This presentation discusses investment banking and security markets. It explains that investment banking assists companies with raising capital through activities like IPOs, mergers and acquisitions. It also discusses the roles of underwriting and providing financial advice. The document then describes the primary and secondary security markets. The primary market involves new securities offerings, while the secondary market is for existing securities. It also outlines different types of secondary markets like stock exchanges and over-the-counter markets. Finally, it briefly touches on market makers, dealers, and different trading venues like call, continuous, third and fourth markets.

1. Presentation on Security Markets

2. Investment Banking and
Underwriting
Investment banking is a particular form of
banking which finances capital requirements of an
enterprises. Investment banking assists as it
performs IPOs, private placement and bond
offerings, acts as broker and carries through
mergers and acquisitions.
A financial intermediary that performs a variety
of services. This includes underwriting, acting as
an intermediary between an issuer of securities
and the investing public, facilitating mergers and
other corporate reorganizations, and also acting
as a broker for institutional clients.

3. Investment Banking and
Underwriting
Investment banks have multilateral functions to
perform. Some of the most important functions
of investment banking can be jot down as
follows:
Investment banking help public and private
corporations in issuing securities in the primary
market, guarantee by standby underwriting or
best efforts selling and foreign exchange
management . Other services include acting as
intermediaries in trading for clients.

4. Investment Banking
Investment banking provides financial advice to
investors and serves them by assisting in
purchasing securities, managing financial assets
and trading securities.
Investment banking differ from commercial
banking in the sense that they don't accept
deposits and grant retail loans. However the
dividing line between the two fraternal twins have
become flimsy with loans and securities becoming
almost substitutable ways of raising funds.

5. Investment Banking
Small firms providing services of investment
banking are called boutiques. These mainly
specialize in bond trading, advising for mergers
and acquisitions, providing technical analysis or
program trading.

6. Underwriting
An arrangement by which a company is
guaranteed that an issue of shares will raise a
given amount of cash. The underwriters
undertake to subscribe for any of the issue not
taken up by the public. They will charge
commission for this service.
Underwriting refers to the process that a large
financial service provider (bank, insurer,
investment house) uses to assess the eligibility of
a customer to receive their products (equity
capital, insurance, mortgage, or credit).

7. Underwriting
 Securities underwriting refers to the process by which
investment banks raise investment capital from
investors on behalf of corporations and governments
that are issuing securities (both equity and debt capital).
 This is a way of selling a newly issued security, such as
stocks or bonds, to investors. A syndicate of banks (the
lead-managers) underwrite the transaction, which
means they have taken on the risk of distributing the
securities. Should they not be able to find enough
investors, they will have to hold some securities
themselves. Underwriters make their income from the
price difference (the "underwriting spread") between
the price they pay the issuer and what they collect from
investors or from broker-dealers who buy portions of
the offering.

8. Types of Security Markets
• Securities markets are the markets in which
securities, or financial assets, are traded. There
are two different types of securities markets.
The first type is known as the primary market:
the primary market is used for trading newly
issued securities. The second type of securities
market is known as the secondary market: the
secondary market is used for trading securities
that have already been issued. Primary markets
and secondary markets are generally used for
trading equity securities.

9. Types of Security Markets
• Primary markets, or primary financial markets, are
where new financial assets are issued. There are two
main types of primary-market issues. The first type of
issue is known as an initial public offering, or IPO. These
issues are the very first shares a company offers to the
public. Investment bankers serve as underwriters for
these issues: they facilitate the process of selling these
initial public offerings.
• The second type of issue is known as a seasoned new
issue. These issues are new shares that are being issued
by a company that already has publicly traded shares on
existing stock exchanges. A seasoned new issue is the
way a company sells more shares to the investing public.

10. Types of Security Markets
• Secondary markets, or secondary financial
markets, trade existing securities (previously
owned shares of stocks, bonds, and other
financial assets). Secondary markets consist of
both organized exchanges, such as the New
York Stock Exchange, and over-the-counter or
electronic markets, such as NASDAQ:
secondary markets consist of markets in which
existing securities are traded.

11. Types of secondary Market
Organized stock exchanges: Organized stock
exchanges are markets that are used to facilitate
the trading of financial instruments. The main
organized stock exchanges are the New York
Stock Exchange and the American Stock
Exchange. There are also regional stock
exchanges, such as the Pacific, Chicago,
Philadelphia, Cincinnati, Intermountain,
Spokane, and Boston Stock Exchanges, but these
stock exchanges are very small.

