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1、CHAPTER1IntroductiontoSecuritiesTradingandMarkets1.1TRADES,TRADERS,SECURITIES,ANDMARKETSAtradeisasecuritytransactionthatcreatesoraltersaportfoliopositionbasedonaninvestmentdecision.Thetradeactionandthetradedecisionfollowtheinvestingdecisiontobuy,sell,orotherwisetakeapositioninanasset
2、orinstrument.Thetradedecisioncon-cernshowtoexecutetheinvestmentdecision,inwhichmarkets,andatwhatpricesandtimesandthroughwhichagents.Tradedecisionsaremoreconcernedwiththespeed,costs,andrisksassociatedwithexecutingthetransaction,whileinvestingemphasizesselectionofthesecurity.Theinvestm
3、entstrategyislinkedtotherationaletobuyortosell(e.g.,toexploitundervaluationtoprovideneededliquidity).Investingisapositivesumgame,allocatingcapitaltowardsproductionandriskmanagement.Tradingisoftenazerosumgame,excepttotheextentthatitfacilitatesinvesting,producesinformation,andimprovesm
4、arketsbyenhancingliquidityandreducingexecutioncosts.Whileinvestingandtradingactivitiesmightbedistinguishedfromoneanother,thereisasignificantover-lapbetweenthem,wherehigh-turnovershort-terminvesting,alsogenerallyreferredtoastrading,blursthedistinctionbetweenthetwo.Traderscompetetogene
5、rateprofits,seekingcompatiblecounterpartiesintradeandseekingsuperiororderplacementandtiming.Proprietarytradersseekprofitsbytradingontheirownaccountswhileagencytraderstradeascommissionbrokersonbehalfofclients.Mostproprietarytradersarespeculatorswhofocusonprofitsderivedfrompricechanges
6、,arbitrageurswhofocusonpricediscrepancies,andhedgerswhoseektocontrolrisk.Dealers,whotradedirectlywithclients,andbrokers,whoseektradecounterpartiesforcli-ents,facilitatethetradingprocess.Brokersactasagentsforinvestors,buyingandsellingforthemonacommissionbasis.Dealersmaintainquotes(bid
7、s,whicharesolicitationstopurchaseandoffers,whicharesolicitationstosell)andbuyandsellonaprofitbasis.Thetypicalquotespecifiesthesecurity,theproposedtransaction’sprice,andthenumberFinancialTradingandInvesting©2013ElsevierInc.Allrightsreserved.121.INTRODUCTIONTOSECURITIESTRADINGANDMARKET
8、Sofunitstobe