3. What are the functions of the Stock Exchange in Britain?
4. What is the most important way of raising long-term capital?
5. What else can companies issue to make up long-term debt?
6. When did the capital market undergo the «Big Bang»?
7. What did the «Big Bang» allow banks and other institutions to acquire?
8. What is «dual capacity»?
9. How does a broker operate?
10. What was the «Big Bang\'s» influence on the Great Britain\'s financial industry?
1Stockbroker\'s creed: A man is a client until proven broke.
2October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February.
3A man calls his stockbroker all anxious and out of breath with this urgency in his voice. He says, «Sell it all, sell everything fast, right away.»
The stockbroker tries to explain that the market is cyclical in nature and that for long term outlook stocks still remain the place to be.
The man says, «Let me tell you a secret. You know I\'ve been married for 6 years now and I\'ve been your client for 5 years.»
«Yes, go on,» the stockbroker says.
"Well. My wife has this thing about the market. Her grandparents lost it all in the great crash and ever since then her family found investing in the market akin to original sin. When we got married I promised her that
I would follow in her parents footsteps and never venture in the stock market and always leave all our money under the mattress."
«Wow, I didn\'t know that. I guess you want the money because the market is going down, in case she asks for it.»
«No, I want the money because she ordered a new mattress and it is being delivered in two days.»
Слова и выражения:akin – подобный
anxious – озабоченный
broke – банкрот; обанкротившийся
creed – кредо
cyclical – циклический
deliver – доставлять
footsteps – следы, стопы
mattress – матрас
peculiarly – особенно
proven – доказано ( в суде )
speculate – спекулировать ( на бирже )
urgency – спешка, торопливость
venture – рисковать, пускаться в рискованное предприятие
out of breath – запыхавшийся
right away – немедленно
long term outlook – долгосрочный прогноз
great crash – падение фондового рынка в США в конце 20-х годов XX века, приведшее к Великой депрессии
original sin – первородный грехExercise 4
Answer the questions:
1. What is a stockbroker\'s creed?
2. What is the most dangerous month to speculate in stocks?
3. What did the man ask his stockbroker to do?
4. What did the broker try to explain to the man?
5. Why did the man\'s family use the mattress as the bank and the stock exchange?Trading Stocks
Trading stocks begins with an investor placing an order, that is informing the stockbroker as to what stock and how much he wants the broker to buy or sell. An order to buy or sell stock at the best possible price is called a market order. The broker conveys the order to an exchange member on the trading floor, who attempts to get a better price for the buyer by offering a little less. For example, the broker might offer 47 1/8 ($47.12,5) for the stock with a current price of 47 1/4 ($47.25) and see if someone will sell at this price. If the investor were selling, the broker would attempt to get a slightly higher price by offering, say, 47 3/8 ($47.3,75).
The final sale will then be electronically relayed to the broker who placed the order.
The investor might also place a limit order which specifies the highest or lowest price at which the broker may buy or sell. If the investor cannot be accomodated immediately, the broker places the order in a sales book and then tries again in order of priority. If an investor wants to keep the order on the books, he can issue an open order which instructs the broker to leave the order on the books until it is executed or cancelled.
Sometimes the investor might give a discretionary order which allows the broker to exercise judgment in making money. The investor leaves it up to the broker to decide when and at what price to buy or sell.
Shares are sold in lots. An odd lot is any number of shares less than 100. One hundred shares comprises a round lot. Brokers usually combine odd lots with a series of other small lots to form a round lot. A purchase of 10,000 shares is sometimes called a block sale.
In addition to the price of the stock, the investor pays the broker a commission for buying or selling the securities.
Sometimes investors pay less than a full amount when they buy stock. This is called margin trading. The Federal Reserve System, the US Central Bank, determines the minimum margin required. In the late 1990s years the stock margin was approximately 50 percent. Fearing that the investor might sell the stock and abscond with the funds, the broker keeps stock certificates of margin accounts at the brokerage as a collateral. If the stocks were to plummet, the broker would call the investor and request that he put up more money or have the stock sold.
Active buyers of stock are called «bulls». They believe that the prices of stocks are going to rise. During the mid 1980s, the US witnessed a very long bull market. At the 1987 crash even bulls became «bears». A bear is an investor who makes a profit when the prices are going to fall. Selling short is a high risk strategy which bears use in order to do that. They sell borrowed stock in the hope of later buying it on the open market at a lower price.
Options are contracts that allow an investor to either buy or sell a security at a predermined price within a certain time. Depending on the investor\'s expectations, he may buy a put option or a call option. A put option grants the owner the right to sell a security. Believing that the price of certain shares will drop over some period of time an investor might buy an option and benefit from selling the shares at the option price to the person who sold the options. A call option grants its owner the right to buy a certain amount of stock at a predetermined price within a fixed period of time.
Слова и выражения:
abscond – скрываться, бежать от кредиторов
accomodate – обслуживать, удовлетворять
bear – медведь
bull – бык
cancel – отменять, отзывать
collateral – обеспечение
comprise – составлять, состоять (из)
convey – передавать
crash – крах, падение
current – текущий, настоящий
execute – исполнять, выполнять
expectations – ожидания
fix – устанавливать
funds – фонды
grant – гарантировать, даровать
lot – лот
plummet – стремительно падать
predermine – предопределять
priority – первоочередность
relay – передавать
slightly – слегка, немного
specify – определять, специфицировать
witness – свидетель; свидетельствовать
place an order – разместить приказ
market order – приказ брокеру о покупке или продаже ценных бумаг по установленной рынком цене
trading floor – торговая площадка
limit order – приказ брокеру, ограниченный условиями
sales book – книга продаж
open order – открытый приказ
discretionary order – дискреционный приказ (переданный на усмотрение брокера)
exercise judgment – опираться на собственное мнение, суждение, оценку
leave up to – оставлять на (усмотрение)
round lot – полный лот
odd lot – неполный лот
block sale – продажа партии (ценных бумаг)
margin trading – торговля с гарантийным взносом
The Federal Reserve System – Федеральная резервная система
stock certificate – фондовый сертификат
margin account – счет биржевика у брокера по сделкам с маржей
sell short – продавать без покрытия
put option – сделка с обратной премией, опцион продавца
call option – сделка с предварительной премией, опцион покупателя
Exercise 5
Answer the questions:
1. What is an order?
2. Where does a broker convey the order?
3. What does an exchange member do when he is conveyed an order?
4. What is a limit order?
5. What is an open order?
6. What does a discretionary order allow the broker to do?
7. What form are shares sold in?
8. What is an odd lot?
9. What is a margin trading?
10. What is the difference between a bull and a bear?
11. What is an option contract?
12. What is the difference between a call option and a put option?1
«I hear that you dropped some money in Wall Street. Were you a bull or a bear?»
«Neither, just a plain simple ass.»
2A young stockbroker decided to take a day off and visit some of his professors in his old school. When he made his way into the entrance he noticed a dog was attacking a small child. He quickly grabbed the dog and throttled it with his two hands.
The next day the local newspaper reported the story with the headline, «Valiant student saves boy from ferocious dog».
The stockbroker called the editor and strongly suggested that a correction be issued and that the paper will tell the readers he was a successful Wall Street broker and not a student.
The next day the newspaper issued a correction and the headline read, «Pompous stockbroker kills school mascot».