Before Big Bang

Stock Exchange members were either brokers or jobbers. Brokers acted on behalf of their clients to buy and sell shares. Jobbers acted as wholesalers on their own behalf buying from, and selling to brokers but not to the general public.

The Changes

• Instead of brokers and jobbers, all member firms operate as “dual capacity^” broker/dealers which means that they are free to buy securities from, or sell them to, clients without dealing through a jobber. Some such members ― called Market Makers ― will undertake to make markets in certain ranges of shares rather as a jobber did in the past.

• Membership of the Stock Exchange, which in the past had only been open to individuals, is now open to corporate members. This has enabled banks, financial institutions, insurance companies and foreign securities firms to become members. Because of their size and capital they are able to compete internationally. This became necessary because as membership was limited to individuals who, although they grouped themselves into partnerships, were too small to compete with their counterparts abroad, particularly in America and Japan.

• The scale of commission charged for buying and selling shares was scrapped. Since October 27th, 1986 stockbrokers have been able to fix their own charges according to the service they provide.

• To cope with the increased business with which the Stock Exchange has to manage, and to coincide with 'Big Bang', a sophisticated new electronic dealing system has been introduced called SEAQ.

New Technology

SEAQ ― Stock Exchange Automated Quotations ― shows information on share prices which until 'Big Bang' was only available on the Stock Exchange floor. The information is shown on television screens in brokers' offices anywhere in the UK or overseas giving them all access to the same information simultaneously.

The information is updated continuously as market makers inform the SEAQ central system of trading of what has taken place. The introduction of this “sophisticated” system has resulted in trading taking place over a television screen rather than on the market floor.

Comprehension

1. What are the people working on the trading floor called? What do they do?

2. What is the difference between “fixed interest” securities and “equities”? Give examples of each group.

3. What is a Contract Note? What is it for?

4. What does Account System provide?

5. How are investors protected against broker defaulting?

Exercises:

Ex. 1. Match the words with the correct definitions.

1. Stock Exchange	A. An individual who buys a security and hopes to sell it at a lower price.
2. Broker	B. A share of the company’s profit which is paid to the shareholders.
3. Bear	C. A loan for a fixed period with a fixed interest rate.
4. Interest	D. A person or firm which buys and sells securities.
5. Bond	E. The list of securities owned by a person or financial institution.
6. Dividend	F. A Stock Exchange Member whose Firm acts as a dealer in securities.
7. Bull	G. A payment made to bondholders in return for the loan of money.
8. Jobber	H. A market place for buying and selling shares.
9. Portfolio	I. An investor who buys a share and owns a stake in a company.
10. Shareholder	J. An individual who buys a security and hopes to sell it at a higher price.
11. Share index	K. Publication with current prices of stock and shares.
12. Stock list	L. Number used to show how share prices have fluctuated based on prices of shares selected for this purpose.

Ex. 2. Choose the word or phrase which best completes each sentence.

1. ______ is the general term used for all types of stocks and shares.

a) Gilt-edged; b) Investment; c) Securities.

2. A ______ is an organisation which defends the wages and rights of the workers who belong to it.

a) pension scheme; b) life assurance; с) trade union.

3. The part of the Stock Exchange where shares are bought and sold is called the ______.

a) floor; b) market place; с) screen.

4. ______ advise their clients of what investments to make and act as agents in buying and selling shares.

a) Wholesalers; b) Counterparts; с) Brokers.

5. To ______ a price means to give the price at which one is prepared to buy or sell a share.

a) act; b) quote; с) undertake.

6. A business deal done between two people is known as a(n) ______.

a) instruction; b) transaction; с) membership.

7. The total wealth of a company in terms of money and property is called ______.

a) funds; b) capital; с) charges.

8. The information contained in the SEAQ system is constantly ______ to keep up with changes in the market.

a) automated; b) updated; с) traded.

9. You should have as diversified a ______ of shares as possible.

a) file; b) case; c) portfolio.

10. The share ______, which is made up of a cross-section of shares, reflects the general activity of the market.

a) indication; b) index; c) indicator.

