is to buy or sell their titles), and representativeness by economic activity, including 400 industrial, 20 from the transportation sector, 40 from the services, and 40 financial. Only US companies are taken into account. It is worth noting that the weight of each action within the index corresponds to the proportion that the market value of the company represents within the total of the 500 companies that make up the index. The market value of the capital is equal to the price per share multiplied by the total number of shares.

Dow Jones Industrial Average (DJIA): It is a stock index. Represents the variation of 30 US industrial companies. Like any other, its objective is to measure the average variation of a group of actions to give investors an idea of ​​the evolution of a certain market or sector. In the particular case of the DJIA, these are the main US companies (large and well-known companies). It is different from most indices insofar as its members are chosen without very precise criteria and the weight assigned to each share has to do with its price (normally, the weight of a company within of an index depends on the value of its capital). Thus, it is very unrepresentative of the US markets. However, it is widely followed and quoted because it is the oldest stock index.

NASDAQ 100: Made up of the 100 non-financial corporations with the highest market value that trade their shares on the NASDAQ. The composition of the index is updated quarterly. This index is commonly used as a benchmark by investors heavily positioned in high-tech companies. Like the S&P 500, this index responds to a calculation formula on a weighted basis with the capitalization value of the companies that comprise it.

Composite Indices: The AMEX Composite, NYSE Composite, and NASDAQ Composite indices include all the companies traded in their respective markets. They come to be representative indices of the stock movement of the three main stock markets. The NASDAQ Composite is the representative index of the evolution of the Nasdaq, the American electronic market for companies linked to the technology sector and small capitalization. The index is calculated with base 100 and starts from February 5, 1971.

Russell 1000, 2000, and 3000: 1000 is the index of the 1000 largest US corporations; 2000 is the index of the next largest 2000; the 3000 is the index of the next largest 3000.

DJ STOXX: Global benchmark index of European markets. It has 660 values, selected from 16 countries in the Euro zone, the United Kingdom, Denmark, Switzerland, Norway, Greece and Sweden. It is divided into 19 sector indices. It is weighted by capitalization and is based on 1,000 points on December 31, 1991. This index is reviewed four times a year, in March, June, September, and December.

DJ Euro STOXX: Global reference index in the Euro zone. It has 360 values ​​from the 11 countries of the Euro zone. It is weighted by capitalization and is based on 1,000 points on December 31, 1991. This index is reviewed four times a year, in March, June, September, and December.

DJ STOXX 50: Reference index of the European “blue chips” (the companies with the largest capitalization). 50 values ​​from 16 countries. It is more representative than the STOXX. It is weighted by capitalization and is based on 1,000 points on December 31, 1991. This index is reviewed four times a year, in March, June, September, and December.

DJ Euro STOXX 50: Reference index of the “blue chips” (the companies with the largest capitalization) of the Euro zone. 50 values ​​from 11 countries. It is more representative than the Euro STOXX. It is weighted by capitalization and is based on 1,000 points on December 31, 1991. This index is reviewed four times a year, in March, June, September, and December.

FTSE 100: Known as the Footsie, it is the benchmark index of the London Stock Exchange. It is weighted by capitalization and includes the 100 companies with the highest capitalization traded on the London Stock Exchange. The index is calculated based on the 1000 points on January 3, 1984.

techMARK 100: The FTSE techMARK 100 includes the 100 largest companies listed on techMARK, the London Stock Market where innovative companies linked to the technology sector are listed. This index is weighted by capitalization. It is calculated based on the 2000 points since October 18, 1999.

CAC 40: The CAC 40 is a reference index of the Paris stock exchange. It includes the 40 companies with the highest capitalization listed on the Paris Stock Exchange. The index serves as the underlying for futures and options traded on the respective markets MATIF and MONEP, the French financial futures and options markets. The CAC 40 is calculated based on the 1,000 points since December 31, 1987.

DAX 30: The DAX 30, Deutschen Aktien Index, is the benchmark index of the Frankfurt stock exchange. Selects the top 30 stocks traded on the Frankfurt Stock Exchange. Weight by capitalization. The Dax 30 is based on 1000 points and starts on December 31, 1987. As of June 18, 1999, only those companies listed on XETRA are used to calculate the DAX.

NEMAX 50: The NEMAX 50 is the index of the 50 largest companies listed on the Neuer Markt, the German stock market linked to the technology sector. It is based on 1000 points and starts on December 30, 1997. The securities that are part of this index cannot have a weighting in it of more than 10%. The NEMAX is reviewed in March and in September.

MIBTEL 30: The MIB Telematics index includes the 30 best companies traded on the electronic system of the Milan Stock Exchange. It weights the 30 values ​​that it includes, by capitalization. The MIB is based on 10,000 points as of December 31, 1992.

Euro.NM All Share: The Euro.NM index is calculated on January 16, 1998, based on 1,000 points on December 31, 1997. It is made up of all companies listed on the pan-European Euro.NM platform is made up of the Nouveau Marché (France), Neuer Markt (Germany), Euro NM Amsterdam (Holland), Euro NM Belgium (Belgium), and Nuovo Mercato (Italy) markets.

In addition to the indices described, many other indices represent the performance of specific market sectors such as small capitalization companies, Internet companies, biotechnology companies, etc.

Index data:

MARKETS AND INDICES

Usually, there is confusion about stock market terms that harm the neophyte investor or the stock market apprentice. It is that as in all things in life, also in the market there is usually more than one name for the same thing, or its inverse: the same name for different issues that have little to do with each other.

A classic mistake is to confuse indices with markets. This error is based on the fact that some indices, in general, take the name of the market to which they belong. At the same time in other cases, the official indices of a market are completely unknown while perhaps the representative indicator of that market does not belong to that market.

Let’s see an example: The leading index of the Buenos Aires Stock Exchange is the MERVAL, which brings together the twelve leading companies of that wheel. At the same time, the Stock Market institution is called MERVAL, that is the market itself. Those accustomed to this lexicon have no problems since they know the difference and apply the term as appropriate to the context, however, students or market novices often begin to ask themselves questions about it, confusing the stock market with the index and vice versa.

