Financial Trading and Investing

In: Business and Management

Submitted By caral
Words 13751
Pages 56
Chapter 8: Institutions and Procedures in Secondary Markets A. Exchanges and Floor Markets The Securities and Exchange Act of 1934 defined an exchange to be: any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the market place and the market facilities maintained by such exchange. An exchange is typically a physical or virtual meeting place drawing together brokers, dealers and traders to facilitate the buying and selling of securities. Thus, exchanges include the floorbased markets as well as many virtual meeting sites and screen-based systems provided by Electronic Communications Networks (ECNs). In the United States and most other countries, exchange transactions are executed through some type of auction process. Exchanges in the United States are intended to provide for orderly, liquid and continuous markets for the securities they trade. A continuous market provides for transactions that can be executed at any time for a price that might be expected to differ little from the prior transaction price for the same security. In addition, exchanges traditionally served as self-regulatory organizations (SROs) for their members, regulating and policing their behavior with respect to a variety of rules and requirements. However, the Financial Industry Regulatory Authority (FINRA) has provided for self-regulation of the two major U.S. stock markets since the 2007 consolidation of the National Association of Security Dealers (NASD) and the Member Regulation, Enforcement and Arbitration operations of the New York Stock Exchange. NYSE Euronext and its…...

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