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The Stock Exchange
A stock exchange is a market for dealings in stock and shares, handling gilt-edged and all kinds of commercial and industrial shares. The London Stock Exchange provides a market for British government stocks and the stocks and bonds of a large number of foreign governments and corporations. Only members are admitted to the stock exchange and business is transacted according to a prescribed set of rules. Banks are barred by law from Stock Exchange (meaning the London Stock Exchange) membership.
Before the 'Big Bang' (1) on 27 October 1986, when trading on the floor of the Stock Exchange for all practical purposes ceased and transactions began to be carried out through the medium of computers there were about 4,100 Stock Exchange members, of whom fewer than 500 were jobbers, middlemen who bought and sold shares from other traders on the Stock Exchange, the others being brokers.
There are no jobbers in the Stock Exchange now, they are market makers. A market maker buys and sells a certain range of securities listed in his book making his money by charging a commission on each transaction.
Anyone who wants to buy or sell shares in the Stock Exchange does it through the broker who acts as a middleman between a seller and a buyer for a commission.
Companies apply to the Stock Exchange to have their shares listed, in other words, they «seek a stock market quotation» because only «quoted» shares can be bought or sold on the Stock Exchange. A Stock Exchange quotation is the price of a share which usually gives the bid price (at which a marketmaker will buy shares) and an offer price (which is the price at which investors buy shares). The bid price (or the selling price) differs from the offer price and the difference between them is called the «spread». The Stock Exchange quotations appear daily in the financial press and the financial section of newspapers.
The greater part of the business transacted on stock exchanges is investment business, but a small part consists of speculative operations. There are three kinds of speculators: bulls, bears and stags.
Speculation is also possible in the form of options: call options, put options and put and call options.
Settlement may be postponed by «carry-over», in which case payment or delivery is deferred from one account day to the next. Carry-over by a bull is «contango», when a bear postpones delivery of shares he has sold he pays a bull a penalty - «backwardation» and that is the charge for a loan of securities from one account day to the next.
The price of the stock in the market reflects investor demand. The tendencies of the market are indicated by indices (indexes), which are regular statistical reports giving rises and falls in prices, shown as a percentage of the previous figure. Some of the most important indexes are: FT Actuaries Share Indices, which are several indices based on prices on at the London Stock Exchange, FT - Stock Exchange 100 Share Index (FT - SE 100 or Footsie), based on the prices of 100 leading companies (this is the main London index, DOW JONES, FAS, NIKKEI, etc.).
Note:
the 'Big Bang' - «Великий вибух», реформа 1986р. в роботі Лондонської Фондової біржі
Ex. III Study the following definitions:
| A bull | A speculator who buys securities because he expects the price to rise. If the price of securities rises, he usually resells them at a profit, which is known as «profit-taking» |
| A bear | A speculator who sells securities because he expects the price to fall. Then he will be able to buy again more cheaply later |
| A stag | A speculator who subscribes for a new issue of shares hoping to sell his allotment at a profit as soon as buying and selling of these shares on a stock exchange (i.e. dealings in these securities) begin |
| A broker (stockbroker) | A broker is an agent for the public. He buys and sells stock on behalf of his clients for a commission |
| A market maker | A market maker is a person who buys (a marketmaker) and sells a certain range of securities listed in his book and charging a commission on each transaction |
| A stock market | This is a stock exchange, i.e. the place where stocks and shares are bought and sold |
| Stocks and shares | This phrase means «shares in ordinary «companies» |
| Stock into shares | It is ownership of a company divided |
| Share | One of many equal parts into which a company's capital is divided |
| Equities (an equity) | They are ordinary shares in a company |
| Securities (security) | They are investments in stock and shares |
| Government stock (Am. bonds) | This is government securities |
| Common stock | This is an American name of ordinary shares |
| Bond | A certificate of ownership of capital lent to a government, municipality, etc. It promises to repay money at a certain date, and pay interest at regular intervals |
Nowadays, the words: stocks, shares, equities and securities mean pretty much the same thing and are used interchangeably which can lead to some confusion.
Ex. IV Find the following words and phrases in the text:
A stock exchange, gilt-edged securities, the stocks and bonds, to be barred by Saw from, Stock Exchange membership, the 'Big Bang', trading on the floor, to cease, a jobber, a trader, a broker, a certain range of securities listed in a book, to charge a commission (fee), a stock market quotation, a bid price, a marketmaker, an offer price, bulls, bears, stags, an option, a call option, a put option, a put and call option, carry-over, contango, backwardation, an index (indexes, indices), Footsie.
Ex. V Match the words in Column A with their synonyms in Column B:
| A | B | ||
| 1) | commission | a) | aim, pursuit, objective, goal |
| 2) | Middleman | b) | to gamble, guess, risk, venture |
| 3) | to speculate | d) | fee, payment, remuneration, toll |
| 4) | to sell | e) | to ask, call, charge, offer, require |
| 5) | purpose | f) | broker, go-between, intermediary |
| 6) | to postpone | g) | to deal in, handle, market, promote, hawk |
| 7) | to bid | h) | guide, indicator, mark, indication |
| 8) | index | k) | to defer, adjourn, delay, hold over, put back |
Ex. VI Fill in the gaps in the text with an appropriate word or phrase:
Exchange, the number of stuff, replaced, Crest, number, income, income, profitable, jobs, system
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