The principal focus of the Garn-St. Germain Act (1982) was to assist the ailing S&L industry.
This was in direct response to the dramatic increase in inflation and interest rates in 1980-81 which caused massive withdrawals from S&Ls to MMMFs which could pay market interest rates on short term deposits.
Specifically, it authorized S&Ls to issue MMDAs with no regulated interest rate ceiling, and allowed them to make non-residential real estate loans.
Only those that own a seat on the exchange can make transactions on the floor (there are currently 1,366 seats).
Trading is conducted through an auction process where specialists “make a market” in selected securities.
As compensation for executing orders, specialists make money on the spread (bid price - ask price).
Securities Exchanges Organized Exchanges Requirements NYSE AMEX shares held by public 1,100,000 400,000 stockholders with 100+ shares 2,000 1,200 pretax income (latest year) $2,500,000 $750,000 pretax income (prior 2 years) $2,000,000 N/A MV of public shares held $18,000,000 $300,000 tangible assets $16,000,000 $4,000,000
When underwriting an issue, the investment banker bears the risk of price changes between the time of purchase and the time of resale.
With a private placement , the investment banker arranges for the direct sale of the issue to one or more individuals or firms and receives a commission for acting as the intermediary in the transaction.
When a firm issues securities on a best efforts basis, compensation is based on the number of securities sold.