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World Financial Markets






Stock markets

Stock market (market of securities, debentures etc.) is part of the capital market; a market of securities traded on any stock exchange as well as on the over-the-counter market (OTC Market).

Stock market is an abstract notion defining the whole set of actions and mechanisms which make it possible to trade securities (stocks, bonds etc.). You should not mistake this term for the notion of stock exchange, which is aimed at providing a place for conducting trades and ensuring the cooperation between buyers and sellers of securities.

NYSE

New York Stock Exchange is the main stock exchange in the USA, the largest one in the world. It is the symbol of the US financial power and of the entire financial industry. In New York the worldwide known Dow Jones Industrial Average and the NYSE Composite Index are defined.

The NYSE Composite Index is one of the most popular stock indices in the world. It reflects the rate changes of all stocks listed on the New York Stock Exchange, including over 1500 largest American companies with the total capitalization of more than $20 billion. That is why NYSE Composite can serve as a barometer of the US economy.

The New York Stock Exchange was founded on the 17th of May, 1792. Since 1975 it has become a non-commercial corporation owned by 1336 members (this figure remains unchanged since 1953). The membership can be purchased; the price for it has reached $3 million.

In early May of 2006 the NYSE merged with Archipelago Holdings, an electronic communications network, and for the first time offered its stocks to investors, thus becoming a commercial organization.

The NYSE Group shares are traded on the stock exchange; at the beginning of March 2006 the NYSE Group market capitalization amounted to $12.5 billion. Operations with over a thousand of securities and shares are conducted here. Total capitalization of the NYSE-listed companies was $26.5 trillion at the end of 2006.

Trading hours: 2:30 p.m. - 9:00 p.m. GMT from Monday through Friday

NASDAQ

NASDAQ (National Association of Securities Dealers Automated Quotation) is an American off-exchange market specialized in shares of high-technology companies (electronics, software production etc.). This is one of three major US stock exchanges (together with the NYSE and the AMEX), a unit of the NASD regulated by the SEC. The owner of the stock exchange is the American company NASDAQ OMX Group. Apart from NASDAQ, it also owns 8 European stock exchanges.

At the moment over 3200 companies, including Russian companies, are listed by NASDAQ.

A regular NASDAQ trading session starts at 9:30 a.m. and ends at 4:00 p.m. ET. Trading operations are held on the basis of such platforms as SuperMontage and Primex. After the end of the regular session it is possible to continue the trade until 8:00 p.m. using the platform SelectNet. The scheme according to which the trading is conducted on the NASDAQ stock exchange differs from a traditional one. Several market makers are competing for execution of the clients' orders. Currently there are about 600 market makers here. The main function of a market maker on the NASDAQ (as well as on the NYSE) is the uninterrupted quotations providing and maintaining liquidity of a certain shares group during the trading. A market maker must execute an order at its own cost in case there is no corresponding opposite order on the market. Some market makers support hundreds of shares, others - thousands. As a result, on average, some types of shares are supported by 14 market makers, other shares’ types - by up to 50. The NASDAQ quotations are the result of quotation correlation provided by market makers and alternative trading systems.

Trading hours: 2:30 p.m. - 9:00 p.m. GMT from Monday through Friday

NYMEX

The New York Mercantile Exchange (NYMEX) was founded in 1872; it takes the first place in the world in oil futures trading. Contracts for oil, gas, platinum, palladium, gold, silver, copper and aluminum are traded on this stock exchange. According to the data of the Futures Industry Association, in 2006 216 billion of trades were executed here. In 2006 the NYMEX profit was equal to $497.3 billion, the net profit - to $154.8 billion. The capitalization is $11.4 billion.

Trading hours: 2:30 p.m. - 9:00 p.m. GMT from Monday through Friday

LSE

The London Stock Exchange is one of the biggest and oldest European stock exchanges. Officially, it was established in 1801; however its history dates back to 1570, when the king's financial agent and adviser Thomas Gresham built the Royal Exchange at his own expense. The LSE is a joint stock company which trades its own shares as well.

Trading hours: 08:00 a.m. - 04:30 p.m. GMT from Monday through Friday

TSE

The Tokyo Stock Exchange accounts for 80% of the country's stock turnover. The main traders are institutional owners of securities. In Japan individual owners have only 20% of the shares involved in the stock market, and 80% belong to financial organizations, insurance companies and corporations.

Placement owners reckon not on the dividends (in early 1990 they were 70 times cheaper than the market stock price), but on the stocks' value rate increase and on profiting from selling stocks at a higher price (the average annual profit from selling a stock issued in 1980 - 1994 was 34.7%). The main trading method is an open two-way auction. Up to 80% of all the stocks traded in the country are sold and purchased on the Tokyo Stock Exchange. 1517 organizations out of 1.3 - 1.5 million incorporated enterprises in Japan are registered here, but they produce over 25% of all the commodities and services.

In 2005 the TSE was the second largest stock exchange in the world. It comprised 2.5 thousand companies bringing yearly profits of more than $3000 billion

Trading hours: 00:00 a.m. - 06:00 a.m. GMT from Monday through Friday.

VSE

The Vienna Stock Exchange is one of the world's oldest stock exchanges and the only one in Austria. This Stock Exchange implements trading shares, obligations and derivatives. It was established in 1771 by the Empress Maria Teresa for trading Austrian government bonds. It is a privately owned company.

