Equity trading Flashcards
What is an equity?
A share in ownership of a company
What does equity entitle the owner too?
Payment of dividends and the right to vote at annual general meetings
Whats the difference between public and private and public equity
Public is listed on a stock exchange, private is not listed
Why are some shares not on the market and held by majority shareholders?
To protect against hostile takeovers
Whats the equation for market cap?
Share price x total number of issued shares
What is a stock’s “beta”
The elasticity measure of a stock’s price fluctuation when there is a 1% rise in the broad index of market prices
What is Earnings per share EPS?
most recent annual accounting profits divided by the number of outstanding shares
What is P/E
share price / EPS
What is the role of the broker?
Executing buy and sell orders on behalf of clients
What is the “duty” of a broker?
Buy or sell at the best possible price
What are types of broker?
- Sales and trading
- Retail broker
- Corporate broker
- Prime brokerage
What’s a sales and trading broker?
Execute trades on behalf of clients
What’s a Retail broker
Firm helping retail customers buy and sell equities and other securities and also manage their portfolios
What’s a corporate broker?
A specialist market niche, largely advisory, helping large companies
What is a Prime brokarage?
Providing a range of supporting services to hedge funds (trading execution/cash or securities lending)
What banks dominate the primary markets?
- Goldman Sachs
- Morgan Stanley
- JP Morgan
What are two ways to access the market without being an LSE member?
- High frequency trading
- Human day trader
What is futures and forward trading?
You place an order and set a price now, and then pay and receive your order later
What are the major OTC markets?
- Government bonds
- Foreign exchange (spot and forward)
- Money markets (Loans of less than 12 months maturity)
- Securities (equity) borrowing
- Forward rate agreements
- Commodity forwards
- Commodity, foreign exchange interest rate options
- Single name and indexed credit default swaps