Another useful example is that of the New York Stock Market (NYSE) where the official index –called NYSE COMPOSITE- is not very famous or consulted, and yet a private index such as the Dow Jones Industrial Average is taken as representative. of that market. The curious thing is that the Dow Jones index has nothing to do with the NYSE, apart from the fact that of its 30 components, 28 are listed on the New York Market. Apart from this fact, it is good to know that Dow Jones is a private index, owned by the company Dow Jones Inc., which in turn belongs to the Wall Street Journal Group. The Dow Jones Industrial Average is modified by the decision of the editors of the famous newspaper after an exhaustive analysis.

This same case is repeated in the London Stock Exchange, of which the only representative index is the FTSE – phonetically futsi – which curiously belongs to the Financial Times newspaper.

Moving on to the points, the truth is that they mean absolutely nothing. This may come as a surprise, but the following should be taken into account. All indices have to have a start date when they were assigned a level. This can be one point, 10 points, 100 points, or 1,000 points. It’s not important. But from that date, the level (the points) will move according to the average variation of the shares that make up the index. For example, if an index closed one day at 100 points and the following day the price of its members’ shares rose 5% on average, it will close that day at 105 points.

Therefore, it is worth remembering that two indices cannot be compared. That is if the Nasdaq Composite closed the day at 2,000 points and the DJIA at 10,000, it does not mean that the second is worth five times more or anything like that. The only thing that must be taken into account in an index is its variation. Thus, a valid inference is that if the DJIA was at 10,000 twelve months ago and now it is at 12,000 points, in that period the average variation in the price of the shares that comprise it was 20%.

We should not be confused about whether the index goes up or down, indicating that all companies have done so. It can perfectly happen that the index rises during a period and several stocks fall in price. The index is also taken as a measure of investment comparison. For example, I invest in particular stocks and compare my performance to the index to see if I’m above or below average. One characteristic of the indices is that being a group of assets, they represent an important diversification, they reduce their risk, so we will usually see that the index reflects less volatility than the individual assets that compose it.

Indices are so important that even valuation methods consider it almost impossible to beat them in performance. We can say that 90% of actively managed funds (seeking to maximize performance) do not beat them. That is why it is not convenient to trust in Mutual fund advertisements that assure amazing returns, it is very difficult to beat the index consistently.

MOST REPRESENTATIVE MARKETS

London Stock Exchange: London market, traditionally was directed by prices through market makers, until the implementation of the SETS (Stock Exchange Trading System) at the end of 1997, the date from which, the negotiation by prices are combined with the directed by orders. The sessions take place from Monday to Friday, from 9:00 a.m. to 4:30 p.m. Its main indicator is the FTSE 100 based on 1000 points and starting on January 3, 1984. The market capitalization in April 2000 amounts to 3,004,429 euros. It is important to take the Libor rate as reference data. Libor Rate (London InterBank Offering Rate), is the base of the interest rate paid on deposits between banks in the Eurodollar market (term deposits in US dollar denomination). The most common modalities are 3 months, 6 months, and 1 year. The Libor rate set in the Wall Street Journal is the average of the rates set by the five largest banks (Bank of America, Barclays, Bank of Tokyo, Deutsche Bank, and Swiss Bank). It is the interest rate determined day by day in the interbank market in London, for international credits and loans of fluctuating rates. It is used to update the rate of loans that have been contracted with a variable rate and mostly with annual readjustment.

Paris Stock Exchange: The French market is governed by a continuous automated trading system. Settlement is made on D+3. The sessions take place from Monday to Friday, with an opening stage from 8:30 a.m. to 9:00 a.m. (where orders can be entered, modified, and canceled but not operations) and an open trading stage from 9:00 a.m. to 5:30 p.m. the operations). Both legs of the trading sessions end with a 30-second random closing auction. The main indicator is the CAC-40 whose start was on December 31, 1987, and based on 1,000 points. The market capitalization in April 2000 is 1,602,093 euros.

Frankfurt Stock Exchange: Orders in the German market are placed through a continuous trading order system called XETRA. Settlement is made on D+2. The sessions take place from Monday to Friday, with an opening stage from 8:30 a.m. to 9:00 a.m. (where orders can be entered, modified, and canceled but not operations) and an open trading stage from 9:00 a.m. to 5:30 p.m. the operations). Both legs of the trading sessions end with a 30-second random closing auction. The main indicator is the DAX-30 whose start was on December 31, 1987, and based on 1,000 points. The market capitalization in April 2000 stood at 1,655,797 euros.

Italian stock market: The Italian stock market has an electronic system that interconnects the different variable income parcels of that country. Settle the operations in D+5.

Euro.NM: The Euro.NM is a pan-European trading platform made up of the Nouveau Marché (France), Neuer Markt (Germany), Euro NM Amsterdam (Netherlands), Euro NM Belgium (Belgium), and Nuovo Mercato (Italy) markets. Innovative companies linked to the technology sector are listed on the Euro. NM.

New York Stock Exchange: The New York Stock Exchange (NYSE), popularly known as Wall Street, still trades in rounds and sessions take place Monday through Friday, from 9:30 a.m. to 4:00 p.m. (New York time). The parquet is made up of 17 circles (trading posts) in which the shares are traded. Settlement is made on D+3. The Dow Jones Industrial (known as Dow Jones) started on October 1, 1928. This index, a mandatory reference at an international level, is made up of the 30 most liquid stocks on the NYSE. These are generally the most important in the US industry and, since 1999, it has also included NASAQ values ​​in its calculation. The market capitalization as of May 2000 was $16,700,000,000.

NASDAQ: Electronic market, pioneer worldwide in listing companies with high growth potential, linked to cutting-edge technological sectors. The NASDAQ was born in 1971 and is currently the largest by volume of business and number of listed companies. Sessions are held Monday through Friday, 9:00 a.m. to 4:00 p.m. (Washington time).

Tokyo Stock Exchange: The Tokyo Stock Exchange is the most important in Japan and one of the most important in the world by business volume. It is an obligatory reference market for the study of Asian markets. Despite the large volume of its transactions, it

maintains a part of its business through the “corros” system.

