US equities, corporate and municipal bonds can be issued in certificated form, though this practice has been largely replaced due to the costs and inefficiencies of keeping them. Rather holdings are kept as "immobilized" or "street name", with the beneficial owners keeping them in accounts at broker-dealers and banks, just as they do for currencies. DTCC uses a nominee firm, Cede & Co., in whose name a share certificate is held in the DTCC vaults. Each day DTCC reconciles with the relevant transfer agent the number of shares held in its accounts for its member banks and broker-dealers. In turn, other banks and broker-dealers hold accounts with DTCC member firms, creating a chain of ownership down to the beneficial owner. [31]
The great advantage of this approach is the efficiency and low cost involved in settling large volumes of trades. The inconvenience is that the issuing corporation no longer knows who its owners are, since its transfer agent has all the immobilized shares recorded as the owner being Cede & Co. For purposes of sending proxy notices and other communications with beneficial owners, the transfer agent, acting on a request of the issuing corporation, sends an inquiry to DTCC, which in turn sends inquiries to its members and so on down the chain. [32]
Options, futures and other derivatives are traded based on contracts, rather than certificates. OCC, CME and ICE act as clearing agents and repositories, keeping track of book entry positions among the various clearing brokers. [29]
US government bonds and notes are uncertificated (dematerialized), which means that certificates are never issued. Instead, the clearing brokers keep book entry positions at the Federal Reserve on behalf of their various clients. [33]
The Financial Stability Oversight Council has designated each of these institutions, with the exception of the Federal Reserve, as a Systemically important financial market utility [34]
Market data consolidators address the needs of investors and regulators who wish to know, at any instant during the trading day, what the National Best Bid and Offer is for any security, the last sale price and other pertinent information related to trading the security. Since both the equity and equity options markets have multiple exchanges, quotation and last trades data from all must be consolidated in real time to provide a market view, rather than an individual exchange view. [35]
Two Security Information Processors (SIPs) consolidate this data in real time: the Consolidated Quotation System run by the Intercontinental Exchange (NYSE affiliate) [36] and the OTC/UTP Plan. [37] Each processes data for half of all such securities, based on the ticker symbol of each. All the equity and equity options exchanges broadcast in real time their quotations, last trade and other data to these organizations, which in turn calculate the best bid and offer and redistribute the data to market participants.
The names for these organizations originated several decades ago, when the NYSE and American Stock Exchange were the two venues for corporations to list their stocks. Data from these listings are known as Tape A (NYSE listed) and Tape B (AMEX). At the time, Nasdaq was a quotation system and not an exchange. This explains the name still used: Over the Counter/Unlisted Trading Privilege for data known as Tape C (Nasdaq). [37]
Revenues from market data amount to a half billion dollars a year, apportioned to each exchange based on the amount of quote and other data broadcast by each. A group of companies, under the banner NetCoalition, [38] along with the Securities Industry and Financial Markets (SIFMA) tried to force the exchanges to price market data based on their costs of producing it, but ultimately lost the argument before the SEC in 2016. [39]
The securities markets are overseen by the SEC, by individual state securities commissions established under blue sky laws, and the self-regulatory organizations, which are overseen by the SEC. The CFTC and NFA also have a role with respect to security futures and security-based swaps. In turn, the CFTC and NFA oversee the derivative markets.
The exchanges and clearing organizations are self-regulatory organizations (SRO's), as are the three sector agencies: [40]
There are two commissions regulating the trading of securities, the U.S. Securities and Exchange Commission (SEC), which governs equities, equity options, corporate bonds, and municipal bonds, [43] and the Commodity Futures Trading Commission (CFTC), which governs activities in the derivatives markets generally. [44]
The SEC is an independent agency of the United States federal government. It holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation's stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States. [43] [45] The SEC falls under the responsibility of the US Senate Committee on Banking. [46]
The CFTC oversees designated contract markets (DCMs) or exchanges, swap execution facilities (SEFs), derivatives clearing organizations, swap data repository, swap dealers, futures commission merchants, commodity pool operators and other intermediaries. [44] The CFTC falls under the oversight of the Senate Agriculture Committee. [47]
In finance, a derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, currency, or interest rate, and is often simply called the underlying. Derivatives can be used for a number of purposes, including insuring against price movements (hedging), increasing exposure to price movements for speculation, or getting access to otherwise hard-to-trade assets or markets.
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any form of financial instrument, even though the underlying legal and regulatory regime may not have such a broad definition. In some jurisdictions the term specifically excludes financial instruments other than equity and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g., equity warrants.
Australian Securities Exchange Ltd (ASX) is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange. The ASX was formed on 1 April 1987, through incorporation under legislation of the Australian Parliament as an amalgamation of the six state securities exchanges, and merged with the Sydney Futures Exchange in 2006.
