Posts Tagged ‘trading’

Financial Regulation Shifts The Focus Of Wall Street’s Leaders

Wednesday, August 18th, 2010

It’s a new world on Wall Street and banks are looking for leaders who can handle the unfamiliar territory.

  • The new financial regulation measures deter banks from trading simply for their own benefit and push them to focus on riskier investments that directly serve customers.
  • As a result, choosing the head of an investment bank can no longer be based solely upon a person’s level of financial success and leadership skills.
  • Chief executives of banks must also be astute risk managers who can handle varying business lines.

Facts & Figures

  • Citi is scaling back trading and expanding advisory business.

Who’s looking at your trades?

Wednesday, July 14th, 2010

This is a somewhat complicated question that depends largely on the situation you find yourself in. Much like the stock market or investment markets themselves, certain people are privy to certain types of information. But let’s say you bought a share of Microsoft (MSFT) yesterday. Who can see that you did that?

  1. On the most immediate level, you can. You can view your purchase in your account register.
  2. Your financial advisor or private banker can also see the trade because she or he has access to your account.
  3. Things start to get a bit impersonal here: theoretically, the bank or brokerage house that you are associated with can see that one more share of Microsoft was bought for one of their customers.
  4. The market will most likely not be affected with the purchase of your one share, but since it is technically the most recent sale, for a little while (we’re talking less than a second) your purchase will be the last visible sale of MSFT which is visible to anyone who is looking at MSFT at that moment.

The long and the short of it is that only you and your financial advisor/ institution can see that YOU personally bought a share of MSFT; the rest of the world can only see that one share of MSFT was bought by someone, somewhere. The identity of the purchaser is confidential information.

A Dark Pool is…

Friday, October 16th, 2009

A dark pool is a financial term that describes an alternative – but legal – venue for trading large orders of stock. What makes trading through a dark pool different from regular trading? Well, there are a few key differences, but the most important is anonymity. When a trade occurs on an exchange like the New York Stock Exchange, the prices that are negotiated between buyer and seller are immediately reflected in the market and published for anyone to see. In a dark pool, there is actual anonymity between the buyer and the seller and the trade is not shown in the market.

In a dark pool, trades occur between institutional investors that are trading large blocks of equities. For example, Institution A has 500,000 shares of Microsoft (MSFT) and wants to sell them. If that institution were to trade all of those shares on an exchange, they would have to split the transaction up into several smaller trades in smaller amounts. Not only would those trades disrupt the market (make it unsettled), but Institution A would also be showing their hand. If they show their hand, it might disrupt the market further, and other institutions would likely capitalize on that information.

So basically, a dark pool is a place where institutional investors can come and anonymously buy and sell large blocks of equities in one or a few orders. By doing this away from an exchange, they do not disrupt the market because the price is not fixed on a public market. Also, other institutions and the public do not know immediately that a large block of stock was bought or sold. Only after the trade is filed with the SEC will the public know what the institution did.

What do you do if someone gives you insider information?

Wednesday, October 7th, 2009

When someone has privileged or sensitive non-public information about a company that could affect its share price once the information becomes public, they can use that information to either buy or sell stock at the expense of the people they sell to or buy from who don’t have this information. This is called insider trading and it’s illegal. Let’s say you work at a company and know that the company just lost a ton of money, even though the public thinks the company is doing great. If you sell  your stock to the unwitting public, that’s insider trading.

But what if you are just given the information and aren’t actually an “insider” at the company? This is often called “tipping,” and it’s still illegal for you to trade based on that privileged information because the effect is the same – if people think that it’s not safe to invest because they are going to be taken advantage of by sneaky insiders and their friends, they won’t buy stock, and that’s bad for everyone.

A Trading Floor is…

Friday, August 21st, 2009

A trading floor is the physical space where listed stocks and bonds are traded (at the New York Stock Exchange or a brokerage company, for example).

Over-The-Counter is…

Thursday, August 20th, 2009

Over-the-counter is a term used to describe the trading of financial instruments that does not happen through an exchange mechanism (such as the stock market).  Instead, these instruments are traded directly among dealers, either on the phone or electronically.

A Trader is…

Monday, August 10th, 2009

A trader is an employee of a broker-dealer, investment company, or other financial institution who specializes in handling the purchase and sale of securities for the firm or its clients. Anyone can be an independent trader by trading their account themselves.

Day Trading is…

Friday, August 7th, 2009

Day trading is a kind of trading in which you buy and then sell a stock or other security on the same day, same hour, or same minute, to take advantage of a quick change in the price of the stock. Day traders, instead of taking a long-term view on valuation, look for short-term market inefficiencies. You get in, and you get out!