ACTIONS IN USA

As a source of operation for their investments in equipment, industrial plants, and services, some companies choose to issue shares. The first time a company offers these shares is called a primary placement, or IPO (Initial Public Offering).

These instruments are traded through markets such as the NYSE (New York Stock Exchange), AMEX (American Stock Exchange), and the NASDAQ (National Association of Securities Dealers Automated Quotation), among others. The shares are placed in these places where they will be subsequently traded in a fully liquid secondary market.

Similarly, the stock market is one of the main investment alternatives for economic entities seeking high returns.

The North American stock markets are the most liquid in the world in this line and represent an excellent investment opportunity for non-US clients since foreigners do not have to pay taxes on the transactions they carry out, nor on the capital gains achieved.

Stocks can be affected by a “split”. Reduction of the nominal value of the shares. This technique is used to spread more ownership of the stock market and allow greater liquidity for the securities, whose prices are lowered when the face value of the issued shares is lowered. It occurs when the shares have a high value and consist, schematically, of the following: “we have a share worth 100 euros, its value is high because to buy a single share we will need 100 euros (16,638 pesetas). What is done is that the value is divided, for example, by 100 and thus we have 100 shares of 1 euro (166,386 pesetas)”.

Splits are frequent to adapt the values ​​to euros the arrival of the European currency caused most of the listed companies to double their nominal value (split).

The psychological effect observed in the market when reducing the nominal value is that the value is cheap and is usually accompanied by a slight rise in the days after this operation is effective.

Contrasplits can also occur, which consist of the opposite, it is about making the shares have a higher value and thus harm speculation.

ADR’s

The ADRs (American Depositary Receipts) are titles of foreign (non-American) companies quoted in the main markets of the United States and issued by an American Bank (Depositary Bank).

Illustratively, there is the case of CANTV in Venezuela. This company issued shares on the Caracas Stock Exchange and ADRs on the New York Stock Exchange. Each ADR is equivalent to 7 shares of the company, the issuing domestic bank was Lehman Brothers.

Through a stock exchange organization, clients will be able to exchange shares of a company for the corresponding amount of ADRs, or vice versa, canceling the expenses that are incurred when carrying out this operation. The purpose of this type of transaction is to carry out arbitration. This is achieved when, for market reasons, the purchase value of a share in one place is less than its sale value in another stock market, contemplating the expenses incurred. In this case, there is the possibility of generating profit immediately. However, the constant evolution of information technology around the world and the increasing access to information from investors and financial institutions reduce these possibilities.

THE AMEX STOCK EXCHANGE (AMERICAN STOCK EXCHANGE)

Its beginnings go back to the end of the 17th century. By 1860 it had taken steps to become an established and recognized exchange. It nearly disappeared during the depression of 1929 but managed to come out stronger even after World War II. In the mid-1970s, he defined the operational structure that currently governs it. In the 1990s, it merged with NASDAQ, becoming one of the associated companies of that organization.

As the entity that facilitates transactions, AMEX has an advanced technological market system, where specialists play a critical role in the entire transaction mechanism. Four different elements intervene to ensure that AMEX works properly: the auction market, specialists, registered dealers, and floor brokers.

AUCTION MARKET

In this market, prices are traded for a wide variety of products, shares, options, exchange-traded funds (EFTs), and structured products, which are determined in a public offer for purchase and sale. By centralizing the flow on the trading floor, orders are given priority, executed by time and sequence regardless of size or source, and investors trade to achieve the best price. AMEX’s sophisticated market structure is based on three primary objectives:

• Liquidity: Under normal circumstances, investors should be able to sell and buy reasonable volumes of securities (the market should have depth) at prices equal to or close to previous trades (the market should have continuity). Also, under normal circumstances, there must be sufficient liquidity to reduce volatility, resulting in market order.
• Efficiency: trading on AMEX should be done at the lowest possible cost to the investor. Since buyers and sellers can negotiate directly with each other, negotiations are reduced, resulting in a lower total cost of execution for both small and large investors.
• Reliability: In AMEX, the interests of investors come first, so they must obtain the best possible price. As a result, the market structure provides transparency, which means that all buying and selling is done in one place and at the same time, at the opening, guaranteeing that both buyers and sellers have an equal opportunity to receive the best price.

SPECIALISTS

The negotiation of each AMEX transaction is supervised by a floor specialist. Specialists are highly experienced market professionals from industry-leading financial firms. As members of AMEX, they carry out a series of functions and must meet specific obligations to fulfill their responsibilities to maintain reliability and order in the market.

• Specialists serve as facilitators, using their extensive market knowledge to advise buyers and sellers, helping each other. This ability is particularly important when large amounts of securities are traded.
• The specialists serve as auctioneers, ensuring that the interests of both buyers and sellers are adequately represented, and that transaction procedures are carried out smoothly and efficiently.
• Specialists comply as promoters when there is insufficient interest in accommodating both buyers and sellers at last-date prices. In these instances, the specialists buy or sell from their accounts, to improve the continuity and liquidity of the price.
• Specialists act as brokers’ agents or agents, following defined orders or on behalf of clients. With that, they ensure that the market reaches the specified price limit.
• The specialists are required to maintain reliability in the securities to stabilize the prices of their securities, as well as to improve the price of these, to make them more reliable.

REGISTERED NEGOTIATORS

Also known as market makers, AMEX members provide an additional source of liquidity for securities traded on the Exchange. As part of the trading crowd, they trade on their account and increase the role of specialists, providing price continuity and liquidity on both sides of the market.

FLOOR BROKERS

Floor brokers, both commission agents and independent, are members of AMEX who participate in the stock market game to achieve the best price for their clients. Members can submit orders to floor brokers, to be executed on the trading floor.

CARRYING OUT TRANSACTIONS

The members of the Stock Exchange can execute purchase and sale orders through automated systems or manually. AMEX, however, does not offer “on-line trading”, that is, the online transaction of securities, as NASDAQ does.

