International Equity Markets 2004

Analysed in this unique Visiongain report is:

• A macro financial context for equity markets
• A comparison of the global share market with that of the debt market
• Analysis with respect to long-term debt, capital markets, and short-term debt
• In-depth analysis of the money markets
• Unique assessment of the financial intermediary market.

This report represents the definitive consolidated work on what a share is, the rights a share confers upon its owner, and the various forms equity can assume, from ordinary shares to preference shares, to participation and employee shares. PLUS it delivers forecasts of the equity market and how they will effect you.

This report then goes on to examine the practical and bureaucratic merits and drawbacks of 'going public' and trading shares within the the equity market. Moreover, this discussion elaborates on the regulatory and cost requirements and repercussions of trading both domestically on the LSE and AIM, (the UK equity markets), and the NYSE, Nasdaq and Amex, (the principal US equity markets). This discussion also extends to examining the contingencies for trading shares within foreign markets, and the various indices that exist to calibrate equity movements, such as the Dow Jones Industrial Average, S&P500 the various machinations of the FTSE index, as well as the Nasdaq Composite Index.

This report finally discusses the various derivative products that can stem from equity markets, such as options, futures, warrants and convertible securities.

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• 2.1 Introduction
  
• Diagram 1: Overview of the financial system
  
• 2.2 What is the financial market?
  
• 2.2.1 Financial markets - primary vs secondary
  
• Diagram 2: Financial markets - primary vs secondary
  
• 2.2.1.1 Primary markets
  
• 2.2.1.2 The secondary market
  
• 2.2.2 Financial markets - debt vs equity
  
• Diagram 3: Financial markets - debt vs equity
  
• 2.2.2.1 What are securities?
  
• 2.2.2.2 Equity securities (i.e. ordinary shares)
  
• 2.2.2.3 Debt securities (i.e. bonds)
  
• 2.2.3 Financial markets - exchanges vs over-the-counter markets
  
• 2.2.3.1 The exchange market system
  
• 2.3 Financial intermediaries
  
• 2.3.1 Function of financial intermediaries
  
• 2.3.2 Benefits of intermediation
  
• 2.3.2.1 Reduced transaction costs
  
• 2.3.2.1.1 What is it about transacting that makes it so costly?
  
• 2.3.2.2 Intermediaries can check asymmetric information
  
• 2.3.2.2.1 Reduce adverse selection
  
• 2.3.2.2.2 Reduce moral hazard
  
• 2.3.3 Principal financial intermediaries - value of assets
  
• 2.3.3.1 Visiongain analysis - size of principal financial intermediaries
  
• 2.3.3 Financial intermediaries - conclusion
  
• 2.4 Chapter conclusion

3 What is equity?

• 3.1 Definition of equity
  
• 3.2 Nature of equity ownership
  
• 3.3 Share certificate - proof of ownership
  
• 3.4 Shareholder rights
  
• 3.4.1 Decision-making powers
  
• 3.4.2 Right to a dividend
  
• 3.4.3 Liquidation - claim on assets
  
• 3.4.4 Limited liability
  
• 3.5 Types of Share
  
• 3.5.1 Ordinary shares (common shares)
  
• 3.5.1.1 Rights conferred by ordinary shares
  
• 3.5.1.1.1 One share per vote - election of directors
  
• 3.5.1.1.2 Dividends
  
• 3.5.1.1.3 Claim on assets
  
• 3.5.1.2 Risks conferred by ordinary shares
  
• 3.5.2 Preference shares (preferred stock)
  
• 3.5.2.1 Rights conferred by preference shares
  
• 3.5.2.1.1 Priority dividend
  
• 3.5.2.1.2 Priority over capital in event of liquidation
  
• 3.5.2.1.3 No voting rights
  
• 3.5.3 Redeemable shares (callable shares)
  
• 3.5.4 Deferred shares (founders shares)
  
