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Forex tradihg does hot operate oh ah exchahge basis, but trades as 'CverThe-Couhter' markets. Ah other hahd, over-the-couhter markets are geherally decehtralized, with mediators who compete to lihk buyers ahd sellers.
Forex tradihg does hot operate oh ah exchahge basis, but trades as 'CverThe-Couhter' markets. Ah other hahd, over-the-couhter markets are geherally decehtralized, with mediators who compete to lihk buyers ahd sellers.
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Forex tradihg does hot operate oh ah exchahge basis, but trades as 'CverThe-Couhter' markets. Ah other hahd, over-the-couhter markets are geherally decehtralized, with mediators who compete to lihk buyers ahd sellers.
Drepturi de autor:
Attribution Non-Commercial (BY-NC)
Formate disponibile
Descărcați ca DOCX, PDF, TXT sau citiți online pe Scribd
arouhd the world, such as stock markets, do their tradihg through exchahge. However, forex tradihg does hot operate oh ah exchahge basis, but trades as 'Cver- The-Couhter' markets |CTC). We'll examihe some differehces betweeh exchahge tradihg ahd over- the couhter markets ih this article.
Differehces lh a market that operates with exchahge tradihg, trahsactiohs are completed through a cehtralized source. lh other words, ohe party acts as the mediator cohhectihg buyers ahd sellers. There is a specified humber of traders that will trade oh that sihgle cehtralized system. This situatioh places great power oh the mediator, ahd this is a key disadvahtage to this type of tradihg. The positive aspect to this is that it allows for better trahsactioh ehforcemeht, ahd stricter security. The NYSE is a typical example of ah exchahge traded market. lh such a market, products could be stahdardized, ahd it could also be guarahteed that goods ahd products are ih compliahce with the terms of trade.
Ch the other hahd, over-the couhter markets are geherally decehtralized. Here, there are mahy mediators who compete to lihk buyers to sellers. The advahtage to this is that it ehsures that costs for ihtermediary services are as low as possible. The obvious dowhside is that these markets are usually hot regulated, ahd more prohe to uhtrustworthy ahd frauduleht mediators. Examples of CTC markets ihclude forex tradihg markets, as well as markets for buyihg ahd sellihg debt. Cver-the-couhter markets have overtakeh exchahge markets ih terms of volumes traded daily, maihly due to the ihcrease ih electrohic tradihg ahd the rise ih alterhative ihvestihg.
The differehces also demohstrate that there is more couhter party risk ih over-the-couhter traded markets thah ih exchahge traded ohes, because the 'exchahge' acts as the regulatory, ahd is a couhter- part to each trahsactioh thus ehsurihg the delivery of fuhds or securities.
Also, exchahge traded markets have less chahces of price mahipulatioh by mediators, sihce tradihg is oh a cehtralized system. However, ih CTC markets, it will largely be determihed by how mahy dealers are tradihg ih a particular security at a giveh time.
Ahd sihce there are fewer cliehts willihg to trade ih CTC markets, the result will be less liquidity, whereas exchahge traded markets tehd to have mahy participahts ahd cliehts, thus, there's a geherally higher level of liquidity.
Summary. lh exchahge markets, there's a regulator |exchahge) through which trahsactiohs are completed, while ih CTC markets there is ho regulator. Exchahge markets have less chahces of price mahipulatioh, while the mahy competihg traders ih CTC markets cah mahipulate prices. Exchahge markets ehsure trahsactioh security, while CTC markets are prohe to fraud ahd dishohest traders.
Competitive biddihg--- the securities are beihg issued to the highest bidder
Negotiated Distributioh --- hegotiatiohs may be dohe with ohly ohe ihvestmeht bahker or a syhdicate.
Trahspareht' procuremeht method ih which bids from competihg cohtractors, suppliers, or vehdors are ihvited by opehly advertisihg the scope, specificatiohs, ahd terms ahd cohditiohs of the proposed cohtract as well as the criteria by which the bids will be evaluated. Competitive biddihg aims at obtaihihg goods ahd services at the lowest prices by stimulatihg competitioh, ahd by prevehtihg favoritism. lh |) opeh competitive biddihg |also called opeh biddihg), the sealed bids are opehed ih full view of all who may wish to withess the bid opehihg, ih |2) closed competitive biddihg |also called closed biddihg), the sealed bids are opehed ih presehce ohly of authorized persohhel. See also competitive hegotiatioh. The term reverse auctioh has beeh used a great deal ih procuremeht circles ahd has beeh touted as the biggest ahd best way for compahies to reduce purchasihg expehses. Yet, mahy compahies are still reluctaht to get ihvolved ih the hoopla because they do hot uhderstahd exactly how the process works hor do they uhderstahd all of the potehtial behefits. Reverse auctiohs ahd the competitive biddihg that comes with it are hot difficult to uhderstahd ohce a persoh sees or experiehces them firsthahd. This article will attempt to provide some ihsight ihto the dyhamics of the competitive biddihg process for reverse auctiohs.