Automated order processing:

Orders are sent to the trading floor by member firms, entering them into the Common Message Switch (CMS). After performing specific checks, the CMS sends them to the Booth Automated Routing System (BARS) for handling on the trading floor or to the Amex Order File (AOF), which retains the order data and directs it to the service. execution method: Amex Point-of-Sale Equity Display Book (POS), Amex Options Display Book (AODB), or Automatic Execution (Auto-Ex).

The systems allow brokers to control the transaction process themselves, allowing the execution of tasks in an extremely efficient manner, virtually eliminating the use of paper. Systems can handle all kinds of values.

The CMS allows quick access to information, validates members’ access rights to the system, and properly formats messages.

The BARS improves the flow of information, allowing adequate eligibility in the system, and correctly directing where the transaction should arrive. Using touch-sensitive screens, booth operators can redirect data to wireless devices held by brokers or to a specific printer.

The AOF centralizes all transactional processing systems. Accepts orders from the CMS and retains some data for administrative details, routes incoming messages, records and retains execution details routing reports to different firms, routes reports to market data systems, and provides after-hours information to members, brokers, and specialists.

The POS is an electronic order book that refines the auction market. Handle large amounts of stock information and execute groups of individual or collective orders. Specialists can set distinctive parameters for their securities, so they can execute broker orders, generate transaction reports, update prices, investigate orders, and respond to administrative messages, all within seconds.

The AODB is an electronic order book that provides a highly automated and flexible tool for specialists, who can configure it to manipulate large amounts of information, such as option orders by series, price, and time, and compete in the market for options traded on multiple markets.

Auto-ex offers automatic execution of client orders for options and ETFs. When the price in AMEX is equal to the best national price, it allows the price to be automatically improved.

Manual order processing:

Orders that have not been entered into the AMEX automated system may be sent to the floor by phone, through a member firm’s software, or a wireless device or printer. These generally complex orders can be taken to specialists for promotion between buyers and sellers.

On the floor, a broker can choose to “systematize” an order, instead of manually trading it. To do that, you need to take it to a specialist, to be entered by the AOF or BARS, and routed to the appropriate processing applications. Eligible orders left with specialists are systematized through the “Order Entry” feature of the specialist’s electronic book.

AMEX ETF Services:

They have been offered since 1993 when they were introduced to the market. What is sought with the Exchange Trades Funds is to provide consulting and information services. Services are offered for product concept review, assistance in selecting service providers, and review of data requirements necessary to help the investor.

Data Market Services:

It offers investors, investment portfolio managers, brokers/dealers, and registered representatives a window to trade on AMEX. It is offered in two ways:

1. Direct Data Feeds: Firms that choose to obtain real-time data through the Security Industry Automation Corporation “SIAC”.
2. Market Data Vendors: Vendors act as dealers to real-time and other offline data, such as market news, statistics, company information, and analytics. They rely on electronic media such as satellite transmissions and the Internet.

Networks A and B:

Prices in AMEX are governed by two computer networks. Network A provides price information and the latest available information to NYSE listed items. Network B provides information available from AMEX and regional exchanges. Information time is delayed by 20 minutes, it is not online.

In addition, AMEX provides direct links through the Internet to real-time data vendors as a service to its users. To help facilitate the selection of a real-time data provider, vendors have indicated which of the following services are supported in their products:

• AMEX Equities (network B): access to auctions and last sale data for all offers admitted to trading on AMEX regional exchanges.
• AMEX Options (OPRA): Access to prices and trading data through the Options Price Reporting Authority for AMEX-listed options.

Due to the high number of customer requests, vendors are also asked to indicate if they offer Internet-based products. Since AMEX does not adhere to any vendor service, third-party dealers who offer real-time data can establish their business through an electronic system.

AMEX MEMBERSHIP

The AMEX is made up of 834 regular members, 30 option principal members (OPMs), and 10 holders with limited trading permissions (LTPs). The “chairs” can be bought, sold, or rented through the auction market of the Stock Exchange or directly from their owners. Member types:

• Regular Member: authorized to do business with all types of securities traded on the Exchange. He can trade as a principal or agent for his account or his organization.
• Options Principal Member: An OPM can trade all types of securities and other derivatives traded on the Exchange. You cannot act as a specialist and can only act as a principal for your own or your organization’s account.
• Limited Trading Permission: An LTP holder may trade a principal in options and certain derivative products, including SPDRs, DIAMONDS, and the Nasdaq-100 Index.
• Associate member: authorizes the holder to electronically access the trading floor. To be an associate, the Exchange asks for a price of 5% of the percentage of the last sale of associate positions that was negotiated. In addition, associate members must pay an annual fee of $61,262 for electronic access.

MOST COMMON TRANSACTION FUNDS

The most common funds traded on AMEX are the Nasdaq-100 Index Tracking Stock (QQQ), SPDRs (SPY), and DIAMONDS (DIA).

NASDAQ-100 INDEX TRACKING STOCK (SYMBOL: QQQ)

Investors who invest in QQQs, known as “Exchange-Traded Funds” or ETFs, own a part of an investment fund called the “NASDAQ-100 Trust”. The NASDAQ-100 Trust contains the 100 stocks that make up the NASDAQ-100 Index. In this way, the QQQs are supposed to approximate the behavior of the NASDAQ-100. Consequently, QQQs behave like index fund but are bought and sold like a common stock. The investor who buys shares of the QQQs is indirectly buying the shares of the 100 companies of the NASDAQ-100. The value of QQQs is approximately 1/40 of the value of the NASDAQ-100 index. For example, if the NASDAQ-100 is at 1,600 points, the price of QQQs should be approximately $40 per share.

1. It allows you to trade the shares of the 100 largest companies in the technology sector of the market with a single transaction.
2. It allows you to buy or sell “the market” even if you can’t make up your mind on a specific stock to buy or sell.
3. They can be bought or sold throughout the day (just like a normal stock).
4. They can be sold “short” at a “downtick” (drop in the price of the shares) at any time (something that is not allowed with a normal action).
5. Its immense daily volume (liquidity) allows the investor to easily buy or sell the stock – it is one of the highest-volume stocks on the market.
6. Since the NASDAQ-100 moves roughly the same as the NASDAQ Composite (NASDAQ’s most popular index), QQQs can be used to get a quicker indication of the short-term trend of the NASDAQ Composite than the index itself.

