CH 13: International Equity Markets

What is the criteria to be classified as an “Emerging market”

Must meet at least one of the following:

1) Located in a low or middle-income economy as defined by the World Bank

2) Investable market capitalization is low relative to its most recent GNI figures

Primary markets

The market in which new security issues are sold to investors. In selling new securities, investment bankers can play the role of either the broker or dealer.

Secondary markets

A market in which investors buy and sell securities to other investors; the original issuer is not involved in these trades. Provides marketability and valuation of the securities.

Market order

An order to your broker to buy or sell shares immediately at the market price

Limit order

An order to your broker to buy or sell shares immediately at the market price

Dealer market

The stock is sold by dealers, who stand ready to buy and sell the security for their own account.

Agency market

A market in which the broker takes the clients order through the agent, who matches it with another public order.

Auction market

Organized exchanges have specialists who match buy and sell orders.

Call market

A market in which market and limit orders are accumulated and executed at specific intervals during the day.

Cross-listing of shares

Refers to a firm having its equity shares listed on one or more foreign exchanges.

Advantages of Cross-listing

• Expand investor base for a firm

• Establish name recognition for the firm in new capital markets, paving the way for new issues

• Cross-listing into developed markets may signal investors that improved corporate governance is forthcoming

• May mitigate possibility of hostile takeovers.