12. Types of secondary Market
 Over-the-counter (OTC) market: The OTC market is an
electronic network of dealers that allows investors to execute
trades without going through specialists or intermediaries.
That is, there is no single physical location (exchange) where
stocks are traded, rather these trades are executed through
the National Association of Securities Dealer Automated
Quotation System (NASDAQ) which links various dealers and
brokers through a computer or telephone based
system. Usually the bigger companies are traded on an
exchange rather than an OTC. These trades are also executed
through the National Market System, a system under the
sponsorship of the National Association of Securities Dealers
(NASD), which trades stocks of specific sizes, profitability, and
trading requirements. NASD also trades “pink sheets,” or lists
of small companies not listed on any exchange; these stocks
are traded by brokers through a network of phone and
computer systems and may be significantly more risky.

13. Types of secondary Market
 International stock markets: There are domestic stock
exchanges in the developed countries and in many of
the emerging or developing countries.] Most nations
have securities exchanges; these markets trade more
than $25 trillion in assets. In the U.S. stock markets
investors can often trade American Depository Receipts
(ADRs), which are receipts for -shares that are held on
deposit by foreign banks and represent ownership of
companies which have their primary listing on
exchanges outside the United States.-. Buying an ADR is
very similar to buying the underlying domestic share
from their home market, except you get your dividends
in U.S. dollars and your annual report information in
English. Another way to invest in international shares is
to invest in mutual funds: many mutual funds invest
internationally.

14. Call and Continuous Market
• In a call market, trading for individual stocks takes
place at specified times. The intent is to gather all
the bids and asks for the stock and attempt to
arrive at a single price where the quantity
demanded is as close as possible to the quantity
supplied.
• In a continuous market, trades occur at any time
the market is open. Stocks are priced either by
auction or by dealers. In an auction market, there
are sufficient willing buyers and sellers to keep the
market continuous. In a dealer market, enough
dealers are willing to buy or sell the stock.

15. Third Market
• Trading by non exchange-member
brokers/dealers and institutional investors of
exchange-listed stocks. In other words, the third
market involves exchange-listed securities that
are being traded over-the-counter between
brokers/dealers and large institutional
investors.

16. Fourth Market
• Institutional investors, including mutual fund
companies and pension funds, who trade large
blocks of securities among themselves are
operating in what's called the fourth market.
• Usually, the transactions are handled through
electronic communications networks (ECNs).
• Among the appeals of using an ECN are reduced
trading costs, the ability to trade after hours,
and the fact that offers to buy and sell are
matched anonymously.

17. Market Makers and Dealers
• A broker-dealer firm that accepts the risk of
holding a certain number of shares of a particular
security to facilitate trading in that security. Each
market maker competes for investor order flow
by displaying buy (bid) and sell (ask) quotations
for a specific number of shares (size). Once an
order is received, the market maker immediately
sells from its own inventory or seeks an
offsetting order. This process takes place in
seconds. Market makers buy and sell for their
own accounts to make a profit.

18. Market Makers and Dealers
A market maker is a dealer that buys and sells
securities for their clients, firms, or their own
individual accounts. Market makers unlike
specialists or floor traders can work remotely from
offices. The market makers primary responsibility is
to display quotations for buy and sell offers that
can be guaranteed for a certain number of shares.
If these prices are hit, the market maker stands
ready to use its own inventory to maintain balance
in the trading of the security. This process is all
done electronically and within seconds.

19. Market Makers and Dealers
 A Dealer or Market Maker is someone who acquires securities from sources not
usually available to the general public and then sells them at a markup to his
customers. Dealers who are acting as brokers must be registered with the Securities
and Exchange Commission . To qualify as a dealer in securities, a taxpayer must
engage in transactions with customers.
 Dealers who are brokers may also be specialists in one or more stocks. As a broker,
a dealer is authorized to acquire and sell securities for customers' accounts for a
commission. A Broker/Dealer can transact business as a Principal (for his own
dealer account) or as Agency (as a broker representing the customer to another
dealer).
 Market makers make the majority of their money with the following methods: (1)
capturing momentum moves, (2) commissions, and (3) bid/ask spread.

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