Recognize different types of shares

Study and Learn the Words:

English	English equivalents	Romanian	Russian
discretionary order		instrucţiune discreţionară (de a cumpăra orice titlu de valoare)	поручение, согласно которому брокер может действовать по своему усмотрению
to relay	to receive and send on
booth (n)	a small enclosed place where you can do sth privately, for ex. to vote
ticker (n)		teleimprimator automat care înregistrează cotaţiile la bursă	биржевой телеграфный аппарат
charge (n)		cost, preţ	цена
fee (n)		onorariu	гонорар
commodity (n)	goods
option (n)	the right to buy shares in a company on some future date at a pre-arranged price	opţiune	опцион, сделка с премией
blue chip		acţiune cu capitalizare bursieră foarte mare	акция с наименьшим инвестиционным риском
floating (n)		lansarea pentru prima dată a acţiunilor unei firme	первоначальный выпуск акций
equities (n)		acţiuni obişnuite	простые акции
rights issue		acordarea către acţionari a dreptului de a cumpăra noi acţiuni la un preţ avantajos	предоставление акционерам права покупать акции по более выгодной цене
bonus issue		acţiuni distribuite acţionarilor în locul dividendului cuvenit	акции, полученные акционерами вместо дивидендов
par value=face value, nominal value	the value that a share in a company had originally
merger (n)		fuziune	слияние
donation (n)	sth that is given to a person or an organization as a charity, in order to help them
to rule sth out	to exclude, to say that sth is not suitable
nuclear energy		energie atomică	атомная энергия

An account executive (or stockbroker) is an individual who buys or sells securities for clients. (Actually, account executive is the more descriptive title because account executives handle all securities—not only stocks. Most also provide securities information and advise their clients regarding investments.) Account executives are employed by stock brokerage firms, such as Merrill Lynch, Dean Witter Reynolds, and Prudential-Bache Securities. To trade at a particular exchange, a brokerage firm must be a member of that exchange. For example, the NYSE has a limited mem­bership of 1,366 members, or "seats," as they are often called. Membership on the NYSE is called a “seat” because until 1871 members sat in assigned chairs during the calls of stocks. In the early 1800s, a seat cost $25. Today the price of membership is more than $2 million. Seats are sold or leased by their current owners rather than being bought directly from the NYSE.

The Mechanics of a Transaction Once an investor and his or her account executive have decided on a particular transaction, the investor gives the account executive an order for that transaction. A market order is a request that a stock be purchased or sold at the current market price. The broker's representative on the exchange's trading floor will try to get the best possible price, and the trade will be completed as soon as possible.

A limit order is a request that a stock be bought or sold at the price that is equal to or better (lower for buying, higher for selling) than some specified price. Suppose you place a limit order to sell General Dynamics common stock at $49 per share. Then the broker's representative sells the stock only if the price is $49 per share or more. If you place a limit order to buy General Dynamics at $49, the representative buys it only if the price is $49 per share or less. Limit orders may or may not be transacted quickly, depending on how close the limit price is to the current market price. Usually, a limit order is good for one day, one week, one month, or good until canceled (GTC).

Finally, it is possible for investors to place a discretionary order. A discretionary order is an order to buy or sell a security that lets the broker decide when to execute the transaction and at what price. Financial planners advise against using a discretionary order for two reasons. First, a discretionary order gives the account executive a great deal of authority. If the account executive makes a mistake, it is the investor who suffers the loss. Second, financial planners argue that only investors (with the help of their account executive) should make investment decisions.

A typical stock transaction includes five steps:

1. Account executive receives customer’s order to sell stock and relays order to stock-exchange representative.

2. Firm’s clerk signals transaction from booth to partner on stock-exchange floor.

3. Floor partner goes to trading post where stock is traded with a stock-exchange member with an order to buy.

4. Floor partner signals transaction back to clerk in booth. Sale is recorded on card inserted into card reader and transmitted to ticker.

5. Sale appears on ticker, and confirmation is phoned to account executive, who notifies customer.

The entire process, from receipt of the selling order to confirmation of the completed transaction, takes about twenty minutes.

Commissions Brokerage firms are free to set their own commission charges. Like other businesses, however, they must be concerned with the fees charged by competing firms. Full-service brokers —those that provide information and advice as well as securities-trading services—generally charge higher fees than discount brokers, which buy and sell but may offer less advice and information to their clients.

On the trading floor, stocks are traded in round lots. A round lot is a unit of 100 shares of a particular stock. An odd lot is fewer than 100 shares of a particular stock. Brokerage firms generally charge higher per-share fees for trading in odd lots, primarily because several odd lots must be combined into round lots before they can actually be traded.