Stocks in the NASDAQ-100 Index

STANDARD & POOR’S DEPOSITARY RECEIPTS (SYMBOL: SPY)

Investors who invest in the “Spiders”, known as “Exchange-Traded Funds” or ETFs, own a part of an investment fund called the “SPDR Trust”. The SPDR Trust contains all 500 stocks that are part of the Standard & Poor’s 500 Composite Stock Price Index (also known as the S&P500 or Standard & Poor’s 500). In this way, Spiders are supposed to approximate the behavior of the S&P500. Consequently, Spiders behave like an index fund but are bought and sold like a common stock. The investor who buys shares of the Spiders is indirectly buying the shares of the 500 companies in the S&P500. The value of the Spiders is approximately 1/10th of the value of the Standard & Poor’s 500 Index. For example, if the Standard & Poor’s 500 is at 1,200 points, the price of the Spiders should be about $120 per share. Some of the advantages of trading Spiders stocks are:

1. It allows you to trade 500 of the largest companies in the market with a single transaction.
2. It allows you to buy or sell “the market” even if you can’t make up your mind on a specific stock to buy or sell.
3. They can be bought or sold throughout the day (just like a normal stock).
4. They can be sold “short” at a “downtick” (drop in the price of the shares) at any time (something that is not allowed with a normal action).
5. The S&P500 is a well-known index of the United States stock market.

Top 10 Stocks in the S&P500 Index

DIAMONDS (SYMBOL: DAY)

Investors who invest in the “Diamonds”, known as “Exchange-Traded Funds” or ETFs, own a part of an investment fund called the “Diamonds Trust”. The Diamond Trust contains 30 stocks that are part of the “Dow Jones Industrial Average” index (also known as the “Dow”, the DJIA, or “The Stock Market”). In this way, the Diamonds are supposed to approximate the behavior of the Dow. Consequently, Diamonds behave like an index fund but are bought and sold like a common stock. The investor who buys shares of the Diamonds is indirectly buying the shares of all 30 Dow companies. The value of the Diamonds is approximately 1/100 of the value of the DJIA index. For example, if the Dow is at 10,200 points, the price of the Diamonds should be approximately $102 per share. Some of the advantages of trading Diamonds shares are:

1. It allows you to trade 30 of the strongest stocks on the market (“blue-chips”) with a single transaction.
2. It allows you to buy or sell “the market” even if you can’t make up your mind on a specific stock to buy or sell.
3. They can be bought or sold throughout the day (just like a normal stock).
4. They can be sold “short” at a “downtick” (drop in the price of the shares) at any time (something that is not allowed with a normal action).
5. The Dow Jones Industrial Average is the oldest and most famous barometer of the United States stock market.

Stocks in the Dow Jones Industrial Average Index

RELATIONSHIP BETWEEN AMEX AND NASDAQ

AMEX’s success is based on innovation and diversification. Today it is the only primary market that actively trades equities (common capital in shares of a company), options, and ETFs under one roof. After having merged with Nasdaq, the opportunity has been given to trade shares of said exchange. AMEX can create deep liquidity for large institutional orders. Firms and institutions can find deep liquidity in Nasdaq securities and execute large blocks of shares at a single price.

The full move to trading Nasdaq products will take place in the third quarter of 2002. The program will be launched in several phases beginning with Nasdaq-100 stocks and then the S&P 500 stocks.

The specialist firms authorized to trade Nasdaq securities on the AMEX floor are Bear Wagner Specialists; Spear, Leeds & Kellogg; Cohen, Duffy, McGowan; Equitec Specialist; Helfant Group and Performance Capital Group. Nasdaq securities will be traded in the same way as AMEX securities.

MARKET PERFORMANCE

During 2001 and this year, the situation has been difficult for the AMEX Composite Index (XAX). It has declined 5.6% compared to a 10.2% decline for the NYSE, a 21.1% decline for the Nasdaq, and a 13% decline for the S&P 500. However, since 2000, the XAX has consistently outperformed other indices both domestic and foreign.

MOST ACTIVE EQUITIES

THE NYSE STOCK EXCHANGE (NEW YORK STOCK EXCHANGE)

The NYSE traces its origins to the signing of the Buttonwood Agreement of 1792 when 24 brokers met under a budding tree at what is now 68 Wall Street. The current building was inaugurated in 1903 and is located at 18 Wall Street. It was authorized as a national stock exchange entity on October 1, 1934, by an agreement of the SEC. There was a governance committee until 1938 when the Exchange hired its first paid president and created a 35-member board of directors. The board included members of the Stock Exchange, non-member participants from both New York and out-of-town firms, as well as public representatives.

In 1971, the Exchange was incorporated as a non-profit organization. In 1972 the members voted to replace the board of directors with a board of 25 directors, made up of an Executive Director, 12 public representatives, and 12 representatives of the securities industries. Subject to board approval, the Executive Director may appoint a President, who would serve as director. Additionally, at the discretion of the board, a Vice-Director may be elected who would serve as director. Likewise, 14 different committees are in charge of looking after the interests of the Stock Exchange in different markets and locations throughout the planet.

The New York Stock Exchange has a trading system similar to AMEX. It is an auction market. The shares are sold concerning the economic offer and bought for the most affordable price. Prices are determined by the law of supply and demand. On an average day, more than 1.2 trillion shares, valued at more than $43 trillion, trade on the NYSE. More than 2,800 companies are listed, expanding the market with their combined stocks at a rate of more than $10 trillion.

State-of-the-art strategic posts, containing a variety of information, are distributed on the trading floor with the data of each traded share. The NYSE can trade 6 trillion shares in a day and can handle 2,000 per second. A recent technological improvement called NYSE MarkeTrac was introduced, it is a virtual source of information and data that operates under a 3-dimensional connection, to indicate the point of sale on the trading floor.

The NYSE is self-regulated and governed by a rigid set of rules approved by the Securities and Exchange Commission (SEC). More than a third of the Exchange’s employees work in regulation to ensure reliability for all investors. Membership in the NYSE is called a “chair.” There are currently 1,366 that can be purchased or rented.

