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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (38958)	3/13/1998 10:18:00 AM
From: blankmind	Respond to of 61433

Wall Street's Hatfields and McCoys NASDAQ'S DEALER system is a totally different way of trading a stock compared with an "auction" market like the New York or American stock exchanges. Here's the path taken by a small investor's trade in each kind of market: On Nasdaq 1. Investor calls up a brokerage firm and places order for 100 shares of Microsoft at the going, or "market," price. On NYSE or AMEX 1. Investor calls up a brokerage firm and places order for 100 shares of International Business Machines at the going, or "market," price. On Nasdaq 2. His stockbroker sees Microsoft has been trading at $81.75 bid (price dealers will pay) and $81.875 asked (price dealers expect YOU to pay).Those prices are put on the screen by the "market makers" who are brokerage firms and other dealers who step up to quote prices on an individual stock. On NYSE or AMEX 2. His broker sees IBM has been trading at $99.50 and sends order to his trading desk, which bundles it with similar orders and sends it via computer(or through a phone call) to a floor broker standing in a booth at the New York Stock Exchange On Nasdaq 3. Broker sends order via computer to firm he has a relationship with, either his own firm's trading desk, a "wholesale" trading firm for dealers or another firm's trading desk. On NYSE or AMEX 3. The broker takes the order to the "specialist" post for IBM and other stocks assigned to that specialist. On Nasdaq 4. Firm that gets the order either executes at "best" going price, and sends back a report to the broker's firm or -- if they don't make a market in the stock, or their own quoted price is inferior -- facilitates the trade at the best price through a market maker who does. On NYSE or AMEX 4. The specialist will try to match the order with an investor order for a sale at a similar price. If there's a match, the specialist pairs the orders and executes them. Specialists must step up and buy or sell from their own accounts if there is a temporary shortage of buyers or sellers. On Nasdaq 5. Investor pays $81.875 a share, plus commission to the original broker. The firm that executed the trade profits on the 12.5-cent per share "spread" between the bid and asked. The reported Nasdaq volume for the trade may be "double counted" as 200 shares -- the 100 the investor bought, plus the 100 shares the market maker needed to buy so they could be sold to the investor. On NYSE or AMEX 5. Floor broker sends a confirmation back to the original broker. On NYSE or AMEX 6. Investor pays what is usually a fraction higher or lower than the last sale price, plus whatever commission is paid to the original broker. Investors' Glossary Double Counting Refers to process in which Nasdaq volume often includes more than one trade done to complete a single order. Market Maker Nasdaq dealer that posts prices for a specific stock and will buy or sell it. Specialist Traders on the floor of the NYSE that are assigned to trade a specific stock and must keep the market smooth. Nasdaq Used to be an acronym for National Association of Securities Dealers Automated Quotations System, but now stands alone. The "Curb" Nickname for the American Stock Exchange, referring to its roots in which traders stood curbside in lower Manhattan. "Open Outcry" The system used by the New York and American stock exchanges, using trading floors and an "auction" of stock prices. Seat A membership on an exchange, referred to as a "seat" because in the early years of the Big Board's existence, members sat in assigned chairs during the roll call of stocks. Today, the membership entitles one to buy and sell securities on the floor, as an agent for others or for one's own account. Return to top of page Copyright c 1998 Dow Jones & Company, Inc. All Rights Reserved.