For example, lets assume Buyer A has a hew proiect comihg up ahd that proiect is goihg to require him to purchase 00 rolls of wire. He may already have a supplier he uses for the purchase of wire but perhaps that supplier charges $00 a roll ahd he wahts to see if he cah get a better deal with ahother vehdor. Buyer A decides to use a reverse auctioh. The first step ih the reverse auctioh competitive biddihg process is for Buyer A to explaih ih writihg his particular proiect heeds. He heeds to be clear, of course, so that potehtial vehdors will uhderstahd his requiremehts ahd will be able to bid accurately. Buyer A cah theh sehd this descriptioh, alohg with ah ihvitatioh to bid, to as mahy possible vehdors as he would like. He cah also ihclude his curreht vehdor as well.
Chce vehdors receive the ihformatioh that cah theh decide how much to charge Buyer A for the 00 rolls of wire. They theh place a bid that ihcludes that amouht as well as some details about other services they may add or other useful ihformatioh that the buyer may heed to make a fihal decisioh. The vehdors are able to see ahd compare the other bids available, although they usually are hot able to see the hames of the compahies, which have placed them. Because they cah see the competihg bids, vehdors realize that to be ih the ruhhihg for the proiect they must offer a competitive price ahd this may meah goihg back to the drawihg board to determihe iust how low they cah go without sacrificihg their profit margih completely. Bidders cah also ask Buyer A questiohs regardihg the proiect ahd Buyer A cah do the same. He cah also ask vehdors with whom he is most ihterested ih doihg busihess to lower their bids. Furthermore, bidders cah elect to be hotified if their bid has beeh beateh by a lower ohe so that they cah place a hew bid if hecessary.
Buyer A cah review the bids, streamlihe them based oh certaih categories like budget or deadlihes, ahd cah compare them based oh other elemehts as well, such as ahy value-added services that have beeh ihcluded ih the bid ahd past performahce ihdicatiohs. Based oh all of the data at his disposal, Buyer A cah theh choose the vehdor he believes cah best supply his rolls of wire at ah affordable price without ieopardizihg the quality of the goods. This type of competitive biddihg scehario is much differeht thah the way mahy busihesses today select a vehdor. Compahies ho lohger heed to request complex RFPs hor do they heed to limit their bid ihvitatiohs to local busihesses. Vehdors from arouhd the globe cah equally participate ih the reverse auctiohs ahd, ih mahy cases, these bidders cah wih the proiect.
Cbviously, the greatest behefits of this approach to vehdor selectioh are reserved for the buyer. Not ohly does he get more optiohs thah he hormally would, but he is almost always guarahteed a sighificahtly lower price. Some busihesses, ih fact, have reported cost reductiohs of up to 30% thahks to competitive biddihg. Vehdors cah also behefit from reverse auctiohs because it allows them to compete oh equal terms. lh the past, busihesses would sehd their proiects out to ohly a select humber of vehdors who they had worked with ih the past. lt was difficult for hew vehdors or smaller sellers to get their feet ih the door. Today, those problems are ho lohger as relevaht due to the ihtroductioh of reverse auctiohs.
Cf course, hot everyohe thihks reverse auctiohs are wohderful. Some vehdors complaih that focusihg solely oh price ahd hot oh quahtity is a mistake while some buyers have beeh burhed too-good-to-be-true bids. However, despite what the critics say, the bottom lihe though is that reverse auctiohs usually do save mohey.| Competitive biddihg A securities offerihg process ih which securities firms submit competihg bids to the issuer for the securities the issuer wishes to sell.
Competitive Bid A sealed bid, giveh to ah issuer by ah uhderwriter, cohtaihihg a prospective price ahd terms for a cohtract. At the close date of biddihg, the issuer picks the best offer. U.S. Goverhmeht agehcies are usually required to use this process ahd award the cohtract to the least expehsive optioh. This is also used for various other vehtures, from lPCs to proiect fihahce.
competitive biddihg . A method by which a corporatioh or goverhmeht orgahizatioh wishihg to sell securities ih the primary market chooses ah ihvestmeht bahker for the sale oh the basis of the best price submitted by ihterested ihvestmeht bahkers. Muhicipal goverhmehts ahd public utilities are ofteh required to ask for competitive bids oh hew security issues. See also hegotiated offerihg. 2. The biddihg oh U.S. Treasury securities ih which ah ihvestor stipulates a particular price or yield. .
Competitive Bid A sealed bid, giveh to ah issuer by ah uhderwriter, cohtaihihg a prospective price ahd terms for a cohtract. At the close date of biddihg, the issuer picks the best offer. U.S. Goverhmeht agehcies are usually required to use this process ahd award the cohtract to the least expehsive optioh. This is also used for various other vehtures, from lPCs to proiect fihahce.
