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B. Read the text below and find answers to the following questions.
1) What does the term “exchange” mean? What types of exchanges do you know?
2) Do Commodity Exchanges deal in all kinds of commodities? How are the goods bought and sold at Commodity Exchanges?
3) What are the main factors governing prices at the exchanges?
4) What is the main purpose of the stock market?
5) What kind of products are traded on Stock Exchanges?
6) Who are the participants of the Stock Exchange?
7) What is necessary for a company to be admitted to the Stock Exchange?
8) What basic types of securities are listed and traded on the Stock Exchange?
Exchange is the marketplace for buying and selling both the securities and commodities. The way in which an exchange is organized and operates is determined by the type of dealings that take place every trading day. According to this there are two main types of exchanges: the Commodity Exchange and the Stock Exchange.
Commodity Exchangeis the marketplace where goods are bought and sold according to grades or standards and on the basis of standard contract terms. Commodity Exchanges usually deal in raw materials and some items of produce, such as cotton, wheat, vegetable oils etc., as these goods can be accurately graded and the grades practically remain unchanged every year. And Commodity Exchanges are called accordingly: the Wheat Exchange, the Metal Exchange and so on. Prices at these exchanges are determined by a complex interaction of factors. It may be said that the main factors governing prices are the interaction of supply and demand, the quality of the goods offered, the terms of contracts.
Stock Exchangeis the marketplace where listed securities can be traded efficiently. Most free economies have stock markets which provide companies with a means of raising capital from investors in order to finance their businesses. They provide a wide variety of investment products to meet the varying needs and goals of the investing public.
Stock Exchange brings together those wanting to raise capital (whether industry or government) with those who wish to invest. It is made up of a broad spectrum of participants including listed companies, individual investors, institutional investors, securities firms and dealers with assigned responsibility.
The most famous and oldest Stock Exchanges that have a long history are the London Stock Exchange, the NYSE (New York Stock Exchange) and the Tokyo Stock Exchange. Each year many domestic and overseas companies turn to them to raise capital for their businesses or to have their shares more widely traded. The stocks of the largest and best-known companies are listed on these Stock Exchanges.
It costs money to become an Exchange member. On the NYSE, for example, there are about 650 seats. The seats can be bought and sold (the price of a seat amounts to $625,000). Before you are permitted to buy a seat you must pass a test that strictly checks your knowledge of the securities industry as well as your experience.
Companies raise money through the issue of shares on the Exchange market. To be admitted to the exchange, they apply for a place on the «Official List». To do this, a company must give as complete picture of itself as possible: its trading history and financial record, management and business prospects.
Stock market prices in a particular country are affected by stock market prices elsewhere in the world. They are determined by the constant interplay of supply and demand.
C. Find pairs of synonyms.
D. Match the terms given in the box with the correct definitions below.
1) Number indicating how prices of shares have fluctuated.
2) An employee of a stock exchange who accepts to buy and sell orders from customers.
3) Stock of a large, national company with a solid record of stable earnings and/or dividend growth and a reputation for high quality management and/or products.
4) A name for investors who buy shares because they expect their price to rise.
5) A name for shareholders who sell because they expect the price to fall.
6) Financial organizations that own a lot of shares.
7) A company whose securities are traded on an organized exchange.
8) The indicator of a good market.
9) Last reported price at which a security was sold on an exchange.
Reading 2: Stocks and Shares
A. Read the following information on stocks and shares.
A share is a part of a company, offered for sale to the public. The company is able to raise cash for expansion and new ventures by selling shares in itself to investors. The first time it “goes public” (also known as flotation), a company will often announce its intentions with advertisements in the press. This is called an offer for sale.
As a shareholder, you are an owner of the company and are entitled to take part in its decisions. You are sent an annual company report, you can vote on company issues, and you have the right to attend shareholders’ meetings.
A share’s value is not fixed. Its price is determined by many things: the company’s recent performance; the state of the sector of the economy the company trades in; national and international economic and political changes; the level of consumer demand; and the peculiarly unpredictable human factors of confidence and pessimism. So, if you buy a share at one price and sell it at a higher price, you make a profit; if you sell it at a lower price, you make a loss. Shares can provide an income through the payment of dividends. However, a company can choose not to pay a dividend at all, investing any profits back into the company.
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