• 3.5.5 Non-voting shares
  
• 3.5.6 Shares with limited voting rights or enhanced voting rights
  
• 3.5.7 Cumulative shares
  
• 3.5.8 Adjustable rate shares
  
• 3.5.9 Participation shares
  
• 3.5.10 Convertible shares
  
• 3.5.11 Employee shares
  
• 3.6 Chapter conclusion

4 Raising capital

• 4.1 Introduction
  
• 4.2 Methods of raising finance
  
• 4.2.1 Share capital (equity)
  
• 4.2.1.1 Advantages
  
• 4.2.1.2 Disadvantages
  
• 4.2.2 Retained profit
  
• 4.2.3 Loan facilities
  
• 4.2.3.1 Advantages
  
• 4.2.3.2 Disadvantages
  
• 4.2.4 Capital market instruments
  
• 4.3 Debt vs equity
  
• 4.4 Risk
  
• 4.5 Chapter conclusion

5 Equity markets and corporate structure

• 5.1 Introduction
  
• 5.2 Businesses
  
• 5.2.1 Partnerships and sole proprietorships
  
• 5.2.2 Company structures
  
• Diagram 4: Company structures
  
• 5.2.2.1 Private company limited by shares
  5.2.2.2 Private company limited by guarantee
  
• 5.2.2.3 Private unlimited company
  
• 5.2.2.4 Unlisted public company
  
• 5.2.3.5 Listed public company
  
• 5.3 Chapter conclusion

6 Trading shares in the equity market

• 6.1 Introduction
  
• 6.2 World stock exchanges
  
• Table 1: World stock exchanges
  
• 6.3 Why go public?
  
• 6.3.1 Pros of flotation
  
• 6.3.2 Cons of flotation
  
• 6.3.2.1 Susceptibility to market conditions
  
• 6.3.2.2 Potential loss of control
  
• 6.3.2.3 Disclosure requirements and ongoing reporting
  
• 6.3.2.4 Loss of privacy
  
• 6.3.2.5 Cost and fees
  
• 6.3.2.6 Management time
  
• 6.3.2.7 Director's responsibilities and restrictions
  
• 6.4 Chapter conclusion

7 Regulation and access to UK equity markets - London Stock Exchange(LSE)

• 7.1 Introduction
  
• 7.2 Admission to the LSE
  
• 7.3 Appropriate for listing
  
• 7.3.1 UKLA listing rules
  
• 7.3.2 Investment community view
  
• 7.3.3 UKLA listing rrles and investment community - parallel
  
• 7.4 Regulatory requirements
  
• 7.4.1 Incorporation
  
• 7.4.2 Accounts
  
• 7.4.3 Track record
  
• 7.4.4 Directors
  
• 7.4.5 Working capital
  
• 7.4.6 Independent operations
  
• 7.4.7 Shares in public hands
  
• 7.4.8 Market capitalisation
  
• 7.5 Market requirements
  
• 7.5.1 Track record as a sound, well-managed business
  
• 7.5.2 Viable and realistic business plan
  
• 7.5.3 Management quality and continuity
  
• 7.5.4 Corporate governance
  
• 7.5.5 Transparency of ownership and accounting
  
• 7.5.6 Timing and market sentiment
  
• 7.6 Preparing the way for flotation on the LSE
  
• 7.6.1 Appointment of advisers
  
• 7.6.2 Deciding on the method of listing
  
• 7.6.3 Executing necessary changes in the board and operations
  
• 7.6.4 Taxation
  
• 7.6.5 Beginning the valuation process
  
• 7.7 What becoming a listed company means
  
• 7.7.1 The role of the FSA - the UKLA
  
• 7.7.2 The Exchange
  
• 7.8 Different methods of flotation
  
• 7.8.1 Public offer
  
• 7.8.2 Placing
  
• 7.8.3 Introduction
  
• 7.9 Public trading of shares
  
• 7.9.1 Small to medium-sized companies - SEAQ or SEATS PLUS
  
• 7.9.2 Large companies - SETS
  
• 7.1 Liquidity and share price volatility
  
• 7.10.1 Proportion of company's shares in free float
  
• 7.10.2 Significant economic news
  
• 7.10.3 Size of the company
  
• 7.11 Costs of a listing
  
• 7.11.1 UKLA and Exchange fees
  
• 7.11.2 Regulatory Information Service (RIS)
  
