dealers and brokers by group 2
DESCRIPTION
Dealers and Brokers By Group 2. Brokers. An individual who is paid a commission for executing customer orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission. Types of Brokers. Full-services brokers: - PowerPoint PPT PresentationTRANSCRIPT
Dealers and Brokers
By Group 2
Brokers
An individual who is paid a commission for executing customer orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission.
Types of Brokers
Full-services brokers: It helps you pick investments and devise a financial plan.
However, it will charge a higher brokerage fee
Discount brokers: It charges far lower commissions than full service
brokers. But you will get little or no investment advice
Types of Brokers
Floor brokers: execute orders on the floor of the exchange
Upstairs brokers: handle retail customers and their orders
Dealers
An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price)
Comparison
Dealer Broker
Role Principal/Market Maker
Agent/Intermediary
Inventory hold Yes No
Trading Own account and bear own risk
Clients’ account and no risk
Revenue Bid-ask spread Brokerage commission
Specialists
Specialists make a market in the shares of one or more firms
Specialists can be either a broker or dealer
Functions of the specialists
4 main functions:
Manage the auction process - to maintain a fair and orderly market
Execute order for floor brokers - to keep the market liquid or to prevent rapid price changes
Serve as catalysts - to enable a transaction to take place Stabilize price - to ensure that stock trading moves
smoothly
Big players
Schwab (e-broker) Wachovia Securities (The fifth largest
full service retail broker dealer) Spear, Leeds & Kellogg (Specialist)
Schwab
NYSE ticket symbol: SCH The largest online broker in US Market share Schwab 27% E*trade 12% Waterhouse 12% Fidelity 9%
Schwab
4.2 million out of 8 million clients accounts and US$296 billion out of US$763 billion in
client assets are came from the online market
Schwab
The main core business areas of Schwab are options, fixed income investment, mutual fund, and stocks.
Clients can use the trading tools called StreetSmart ProTM to make these trades.
Schwab
Recent News: 25 October, 2000 first storefront branch in Hong Kong's Central
business district. 21 January, 2001 "Best Internet Brokerage" by Gomez
Wachovia Securities
The 5th largest full service retail broker-dealer in US
3.4 million of active retail client accounts retail clients assets of $265 billion
Wachovia Securities
Business area: discount and full-service brokerage asset management clearing services
Wachovia Securities
Exchange Membership: New York Stock Exchange American Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Philadelphia Stock Exchange NASDAQ
Wachovia Securities
Financial health 8.27% tier-1 capital
(min 4%)
Source: Wachovia investor midyear update 16 Sep
2002
Wachovia Securities
Recent News: Create new firm with Prudential Financial Inc. Wachovia 62%, Prudential 38% Become third largest: $537b client base 3,500 offices in US
Spear, Leeds & Kellogg (SLK) One of the 7 specialist in NYSE Rank No.2 in number of common stocks Famous stocks handled:
IBM Boeing AOL Time Warner AIG NTT DoCoMo
Spear, Leeds & Kellogg (SLK) Acquired by Goldman Sachs in late 2000 GS paid more than $6 million, very high price
Other Business: Market makers in NASDAQ Order management system, REDIPlus Clearing business
Spear, Leeds & Kellogg (SLK)Scandal: In 1998, NASD fined SLK for $950,000 for del
ayed reports of trades In 2003 April, under scrutiny of NYSE Counterparts probed:
LaBranche Van Der Moolen Bear Wagner FleetBoston (fined $150,000)