In finance, a futures contract is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price or delivery price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative.
In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and derivatives trading process.
The Securities Exchange Act of 1934 is a law governing the secondary trading of securities in the United States of America. A landmark piece of wide-ranging legislation, the Act of '34 and related statutes form the basis of regulation of the financial markets and their participants in the United States. The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.
Over-the-counter (OTC) or off-exchange trading or pink sheet trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges. A stock exchange has the benefit of facilitating liquidity, providing transparency, and maintaining the current market price. In an OTC trade, the price is not necessarily publicly disclosed.
The Depository Trust & Clearing Corporation (DTCC) is an American financial market infrastructure company that provides clearing, settlement and trade reporting services to financial market participants. It performs the exchange of securities on behalf of buyers and sellers and functions as a central securities depository by providing central custody of securities.
In finance, a contract for difference (CFD) is a financial agreement between two parties, commonly referred to as the "buyer" and the "seller." The contract stipulates that the buyer will pay the seller the difference between the current value of an asset and its value at the time the contract was initiated. If the asset's price increases from the opening to the closing of the contract, the seller compensates the buyer for the increase, which constitutes the buyer's profit. Conversely, if the asset's price decreases, the buyer compensates the seller, resulting in a profit for the seller.
Security market is a component of the wider financial market where securities can be bought and sold between subjects of the economy, on the basis of demand and supply. Security markets encompasses stock markets, bond markets and derivatives markets where prices can be determined and participants both professional and non professional can meet.
Prime brokerage is the generic term for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The prime broker provides a centralized securities clearing facility for the hedge fund so the hedge fund's collateral requirements are netted across all deals handled by the prime broker. These two features are advantageous to their clients.
In finance, securities lending or stock lending refers to the lending of securities by one party to another.
Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the asset from someone else or ensuring that it can be borrowed. When the seller does not obtain the asset and deliver it to the buyer within the required time frame, the result is known as a "failure to deliver" (FTD). The transaction generally remains open until the asset is acquired and delivered by the seller, or the seller's broker settles the trade on their behalf.
A commodity broker is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of the clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial derivatives. Clients who trade commodity contracts are either hedgers using the derivatives markets to manage risk, or speculators who are willing to assume that risk from hedgers in hopes of a profit.
The National Market System (NMS) is a regulatory mechanism that governs the operations of securities trading in the United States. Its primary focus is ensuring transparency and full disclosure regarding stock price quotations and trade executions. It was initiated in 1975, when, in the Securities Acts Amendments of 1975, Congress directed the Securities and Exchange Commission (SEC) to use its authority to facilitate the establishment of a national market system. The system has been updated periodically, for example with the Regulation NMS in 2005 which took into account technological innovations and other market changes.
The Ukrainian Exchange was founded in 15 May 2008 and its operation premises are situated at 7g, Tropinina Street, Kyiv.
Interactive Brokers, Inc. (IB), headquartered in Greenwich, Connecticut, is an American multinational brokerage firm which operates the largest electronic trading platform in the United States by number of daily average revenue trades. In 2023, the platform processed an average of 3 million trades per trading day. Interactive Brokers is the largest foreign exchange market broker and is one of the largest prime brokers servicing commodity brokers. The company brokers stocks, options, futures contracts, exchange of futures for physicals, options on futures, bonds, mutual funds, currency, cryptocurrency, contracts for difference, derivatives, and event-based trading contracts on election and other outcomes. Interactive Brokers offers direct market access, omnibus and non-disclosed broker accounts, and provides clearing services. The firm has operations in 34 countries and 27 currencies and has 2.6 million institutional and individual brokerage customers, with total customer equity of US$426 billion as of December 31, 2023. In addition to its headquarters in Greenwich, on the Gold Coast of Connecticut, the company has offices in major financial centers worldwide. More than half of the company's customers reside outside the United States, in approximately 200 countries.
Axis Direct is the flagship brand under Axis Securities Limited, a subsidiary of Axis Bank in India. Providing Demat and Trading services. Its main offices are in Mumbai. The company employs over 2,100 people.
Citadel Securities LLC is an American market making firm providing liquidity and trade execution to retail and institutional clients, headquartered in Miami. The firm also trades futures, equities, credit, options, currencies, and Treasury bonds. It is the largest designated market maker on the New York Stock Exchange.
A company that issues and invests in securities. The three types of investment companies are mutual funds, closed-end funds, and unit investment trusts.
An investment adviser is a firm or an individual that, for compensation, engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities. An investment adviser can also be a firm or individual that, for compensation and as part of a regular business, issues analyses or reports concerning securities.
Having a "long" position in a security means that you own the security. Investors maintain "long" security positions in the expectation that the stock will rise in value in the future. The opposite of a "long" position is a "short" position.
federal reserve bank.
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