Posted on Monday, 23rd March 2009 by admin

As we saw in our previous post, there are a lot of different stock exchanges in North America. It is also interesting to see that there are not only company stocks that can be traded on those stock exchanges. In fact, you can do a lot more than buying and selling stocks on them.

Company Stocks (Equities)

The most common transactions will be done on company stocks, a.k.a. equities. These titles represent a share of a public company. We call them “public” because they are offering individuals (and institutions) to buy shares of their company.

Stock Options

Based on the price of company stocks, stock options are a financial instrument that conveys right, but not obligation, to trade a specific stock (buy or sell) at a specific price in the future. There is usually a time frame related to the stock option.

Futures

Futures are similar products to stock options as they represent an agreement between two parties to trade a commodity (example gold) or a financial instrument (like bonds) at a specific price in the future (at a specified date). Please note that contrary to stock options; a future is a contract conveying the obligation to do the trade (but you can sell the contract before it expires).

Exchange Traded Fund (ETF)

Usually called ETF, exchange traded funds are investment products traded as any other stocks. They usually represent an index such as the Dow Jones index or the S&P 500 index (regrouping the 500 biggest companies on the NYSE). Their main advantage is to regroup several companies into one title but they have lower management fees (called MER’s) than mutual funds.

Bonds

Bonds are a debt instrument over more than a year with the purpose of raising capital. Countries, provinces, states, cities and companies can issue bonds. When buying a bond, you buy a right on the assets of the issuer and should receive your capital back along with a defined interest rate.

Mutual Funds

Mutual funds or investment funds are money from different investors pooled together and manage by portfolio managers. There are tons of types of mutual funds (ethic, growth, balanced, dividend, etc). The main advantage of this type of investment relies in its diversification (holding several equities at the same time).

Structured Products

Structured products are financial instruments created from derivatives (options and futures) and other financial products. They are able to give you the best and the worst of the capitalism market. Structured products such as credit default swaps are partially responsible of the current economic crisis.

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Posted on Sunday, 15th March 2009 by admin

After writing my first post about the stock market definition, I thought it would be interesting to list all major stock exchanges in the world. I got the list from wikipedia so you can check it out there to have a more updated list.

Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end of January 2009

Region	Stock Exchange	Market Value (millions USD)	Total Share Turnover (millions USD)
Americas	New York Stock Exchange	9,363,074.0	1,517,615.7
Asia-Pacific	Tokyo Stock Exchange	2,922,616.3	301,781.5
Americas	NASDAQ	2,203,759.6	2,325,238.3
Europe	Euronext	1,862,930.9	146,173.3
Europe	London Stock Exchange	1,758,157.7	241,151.1
Asia-Pacific	Shanghai Stock Exchange	1,557,161.3	142,144.2
Asia-Pacific	Hong Kong Stock Exchange	1,237,999.5	80,696.8
Americas	Toronto Stock Exchange	997,997.4	84,323.0
Europe	Frankfurt Stock Exchange (Deutsche Börse)	937,452.9	264,970.3
Europe	Madrid Stock Exchange (Bolsas y Mercados Españoles)	871,061.4	114,994.0
Europe	Swiss Exchange	761,896.1	63,435.6
Asia-Pacific	Bombay Stock Exchange	613,187.6	14,425.0
Americas	São Paulo Stock Exchange	611,695.0	30,748.5
Asia-Pacific	Australian Securities Exchange	587,602.7	37,400.1
Asia-Pacific	National Stock Exchange of India	572,566.8	39,057.1
Europe	Nordic Stock Exchange Group OMX1	503,725.8	55,299.9
Asia-Pacific	Korea Exchange	470,417.3	81,755.0
Europe	Milan Stock Exchange (Borsa Italiana)	456,206.7	48,094.8
Africa	Johannesburg Securities Exchange	432,422.1	17,999.7
Asia-Pacific	Shenzhen Stock Exchange	389,248.3	75,365.5

As you can see, 2 of the most important stock exchanges are American (NYSE and NASDAQ). You also have another North American Stock Exchange in the top 10 positions (TSE with a 8^th position).

The size of the stock market will give you an idea of its importance while the share turnover figures will show you its liquidity. We will come back later on the concept of liquidity but let just say that the more liquid the stock market (or a single stock), the easiest it is to make a transaction (to a decent stock price!).

If you are looking to buy a specific company stock, you should see on which stock exchange it is listed. For example, you won’t be able to buy BMW shares on the TSE (Toronto Stock Exchange) as the company stock does not trade (i.e. is not offered) on this market.

In order to find the right stock exchange, a quick suggestion would be to look at the company website in the “investor relation” section. They usually give you the stock ticker (name of the stock listed on the market) and the market where is it traded. Another way would be to look directly on each stock exchange starting with the company’s original country (chances are that BMW stocks would be traded on the Frankfurt Stock Exchange than on the NYSE).

image source: TopNews

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Posted on Saturday, 14th March 2009 by admin

A stock market, also called stock exchange is the place where buyers and sellers of stocks will do transactions. There are physical places such as the New York Stock Exchange (See image below) but you can also have access to buy stocks online through an online brokerage account (this will be discussed in a later post).

Picture a regular fruits & vegetables market where people are selling and buying. Depending on the season (economic cycle), you will find rebates on specifics items (which we call undervalued stocks). When there is a rumor that products big be infected by a bacteria (or toxic financial products and subprime for example), the price of everything will drop, even the good fruits and vegetables (and the good company stocks!).

As you can see, a stock exchange is very similar than any other type of markets. Buyers and sellers determine a price they judge fair for a specific stock at a specific time. It doesn’t really mean that the stock worth the price of the transaction, it simply means that 2 individuals agreed on a specific price. So every time you are about to sell a stock because you think it’s not worth it, someone else (the stock buyer) thinks it is undervalued at that price!

The major stock exchanges in North America are the following:

USA:

New York Stock Exchange (NYSE): this is where most US company stocks are traded. We usually refer at the S&P 500 as the biggest 500 companies listed on this stock exchange.

National Association of Securities Dealers Automated Quotations NASDAQ: This is the first automated system that allows traders to get quotes electronically. Famous and fast growing company Google is on this market.

American Stock Exchange (AMEX): The AMEX has been bought by the NYSE Euronext, the company operating the NYSE.

Chicago Board Option Exchange (CBOE): You can trade US stock options on this market.

Canada:

Toronto Stock Exchange (TSE): this is where you will find all major Canadian company stocks such as RIM, Canadian Banks, Power Corporation, etc. Its main index is the S&P TSX.

Montreal Stock Exchange (ME): you can trade Canadian options on this market

Image source: NY Times

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