HOW TO INVEST IN NYSE?

The first step that must be followed is the selection of the stock intermediary, which are the brokerage firms or brokerage firms, which will allow access to the American stock market. The final choice should be carefully evaluated, as many options will be found, including:

• Stock brokerage firm or traditional brokerage company: Offers personalized attention and abundant research (market research). However, it usually has access limitations (account opening with high minimum amounts) and/or high costs (commissions equivalent to a percentage of the amounts traded). Examples of this are Morgan Stanley, Lazard Freres, Westfalia Investments, and Donaldson Lufkin & Jenrrete.
• Discount house (Discount Broker): They charge very low commissions and require small amounts to open accounts, but generally, they lack sufficiently trained personnel to guide the most advanced customer. An example of them is Charles Schwab and TD Waterhouse.
• Online houses: They are usually a kind of discount house with the benefits of “research” (market research) offered by a traditional brokerage house. Its great defect is the lack of physical contact that allows the investor to feel confident, as well as some technological deficiencies that will be overcome over time. An example of these houses is Datek, Ameritrade, Etrade, and some traditional companies that launched their online versions such as DLJ and Direct Morgan Stanley Online.

When the brokerage firm has been selected, one of its executives must be contacted -maybe through the Internet-, to follow the account opening process, which generally involves the following steps:

• Signature of the contract for cash purchases (Cash Agreement) or financing (Magin Agreement), depending on the choice, although usually only the latter is signed since it covers both options.
• Fill out the “Application of the Account” form in which all the personal data are indicated.
• Signature of the beneficiary form in case of death, if required.
• Money transfer or check sent. Once an account number is assigned, the funds that will be used to make the investments must be sent.

With this type of account, you can invest in acquiring shares of any company listed on the US stock exchanges, in international mutual funds (for foreign investors – offshore), and in bonds of international companies.

TRADABLE INDICES WITH GREATER ACTIVITY

These are the symbols of the indices or sectors that are bought and sold like stocks and that have the largest buying and selling volume. They are also called ETFs or “exchange traded funds”. Since they can be bought and sold just like any common stock, an investor who wants to make money with a rise or fall in a sector or stock market index can buy or sell “short” the corresponding ETF. This would occur without the investor having to invest in the shares of any specific company.

When day trading (buying and selling on the same day), the investor wants to make sure that a stock has enough volume (liquidity) during the day to be able to buy and sell that stock easily. Not many tradable indices have a lot of volumes, but these three do, making it possible to buy and sell them just like regular high-volume stocks.

THE TRANSACTION FLOOR

The first impression of the NYSE trading floor can be captivating. In an area of ​​48,000 square feet made up of 4 similar rooms, professionals assisted by computers and state-of-the-art communications equipment, sell and buy shares when they hear the bell ring.

While the trading floor may seem isolated, activity is closely monitored to maintain market reliability and order. The NYSE is governed by very strict rules that ensure the transparency and efficiency of trading billions of shares every day.

MARKET PROFESSIONALS

Market professionals aided by the latest technology represent the orders of buyers and sellers, adjusting the operation to supply and demand.

The two main positions on the trading floor, where trades take place, are brokers and specialists. Each of them has a membership that entitles them to trade on the Stock Exchange.

Brokers receive orders from the public to buy or sell shares. Two different types of brokers work on the floor: “house brokers” and independent ones. House brokers are those who work for NYSE member brokerage houses. These highly trained professionals buy and sell securities for their institutional clients. Most independent brokers are “shortcut” brokers, who trade with the institutional public for affordable commissions.

TYPES OF ORDERS

There are different types of orders to buy or sell shares. Some of the most common are:

• Market order: It is an order that an investor wants to buy or sell shares at the best available price. They instruct the broker to buy or sell shares “at the market.”
• Limit Order: An order in which the investor specifies a price at which to buy or sell. While a market order is executed immediately, in the case of limit orders, the price might not reach the level specified by the investor and it would not be executed. A limit order might only last one day, which means that it is automatically canceled if it is not filled by the end of the day. Or an investor could specify it as GTC (good ’til canceled), which means that the order will be active until it is executed or the investor issues other instructions.
• Stop Order: A stop order to buy becomes a market order when a transaction in the security increases the value of the share price after it has been placed on the trading market. A stop-sell order becomes a market order when a transaction in the security decreases the value of the share price after it has been placed on the trading market.

HOW IS A SHARE BOUGHT OR SOLD?

The following process summarizes how a transaction is carried out on the NYSE. It will be viewed from 3 different perspectives: the buyer, the seller, and the market professional executing the transaction.

• Individual A decides to invest in the market.
• Said individual has been thinking of investing in the New York Times Co. So he calls his broker, who is a member of the NYSE, to obtain a share of NYT shares; that is, he must find the best auction to buy and the lowest asking price.
• At the same time, individual B decides to sell 300 shares of NYT to help pay for a new car.
• Check the NYSE website to find out how much the NYT stock is trading for.
• Both the broker and individual B find out what the fee and price are, in an electronic system that continually updates information on the NYSE floor.
• After speaking with the broker, Individual A instructs him to buy 300 shares of NYT at the market price.
• Individual B, with the help of an online system, puts his 300 shares up for sale.
• Both orders are sent to the NYSE trading floor via the SuperDOT System (Designated Order Turnaround System, in which more than 95% of the operations are traded through PCs, and handles most of the smaller orders) to the specialists, or to through the BBSS (Broker Booth Support System, advanced computer system for trading on the floor) to a broker with wireless equipment. In this case, since the orders are small, they will be shipped by SuperDOT.
• On the floor, the specialist in charge of NYT ensures that transactions are executed reliably and orderly.
• If floor brokers are handling the order, they compete with other brokers in the crowd to get the best price for their clients.
• After the transaction is executed, the specialist from his computer sends the information to the firms, originating the respective orders and consolidating them, so that they are recorded on tape, which is done with every transaction.
• The transaction is reported by the computer and appears in a few seconds on the respective tape, which is shown all over the world.
• The transaction is processed electronically, crediting Guy A’s signature and debiting Guy B’s signature. Guy A’s broker calls him and tells him at what price he bought the 300 shares of NYT. In a couple of days, he receives a confirmation in the mail. Individual B receives confirmation from your brokerage firm electronically on his computer in seconds. These confirmations describe the trade, its terms and conditions, and the exact amount paid or received.
• Individual A applies to his account within 3 business days of the transaction, sending payment to his brokerage firm for the 300 NYT shares, plus commission.
• Individual B is also applied to his account within 3 business days. Your account will be credited with the proceeds from selling the shares, less the commission.

