1. Dealers and Brokers By Group 2

2. Brokers An individual who is paid a commission for executing customer orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission.

3. Types of Brokers Full-services brokers: It helps you pick investments and devise a financial plan. However, it will charge a higher brokerage fee Discount brokers: It charges far lower commissions than full service brokers. But you will get little or no investment advice

4. Types of Brokers Floor brokers: execute orders on the floor of the exchange Upstairs brokers: handle retail customers and their orders

5. Dealers An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price)

6. Comparison DealerBroker RolePrincipal/Market Maker Agent/Intermediary Inventory holdYesNo TradingOwn account and bear own risk Clients ’ account and no risk RevenueBid-ask spreadBrokerage commission

7. Specialists Specialists make a market in the shares of one or more firms Specialists can be either a broker or dealer

8. Functions of the specialists 4 main functions: Manage the auction process - to maintain a fair and orderly market Execute order for floor brokers - to keep the market liquid or to prevent rapid price changes Serve as catalysts - to enable a transaction to take place Stabilize price - to ensure that stock trading moves smoothly

9. Big players Schwab (e-broker) Wachovia Securities (The fifth largest full service retail broker dealer) Spear, Leeds & Kellogg (Specialist)

10. Schwab NYSE ticket symbol: SCH The largest online broker in US Market share Schwab 27% E*trade 12% Waterhouse 12% Fidelity 9%

11. Schwab 4.2 million out of 8 million clients accounts and US$296 billion out of US$763 billion in client assets are came from the online market

12. Schwab The main core business areas of Schwab are options, fixed income investment, mutual fund, and stocks. Clients can use the trading tools called StreetSmart Pro TM to make these trades.

13. Schwab Recent News: 25 October, 2000 first storefront branch in Hong Kong's Central business district. 21 January, 2001 "Best Internet Brokerage" by Gomez

14. Wachovia Securities The 5th largest full service retail broker- dealer in US 3.4 million of active retail client accounts retail clients assets of $265 billion

15. Wachovia Securities Business area: discount and full-service brokerage asset management clearing services

16. Wachovia Securities Exchange Membership: New York Stock Exchange American Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Philadelphia Stock Exchange NASDAQ

17. Wachovia Securities Financial health 8.27% tier-1 capital (min 4%) Source: Wachovia investor midyear update 16 Sep 2002

18. Wachovia Securities Recent News: Create new firm with Prudential Financial Inc. Wachovia 62%, Prudential 38% Become third largest: $537b client base 3,500 offices in US

19. Spear, Leeds & Kellogg (SLK) One of the 7 specialist in NYSE Rank No.2 in number of common stocks Famous stocks handled:  IBM  Boeing  AOL Time Warner  AIG  NTT DoCoMo

21. Spear, Leeds & Kellogg (SLK) Acquired by Goldman Sachs in late 2000 GS paid more than $6 million, very high price Other Business: Market makers in NASDAQ Order management system, REDIPlus Clearing business

22. Spear, Leeds & Kellogg (SLK) Scandal: In 1998, NASD fined SLK for $950,000 for delayed reports of trades In 2003 April, under scrutiny of NYSE Counterparts probed:  LaBranche  Van Der Moolen  Bear Wagner  FleetBoston (fined $150,000)