Trading volume: $ 48 468 billion

Listing: 110 companies

Capitalization: $ 157 358 billion

Profit: EUR 8.12 million

Trading hours: 07:00 a.m. - 04:30 p.m. GMT from Monday through Friday

FWB

The Frankfurt Stock Exchange is the largest one in Germany and one of the world's biggest stock exchanges. Its operator is Deutsche Boerse Group AG. The starting point of the existence of this stock exchange is considered to be 1585 - the year when unified exchange rates were accepted by merchants in Frankfurt am Main which had become a large European commercial centre by that time. The FBW has been in the leading position in Germany since 1949. It passed under control of the Deutsche Boerse Group in 1993 created on its basis.

Its main index is DAX reflecting the prices for shares of 30 major German companies and is a barometer of the German economy.

Trading hours: 08:00 a.m. - 07:00 p.m. GMT from Monday through Friday

RTS

The Russian Trading System was established in mid-1995 for the purpose of unification of regional markets into a single organized securities market of Russia. It falls under the RTS Group.

The RTS is a generally recognized centre where shares and obligations of a wide range of issuers are priced. The information about trading on the RTS is the most important source of data about a situation on the Russian securities market, because it is the RTS which serves a significant part of foreign and Russian portfolio investments in shares of the Russian companies.

Trading hours: 06:00 a.m. - 07:50 p.m. GMT from Monday through Friday.

Foreign Exchange Markets

The term "forex" is derived from "foreign exchange". It is usually used for mutual exchange of freely convertible currencies, but not for the totality of foreign exchange transactions. On the basis of objectives, forex operations can be trading, speculative, hedging and regulating (central banks’ interventions in the foreign exchange market). In Russia Forex means solely speculative currency trading via commercial banks or dealing centres held with a certain leverage, i.e. margin trading.

Forex is an international interbank market. Operations are carried out through such institutions as central banks, commercial banks, investment banks, brokers and dealing centres, retirement funds, insurance companies, transnational companies etc. The volume of one contract with a delivery of real currency on the second working day (spot market) usually amounts to approximately $ 5 million or the equivalent sum. The value of one conversion payment is ranged from 60 to 300 US dollars. Moreover, around $ 6000 per month are spent on the interbank informational trading terminal. Thus, the exchange of insignificant amounts is not conducted on Forex. For conversions of smaller amounts it is better to address a financial intermediary (a bank or an exchange broker) which executes the operations for a certain percent of the transaction amount. Intermediaries do not need to operate on the foreign exchange market if they have many clients and differently directed orders. Though, they always get commissions from their customers. Due the fact that not all the clients' orders go to Forex, the intermediaries can offer lower charges to their clients than the cost of direct operations on Forex. At the same time, if the intermediaries are eliminated, the exchange costs for the clients will increase.

The current quotations are used for a large number of operations which do not always get directly to Forex. For example, the changing of the national currency rate by the central bank that has to preserve the ratio of the international currencies in compliance with their proportions on Forex, even if the real supply/demand in a country does not correspond to the tendencies on Forex. For instance, if the supply of the euro is excessive on the domestic market, while the EUR/USD price is increasing on Forex, the central bank will have to increase the price, rather than reduce it, being pressurized by the excessive supply.

Another vivid example is a margin speculative currency trading devoted to the fixation of current forex quotations. However it does not imply the real delivery. Almost all intermediaries offer direct exchange services as well as speculative trading with the leverage on the currency market. Generally, commissions for such operations are much lower than those for direct conversion, because the necessity in the real contracts for delivery concluding appears rather seldom due to large-scale involvement and fugacity of trades. Often such commissions are taken in the form of a spread – a fixed difference between Bid and Ask prices quoted at the same particular moment. Commonly, a chain of intermediaries exists between Forex and a speculator, with every intermediary taking its charge.

Margin operations can lead (though not necessary do) to the real additional demand and supply formation on the currency market, especially within a short-term period. However they cannot develop the general trend of the currency rates’ movement.

Trading hours: 24 hours a day except weekends

MICEX

The Moscow Interbank Currency Exchange is one of the largest universal exchanges in the Russian Federation, the CIS countries and East Europe. It was established in 1992.

The MICEX is a leading Russian stock exchange where trading stocks and bonds of approximately 600 Russian issuers with the total capitalization of almost 24 billion rubles is conducted every day. The entry list of the MICEX consists of about 650 organizations which are professional market makers with the number of clients amounting to over 490 investors.

98% of the Russian companies' stocks’ and ADRs of the total turnover on the Russian stock exchanges are traded on the MICEX; and approximately 70% of the world trading volume of these securities.

During the period of 1992-1998 the foreign currency trading was carried out in the form of an auction on the MICEX where unified fixed rates of the ruble versus the US dollar and of the Deutsche Mark against the US dollar for all participants of the trading session were set up. In 1997 the System of Electronic Lot Trading (SELT) was launched; it was functioning along with the main trading (the auction) till the crisis of 1998 and became the major currency trading platform of Russia thereafter. At present, trading via SELT joins eight interbank currency exchanges within the framework of a single trading session. Here the deals for the US dollar, the euro, the Ukrainian hryvnia, the Kazakhstan tenge, the Belarusian ruble and the operations with currency swaps are carried out. The total volume of operations with foreign currency in 2006 equaled 25.9 billion rubles or 956 million US dollars (approximately half of the total MICEX group stock turnover). Currently, an effective system of risk management is established on the MICEX currency market, which guarantees timely discharge of obligations by all trading participants. Another element of the system is the "payment against payment" principle, according to which the MICEX settles accounts with a trading participant only after the participant has discharged its obligations. 540 credit organizations are members of the MICEX.

Trading hours: 06:30 a.m. - 02:45 p.m. GMT from Monday through Friday