Ex. 3. Complete the sentences with one of the following prepositions and note the different ways of expressing the change in a share’s performance.

down to by from of to at up

Name of share	Yesterday’s closing price	Today’s closing price	Change (+/-)
Abbeycrest	92	78	-14
Anglian Water	327	332	+5
Lloyds	400	394	-6
Sun Alliance	300	303	+3
Thames TV	174	180	+6
Ward Holdings	48	48	-
Whitbread	390	387	-3

1. Shares in Anglian Water increased ______ 5p.

2. Shares in Abbeycrest fell ______ 92p ______ 78p.

3. Sun Alliance shares rose 3p ______ 303р.

4. Thames TV shares were ______ 6p at 180p.

5. There was a drop ______ 6p in Lloyds shares.

6. Whitbread shares were ______ 3p at 387p.

7. Shares in Ward Holdings stood ______ 48p.

Ex. 4. Use the words in the box to complete the text about SEAQ below.

security stocks market makers

services corporate screens

computerised brokers database

commissions operations purchasing

SEAQ

This is a (1)______ dealing system and stands for the Stock Exchange Automated Quotations. (2)______ now deal in (3)______ and shares over the telephone at their own dealing desks. (4)______ and selling prices are displayed on their (5)______. This new system provides added (6)______ for investors because all deals are recorded on a (7)______. In 1986, the London Stock Exchange made several changes in its (8)______. First of all, in March, it offered overseas and (9)______ membership to banks and insurance companies. At the same time minimum (10)______ were abolished. This now enables clients to negotiate freely with their (11)______ about charges for (12)______.

Ex. 5. Match the expressions in the box with the correct definitions.

boutique seed capital megabid

pearl elves fat cat

turkey window amber light

1. Market analysts who believe they control the market. ______

2. An investment bank which concentrates on mergers and acquisitions or other specialised transactions. ______

3. A very profitable investment or stock. ______

4. A bad investment. ______

5. Money provided by an existing company to start a new business. ______

6. An investment which allows the investor to observe technology. ______

7. Advanced warning that something is wrong in a company. ______

8. A venture capitalist who receives a high return on an investment. ______

9. A very large takeover bid. ______

Ex. 6. Use the words in the box above to complete the text about how new stocks are issued.

stock prices investment banking basic ownership going public

underwriting common stock initial offer underwriters

market value initial public offering preferred stock tombstone

The first time a company's stock is issued, the company is said to be (1)______. This means that the owners of the company are selling part of it to the general public. The formal name for this process is (2)______. Usually, a company offering stock for sale places a special kind of advertisement in the financial press, called a (3)______. This provides potential investors with specific information about the company. It includes price per share, which is the (4)______ of the stock. The price of shares when offered for the first time is the (5)______. The offering of shares is dealt with by the (6)______ who actually buy up all the shares for sale and sell them on the market. This is referred to as (7)______ and is handled by the (8)______ division of a securities firm.

Companies can issue two kinds of stock ― the first offers owners a share in the direct success or failure of the business and represents the (9)______ of a corporation. This type of stock is called (10)______. Common stock owners benefit directly through increases in (11)______. The other type of stock offers holders dividends which are distributed to them before common stock holders and is called (12)______.

Ex. 7. A client has purchased a variety of investment instruments. Can you identify the instruments in the portfolio?

blue chip shares offshore funds convertible bonds certificates of deposit

Eurobonds ordinary shares gilts

Treasury Bills unit trusts index-linked bonds

1. Listed shares with a record of good financial performance. ______

2. British pound sterling bonds which are issued by the Bank of England. ______

3. Government bonds whose interest rate varies according to the level of inflation. ______

4. Funds held in countries where the level of taxation is relatively low. ______

5. Equal parts of a company which pay the holder a dividend. ______

6. Funds held by a group of people which are then invested in securities by a management company. ______

7. Short-term bonds which are issued regularly by a central bank and are sold at a price below their eventual value. ______

8. Written statements that money has been deposited at a bank to be repaid at a future date. ______

9. Bonds which are issued in a variety of currencies by governments or international companies. ______

10. Bonds which can be exchanged for shares. ______

Ex. 8. Transform Active Voice into Passive.

1. My stockbroker advised me to make several safe investments. 2. He invested most of his savings in the Stock Exchange. 3. Stock Market is a place where one can buy or sell loans to the Government. 4. Investors who use the Stock Exchange will decide the general level of prices. 5. The Stock Exchange has found different solutions to the problem of providing a continuous and free market in securities. 6. To protect investors, the Stock Exchange has set up a compensation fund. 7. SEAQ shows information on share prices. 8. They may tempt a broker to recommend shares to a client which he has acquired as a principal. 9. They didn’t allow members of the public to buy shares from stockjobbers directly. 10. Information screens on the trading floor displayed share prices.