SAFETY AND REGULATION

The security system that monitors the entire operation of the NYSE is called Stock Watch. Monitor suspicious trading signals such as why a stock price suddenly fluctuates without a proper explanation. Highly trained investigators determine what has occurred.

Regulation is determined by the Regulatory Pyramid. It is made up of the United States Congress, the Securities and Exchange Commission (SEC), the regulatory organizations of the NYSE, and individual brokerage firms.

MARKET RATES ON NYSE

When economic indicators point to a healthy and growing economy, companies make money, the future looks good, and people have money to invest. When this happens, stock prices generally go up, which is called a bull market. By contrast, when the economy is down, businesses don’t make much money, and people lose their jobs and have less money left over after meeting their needs, stock prices fall; this is known as a bear market.

STOCK TYPES

Income stocks: They pay unusually large dividends that can be used as a method of generating cash inflows without selling the stock, but the price generally doesn’t grow very fast.

Blue-Chip stocks: they are issued by very solid and profitable companies, with long histories of sustained and stable growth. They typically pay little but regularly and maintain a reliable price through the ups and downs of the market.

Growth stocks: Issued by small companies experiencing rapid growth in their industries. They typically pay little or no dividends because the company needs all of its earnings to finance expansion. Since they are issued by companies with no proven historical record, their stocks are riskier than other types.

Cyclical stocks: they are generated by companies that are affected by economic variations. The prices of these stocks tend to fall during recessions and rise during booms. Examples of companies of this type are automobiles, heavy machinery, and construction.

Defensive stock: they are the opposite of the cyclical type. They are generated by companies that produce food, beverages, drugs, and insurance, typically holding their value during recessions.

NASDAQ (NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION)

It is an electronic market, a pioneer worldwide in listing companies with high growth potential, linked to cutting-edge technological sectors. The NASDAQ was born in 1971, after obtaining authorization from the Security and Exchange Commission (SEC), the stock market financial regulatory body of the United States. It is the largest market in the US by dollar volume and repeatedly breaks equity and money records. After extensive restructuring, in 2000 Nasdaq became a fully shareholder-driven, for-profit company. Between 1997 and 2000, it launched 1,649 public companies and in the process generated $316.5 billion. Currently, it continues to increase its capacity in the volume of transactions, being able to trade 6 billion shares in one day.

His work vision is to facilitate capital formation in both the public and private sectors by developing, operating, and regulating the most liquid, efficient, and reliable stock market in existence. His vision is to build the world’s first global stock market. A global market of markets within a network of networks, linking poles of liquidity and connecting investors from around the globe, ensuring the best possible price for securities at the lowest possible cost.

As the largest electronic exchange, Nasdaq is not limited to one place. Instead, a sophisticated computer and telecommunications network transmits real-time share prices and trading data to more than 1.3 million users in 83 countries. Without limits or borders, the “open architecture” of the Nasdaq market allows an unlimited number of participants in the transaction process. Nasdaq currently lists the stocks of more than 4,100 leading companies and each year helps many more enter the stock market.

WHO TRADES ON NASDAQ?

Trading on Nasdaq is not limited to a fixed number of participants. This allows a large number of firms with extensive business models and technologies to connect to the network provided by Nasdaq and compete on equal terms. Rather than forcing investors to buy or sell securities through a financial firm, Nasdaq links to a wide variety of competitors and participants, so you can choose who you trade with. All firms on Nasdaq must be authorized by the Securities and Exchange Commission (SEC) and be registered with both Nasdaq and Nasdaq Regulation. Examples of firms that trade on Nasdaq:

• Market generators: it is a structure of firms, made up of more than 500 companies that trade on the Stock Exchange. They act as dealers for the securities. They are also known as dealers, they are unique to the market since they commit their own capital to the values ​​traded. Then, they redistribute the shares as needed. They are required at all times to post their auction and asking prices on the Nasdaq network, where they can be viewed and accessed by all participants. By being willing to buy and sell shares using their own funds, generators add liquidity to the market, ensuring that there are always buyers and sellers and enabling trades to be conducted quickly and efficiently.
• Electronic Communication Networks: The Nasdaq network connects alternative trading systems in the market, which are known as Electronic Communication Systems (ECNs). ECNs provide electronic facilities that investors can use directly with others. As market participants, ECNs show current orders for shares. Additionally, they provide investors with a way to anonymously introduce securities to the market. Unlike market makers, ECNs simply operate as order-accepting mechanisms and do not maintain their own inventories.
• Order Entry Firms: These firms enter and execute orders through the Nasdaq, or on behalf of retail or institutional clients and other broker/dealers, but do not buy or sell shares in listed securities. Like ECNs, these firms do not commit equity capital, but increase competition among market participants, helping to keep share prices competitive and adding liquidity to the market.

HOW DOES THE NASDAQ STRUCTURE BENEFIT LISTED COMPANIES?

Through its multi-participant market operating framework, Nasdaq provides company securities with immediate access to investors, market visibility, and conditions that promote immediate and continuous trading:

• Liquidity: Liquidity is defined as the ease with which shares can be bought and sold in the market. Nasdaq creates the necessary environment for great liquidity.
• Market depth: refers to the total amount of money that market makers have invested in a single security and is related to the number of participants trading in the security. However, even a small group of market participants can provide abundant depth by committing to buy or sell large amounts of security. Knowing that there is market depth can assure investors of the marketability of shares, especially during high transaction levels.
• Transparency: it is the investor’s ability to buy and sell at different price levels, it is crucial in the decision-making process. Nasdaq’s level of transparency is unmatched, as all prices are transmitted over the network; so, all market participants can see the same information.
• Price Efficiency: In securities trading, as in many other industries, competition is one of the most important factors. The aggressive competition promoted through the Nasdaq by market participants helps ensure that the investor receives the best prices for the securities they trade.

