Chapter Objectives
    15.1 Identify the functions of stock exchanges
    15.2 Describe how to interpret stock quotations
    15.3 Explain how to execute the purchase and sale 
    of stocks
    15.4 Explain how to analyze a stock
    15.5 Explain how investing in stocks fits within your 
    financial plan
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    Stock Exchanges (1 of 4)
    • Stock exchanges: facilities that allow investors to 
      purchase or sell existing stocks
    • New York Stock Exchange
        – Most popular organized exchange in U.S.
        – Floor traders: traders at a stock exchange who execute 
          trades to fulfill orders placed by other investors
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    Stock Exchanges (2 of 4)
       – Specialists: traders who help to make a market in one 
          or more stocks by taking the position opposite of orders 
          placed by clients
       – A typical stock transaction on the NYSE is submitted 
          through a brokerage firm and executed by a specialist
    • Other stock exchanges
       – American Stock Exchange
       – Other regional exchanges in large U.S. cities
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    Stock Exchanges (3 of 4)
    • Over-the-counter (OTC) market: an electronic 
      communications network that allows investors to 
      buy or sell securities
       – Market makers: traders who execute trades on the 
         OTC market and earn commissions in the form of a 
         bid-ask spread
       – Less stringent listing requirements than for NYSE
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    Stock Exchanges (4 of 4)
        – Electronic Communication Networks (ECN): computer 
          systems that match up desired purchases and sales of 
          stocks
             Allow for after-hours trading
             No person needed to perform the exchange
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