Ex. 9. Put the verbs in brackets in the proper form.

1. Over 7,000 securities (trade) on the London Stock Exchange. 2. In 1986 great changes (take place) in the work of the Stock Exchange. 3. Before 1986 stockjobbers (know) as wholesalers of shares. 4. Since 1986 stock brokers (be able) to fix their own charges according to the service they provide. 5. To coincide with “Big Bang” a sophisticated new electronic dealing system called SEAQ (introduce). 6. After the Big Bang the process of buying and selling shares (change) naturally. 7. Even when he (act) in his traditional role, a Broker’s responsibility (no/end) with the transaction on the trading floor. 8. Investment decision (affect) by a client’s tax position. 9. At the same time, American brokers (attract) an increasing volume of big business in London industrial shares across the Atlantic. 10. Before 1986 shares in certain major UK companies (trade) more heavily in New York than in London. 11. Share ownership (rise) significantly over the past decade. 12. Business (transact) entirely within and between broker – dealers’ offices now.

Ex. 10. A. Complete this financial report using expressions from the box below.

DAX London CAC40 Nasdaq DOW Nikkei New York Hong Kong

Yesterday in Asia, in (1)_______, the Hang Seng closed 1.6 per cent up at 15,657 exactly. In Tokyo the (2)_____ was also up, at 15,747.20. In (3)_______ last night, the (4)_______ closed 1.8 per cent higher at 10,824 exactly, and the hi-tech (5)_______ index was 3.3 per cent up at 3,778.32. Turning now to Europe, in early trading in (6)_______ the FTSE is 0.1 per cent down at 6,292.80 The French (7)_______ index is also slightly down at 6,536.85. The (8)_______ in Germany, however, is 0.1 per cent higher at 6,862.85.

B. And now use expressions from the box to describe:

barrier spectacular gains bull market blue chips very high turnover trading record high bullish

1. shares in companies like IBM, Kodak, and Procter and Gamble.

2. buying and selling of shares on a stock market.

3. a day with twice as many shares sold as usual on a particular stock market.

4. shares that were worth $15 and are now worth $110.

5. a period when the stock market index has gone from 20,--- to 25,000.

6. the feelings of dealers who are optimistic that prices will continue to rise.

7. when a stock market index reaches 25,500 for the first time.

8. the level on a stock market index which may be difficult for shares to pass.

Ex. 11. Translate into English.

Биржа ― организационно оформленный, постоянно действующий рынок, на котором осуществляют торговлю ценными бумагами, недвижимостью и оптовую торговлю товарами. В соответствии с этим различают фондовую и товарную биржи. Биржи ― это в основном акционерные общества, основателями которых могут быть юридические и физические лица при наличии у них разрешения на коммерческую и комиссионную деятельность. Фондовая биржа ― специализированная финансовая организация, которая сосредотачивает спрос и предложение ценных бумаг, содействует формированию их биржевого курса. Она действует по принципам частного предпринимательства или на основе государственной собственности. В условиях современных промышленно развитых стран основная масса долгосрочных вкладов капитала осуществляется с помощью фондовой биржи.

В торгах на бирже принимают участие брокеры и биржевые маклеры. Брокер ― посредник при заключении соглашений между заинтересованными сторонами о купле-продаже товаров, ценных бумаг, валют. Брокером может быть отдельное лицо, фирма или организация, которая не имеет в своём распоряжении товаров, ценных бумаг, валюты. И действует по поручению клиента-продавца или покупателя. Деятельность брокера вознаграждается только за проданные товары. И его доход (брокеридж) формируется либо за счёт заранее оговоренного процента от стоимости проданного товара, либо в виде выплаты фиксированного вознаграждения на каждую проданную единицу или партию товара. Маклер ― посредник при заключении торговых и биржевых сделок, который действует по поручению и за счёт клиента. Маклер специализируется на определённых видах посреднических операций, имеет права юридического лица. За свои услуги он берёт комиссионные, размер которых устанавливается биржевым комитетом в размере 0,25―3% от суммы сделки.

Все участники торгов действуют на договорной основе и должны строго придерживаться биржевых правил.