Due to its online nature, Nasdaq is one of the largest financial sites on the Internet. With an average of more than 7 million visits per day, the site provides complete visibility to the companies. Thus, investors can see what the behavior of Nasdaq, Dow Jones, and S&P 500 is, and access the latest stock market news, and information regarding stocks, mutual funds, and options in the largest US markets. In addition, Nasdaq has the MarketSite, which is located in New York Times Square, providing a system with the largest screen in the world. It broadcasts live all the necessary information for millions of investors, even on the Internet. To ensure regulation, MarketWatch was created, which monitors the news and the dissemination of information through data networks.

WHAT IS ONLINE TRADING?

Simply, this concept is defined as the possibility that an investor has to carry out a purchase or sale operation of a title through the use of the Internet. The difference between this advance and the traditional way of carrying out stock operations is the use of the personal computer and the connection to the network since the client still has to send his operation to an electronic brokerage firm and wait for it to carry out the transaction. the transaction. It can be affirmed that, although a little more efficient, this system maintains the same bases used traditionally. But this process of progress does not remain stagnant in On-Line Trading but rather continues to develop until it reaches Direct Access technology, where the true stock market revolution begins.

WHAT IS A WARRANT?

They are materialized options in the form of an officially listed security. They can be bought or sold just as easily as a stock, but they are not stocks. They will always be or will be referenced to the security that interests us, but the quote or price of the warrant will have nothing to do with said company, index, etc. For example, SCH can be listed on the Ibex at 10.5 and the warrants of Société Générale on the SCH are listed, depending on the type of warrant, at 1.3, or 2.4, etc…

The entities that issue the warrants (CITIBANK, SOCIETÉ GENERALE, and SCH) normally act as “market makers”, which means that to buy some warrants it is not mandatory for an individual to want to sell theirs for you to be able to buy them, and vice versa. It will be the entity itself that sells or buys them, which guarantees liquidity and purchase-sale at any time.

What is the expiration date? Each warrant is assigned a period in which this option must be executed. If we use them as elements of speculation, in the short term, we must know that temporary depreciation is usually in geometric progression, that is, if the expiration date is far away, the price will deteriorate more slowly and this deterioration will become increasingly faster (in the same period) as the aforementioned date approaches).

WHAT IS CHARTISM?

Chartism is a stock market analysis and forecasting system, which is part of technical analysis. It is based exclusively on the study of the figures drawn by the price curve on a stock graph (chart). It originated at the beginning of the century and became established in the 1930s since the breadth and depth of the 1929 crisis generated new reflections tending to provide other stock market analysis techniques that would improve the information obtained by fundamental analysis. In Europe, it became known in the fifties, and in Spain, it began to be used in the seventies.

Chartism, which can be translated as graphic analysis, completely disregards the intrinsic value that an action may have, the results of the company, the news about it, etc. He focuses all his attention on the price, and to a lesser extent on the trading volume. With these data, the technical analyst has two elements that do not allow much manipulation and are easy to obtain.

The objective of chartism is to determine the trends of the prices (that is, if it is in a bullish or bearish phase) and to identify the movements that the price curve makes when it changes trend (that is, when it loses the bullish phase and becomes bearish, and vice versa). To obtain results, it is based exclusively on the study of the figures that draw its quotes. This set of figures is meticulously studied and codified, each of them indicating the future evolution of prices with a specific risk factor.

Chartism is based on three premises:

1. All the factors that affect a company are reflected and are discounted, by the price.
2. The prices move by trends.
3. The movements of the prices are always repeated.

Taking these premises into account, the chartist analysis maintains that knowing the price, it is not necessary to analyze the causes that move it, it being enough to identify the trend of the price and monitor its movements to control and anticipate any change. trending.

WHAT IS THE QUOTES CURVE?

By placing the successive prices of a title on a chart, the price curve is formed. In other words, the price curve is the successive set of prices of a title expressed in a graph or chart. This curve allows you to analyze the evolution of the price over time, that is, you can see if it is at maximum or minimum, if it has risen or fallen a lot in recent sessions, etc. In addition, the price curve is the basic element on which chartism is based, which studies the drawings and figures that form the price curve (chartist figures) to predict the price trend or future trend changes.

WHAT IS A BEARISH GUIDELINE?

If we look at a chart, we can verify that the prices move following trends. This means that during a certain period, prices tend to follow a path that is predominantly ascending or descending. If the trajectory is downward, we are in a downtrend, the origin of which is that there are more sellers than buyers.

Once a downtrend is defined, the bearish guideline is the line that joins the maximums that form at the peaks of the price curve. In other words, the bearish guideline is the line that guides the prices downward, and which is never exceeded by the price. Not always the bearish guideline, it takes the form of a single straight line, because sometimes the bearish guideline is a succession of bearish guidelines with increasingly pronounced slopes. It is very important to identify when the bearish guideline is broken, as it is the prelude to a new bullish phase, which should be used to buy decisively. We have seen that the bearish guideline is defined as the line that joins the successive maximums of the descending peaks of the prices curve, then the guideline breaks,

To consider that a bearish guideline has been broken, this break must be greater than three percent of the value of the price, and the break cannot be considered confirmed until it exceeds this level. Do not forget the importance of volume in these breaks, the volume of business gives us an idea of ​​the strength of the market at the time of crossing the bearish guideline. The strength of a bearish guideline is greater the more times prices bounce off it without being able to overcome it, and also the longer it remains in force. In return, the stronger the bearish guideline is, the more upside potential the price will have when it manages to break it. Usually, when the price breaks a bearish guideline, it has a quick and short rise followed by a fall to the vicinity of resistance (pull back),

For example, Tubacex (see chart), is in a bearish phase since its highs at the end of June, and it is necessary to wait for the break of the bearish guideline, with a good volume of business, to buy these titles and take advantage of the new bullish phase that It startedwith this break.