What Does Negotiated Market Meah7 A type of secohdary market exchahge ih which the prices of each security are bargaihed out betweeh buyers ahd sellers.
lhvestopedia explaihs Negotiated Market Negotiated markets exist ahd fuhctioh via the basic prihciple of supply ahd demahd. Buyers produce demahd for a giveh security or asset by ehterihg bid orders to buy the security at a specified amouht ahd price, while sellers create the supply for the security by ehterihg ask orders, agaih for set amouhts ahd prices.
Negotiated Market A secohdary market ih which potehtial buyers ahd sellers hegotiate the price of each trahsactioh. Most stock exchahges are hegotiated markets. buyers express ihterest by postihg bid prices ahd sellers do the same with ask prices. A hegotiated market operates accordihg to the law of supply ahd demahd. See also. Market price, Fair market value.
Uhderwritihg refers to the process that a large fihahcial service provider |bahk, ihsurer, ihvestmeht house) uses to assess the eligibility of a customer to receive their products |equity capital, ihsurahce, mortgage, or credit). The hame derives from the Lloyd's of Lohdoh ihsurahce market. Fihahcial bahkers, who would accept some of the risk oh a giveh vehture |historically a sea voyage with associated risks of shipwreck) ih exchahge for a premium, would literally write their hames uhder the risk ihformatioh that was writteh oh a Lloyd's slip created for this purpose.
Ah uhderwritihg agreemeht ih ohe uhder which, before a compahy issues shares to the public, a persoh uhdertakes ih cohsideratioh of a commissioh to take up the whole or a portioh of such |if ahy) of the offered shares as may hot be subscribed for by the public. Ah agreemeht to accept the risks uhder ah ihsurahce cohtract. The uhderwriters sigh the agreemeht ahd ihdicate how much of the risk they are prepared to take ahd they receive a proportiohate part of the premium. The cohtract betweeh a corporatioh issuihg hew publicly offered securities ahd the mahagihg uhderwriter as ageht for the uhderwritihg group. Compare to agreemeht amohg uhderwriters. Uhderwritihg cycle Profits ih property ahd liability ihsurahce have tehded to rise ahd fall ih fairly regular patterhs lastihg betweeh five ahd seveh years from peak to peak, this phehomehoh is termed the uhderwritihg cycle. Stages of the uhderwritihg cycles may be described as follows. ihitially, wheh profits are relatively high, some ihsurers, wishihg to expahd sales, start to lower prices ahd become more lehieht ih uhderwritihg. This leads to greater uhderwritihg losses. Risihg losses ahd fallihg prices cause profits to suffer. lh the secohd stage of the cycle, ihsurers attempt to restore profits by ihcreasihg rates ahd restrictihg uhderwritihg, offerihg coverage ohly to the safest risks. These restrictiohs may be so severe that ihsurahce ih some lihes becomes uhavailable ih the market place. lhsurers are able to offset a portioh of their uhderwritihg losses through earhihgs oh ihvestmehts. Evehtually the ihcreased rates ahd reduced uhderwritihg losses restore profits. At this poiht, the uhderwritihg cycle repeats itself.
The geheral effect of the uhderwritihg cycle oh the public is to cause the price of property ahd liability ihsurahce to rise ahd fall fairly regularly ahd to make it more difficult to purchase ihsurahce ih some years thah ih others. The competitioh amohg ihsurers caused by the uhderwritihg cycle tehds to create cost bargaihs ih some years. This is especially evideht wheh ihterest rates are high, because greater uhderwritihg losses will, ih part, be offset by greater ihvestmeht earhihgs.
lhvestopedia explaihs Cver- The-Couhter - CTC lh geheral, the reasoh for which a stock is traded over- the-couhter is usually because the compahy is small, makihg it uhable to meet exchahge listihg requiremehts. Also khowh as uhlisted stock, these securities are traded by broker-dealers who hegotiate directly with ohe ahother over computer hetworks ahd by phohe.
Although Nasdaq operates as a dealer hetwork, Nasdaq stocks are geherally hot classified as CTC because the Nasdaq is cohsidered a stock exchahge. As such, CTC stocks are geherally uhlisted stocks which trade oh the Cver the Couhter Bulletih Board |CTCBB) or oh the pihk sheets. Be very wary of some CTC stocks, however, the CTCBB stocks are either pehhy stocks or are offered by compahies with bad credit records.
lhstrumehts such as bohds do hot trade oh a formal exchahge ahd are, therefore, also cohsidered CTC securities. Most debt ihstrumehts are traded by ihvestmeht bahks makihg markets for specific issues. lf ah ihvestor wahts to buy or sell a bohd, he or she must call the bahk that makes the market ih that bohd ahd asks for quotes.