Commissions for trading bonds, commodities, and options are usually lower than those for trading stocks. The charge for buying or selling a $1,000 corporate bond is typically $10. No matter what kind of security is traded, the investor generally pays a commission when buying and when selling. Payment for the securities and for commissions is generally required within five business days of each transaction.

It is important to remember that a broker has two goals: to help investors achieve their financial objectives and to promote his or her own interests and those of the brokerage firm, (These goals do not necessarily conflict with one another, but the fact that the broker and brokerage house receive a commission on every trade may sometimes lead to recommendations to trade more frequently than necessary.) With this fact in mind, it is obvious that investors should be involved in planning their investment programs.

 

I. VOCABULARY PRACTICE

A) Choose the correct meaning of the following words according to the context:

1. to cancel means:

a) to stop paying attention to sth:

b) to say that you no longer want to continue with an agreement that has been legally arranged;

c) to change from one thing to another.

2. to decideon a transaction means:

a) to choose the best possible transaction;

b) to form an opinion about the transaction;

c) to publicly tell people about the transaction.

3. to trade means:

a) to buy and sell things;

b) to rent things;

c) to resell things.

4. primarily means:

a) shortly;

b) particularly;

c) mainly.

5. option means:

a) the freedom to choose what you want to do;

b) the right to buy shares on some future date;

c) the instruction what to do.

B) Fill in the table with nouns, verbs and adjectives from the same word family:

	Noun	Verb	Adjective
1.	receipt
2.			discretionary
3.		cancel
4.	investor
5.		advise
6.	reason
7.			complete
8.		compete
9.			financial
10.	charge

II. COMPREHENSION

Answer the following questions:

1. Who is a stockbroker and what services does he provide? What is the difference between an account executive and a stockbroker?

2. Where does an account executive work?

3. Describe the mechanics of a stock transaction. What orders can an investor give to his account executive?

4. List the advantages and disadvantages of each order both for the investor and for the broker.

5. How many steps are included in a typical stock transaction? How much time is needed to effect such a transaction?

6. What is a commission and who charges it?

7. What is the difference between a full-service broker and a discount broker?

8. How are stocks traded on the trading floor? Why do brokerage firms charge higher per-share fees for trading in odd lots?

9. When is the payment for the securities and for commissions due?

10. What goals does the broker have?

 

III. Fill in the blanks with the words given at the end of the exercise:

In order to … (1) capital companies …(2) shares or stocks and offer them for …(3) to the public. When it is the first time that a company does it, this is called … (4) a company.

Shares of important companies are … (5) on the Stock Exchange. A stock exchange is a … (6) where stocks and shares are … (7). It performs an important economic function in a country’s economy by … (8) buyers and sellers together. A company that cannot meet all the … (9) for being admitted on the stock exchange has to transact its shares on the … (10) market.

The value of a share as written on the share certificate is its … (11) value. This could be significantly different from the market … (12) at a given moment, which is influenced by supply and … (13) for the shares under consideration.

There are different types of shares. … (14) are common shares. Those shares whose holders are paid a fixed dividend before any other type of shares are called … (15). Shares of very secure companies with a minimal risk are … (16). Sometimes companies want to raise extra capital and issue new shares offering them to their shareholders at a lower price than their market value. This is known as a … (17) issue. If companies resort to offering new shares to shareholders instead of payment of dividends this is called … (18) issue.

 

Value, market, bringing, blue chips, rights, sale, traded, equities, requirements, raise, listed, preferred, bonus, issue, par, over-the-counter, floating, demand.

IV. FOCUS ON GRAMMAR

Fill in prepositions where necessary:

1. To purchase securities one must act ……. a stockbroker.

2. An investment banking firm assists ……. corporations ……. raising funds.

3. The size ….. the commission depends …… the financial health …… the corporation.

4. The most obvious reason ……. selling its own securities is to avoid the investment bank’s commission.

5. The securities sold ……. a particular exchange must first be accepted ……. trading ……. that exchange.

6. Brokers advise …….. their clients regarding investments.

7. Once the investor has decided …….. a particular transaction he gives ……. the broker an order … that transaction.

8. Brokerage firms must be concerned …the fees charged …….competing firms.

9. Usually the stockbroker acts entirely ….. his own interest.

V. DISCUSSION

Discuss the following questions:

1. If you were an account executive would you take discretionary orders from your clients? Give your reasons.

2. In your opinion, what order do most investors prefer to give to their brokers?

3. If you were an investor would you give a discretionary order to your account executive? Substantiate your answer.

4. To your mind, a stockbroker – is it a well-paid job or not?

VI. INDIVIDUAL WORK