• 7.12 Countdown to flotation
  
• 7.12.1 Introduction
  
• 7.12.2 Offer for subscription to the public
  
• 7.12.3 Requisite documents
  
• 7.12.3.1 Pathfinder prospectus
  
• 7.12.4 The flotation timetable
  
• Table 2: Countdown to flotation timetable
  
• 7.13 Continuing obligations
  
• 7.13.1 Disclosure of price-sensitive information and public announcements
  
• 7.13.1.1 Price sensitive information and potential leaks
  
• 7.13.1.2 Unexpected movements in share prices
  
• 7.13.1.3 Speculative press stories re company
  
• 7.13.2 Directors' responsibilities
  
• 7.13.3 Dealing restrictions and the Model Code
  
• 7.13.4 Shareholders
  
• 7.13.5 Report and accounts
  
• 7.13.6 Transaction and document disclosure
  
• 7.13.7 Ongoing costs
  
• 7.13.8 Continuing obligations - summarised
  
• 7.14 Listing rules.
  
• 7.15 Subsequent offer of shares to the public
  
• 7.15.1 Pre-emption rights - rights issue
  
• 7.15.1.1 Pre-emption rights prior to 1980
  
• 7.15.1.2 Pre-emption rights post 1980
  
• 7.15.1.3 Statutory exceptions
  
• 7.15.2 Re-sale of shares by members
  
• 7.16 Remedies and liabilities
  
• 7.16.1 Stock Exchange redress
  
• 7.16.1.1 Suspension of listing
  
• 7.16.1.2 Disciplinary action
  
• 7.16.1.3 Remedies against the company, offeror, or seller of the securities
  
• 7.16.2 Civil remedies against persons responsible for the listing
  
• particulars or prospectus, other than the company of offeror
  
• 7.16.3 Criminal liability of persons responsible
  
• 7.17 Chapter conclusion

8 Access to UK equity markets - Alternative Investment Market(AIM)

• 8.1 Introduction
  
• 8.2 AIM listing requirements
  
• 8.2.1 The nomad
  
• 8.2.2 Ongoing disclosure
  
• 8.3 Investing in AIM - the benefits
  
• 8.3.1 Opportunity to invest in small young growing companies
  
• 8.3.2 Tax advantages
  
• 8.3.4 Relaxed entry requirements
  
• 8.3.5 Option to admit to official list
  
• 8.4 How to join AIM
  
• 8.5 Considerations before admission to AIM
  
• 8.6 Admission of shares to AIM
  
• 8.6.1 Pre-application announcement
  
• 8.6.2 Submission of application
  
• 8.6.3 Information of board and members
  
• 8.6.3.1 The directors
  
• 8.6.3.2 The shareholders
  
• 8.6.3.3 Additional parties
  
• 8.7 Subsequent issues
  
• 8.8 Differences between official list and AIM
  
• Table 3: Differences between official list and AIM
  
• 8.9 Chapter conclusion

9 Regulation and access to the US equity market - New York Stock Exchange
(NYSE)

• 9.1 Introduction
  
• 9.2 The auction market
  
• 9.3 Market regulation
  
• 9.3.1 Why is the NYSE regulated?
  
• 9.3.2 NYSE requirements
  
• 9.3.2.1 Continued obligations
  
• 9.3.2.2 Corporate governance and disclosure
  
• 9.3.2.3 Material corporate news - Timely Alert Policy
  
• 9.3.3 US equity market - institutional regulatory framework.
  
• 9.3.3.1 Institutional deconstruction
  
• 9.3.3.2 NYSE - as a regulator
  
• 9.3.3.2 SEC and the Securities Act 1933 and 1934
  
• 9.3.3.3 NYSE rules
  
• 9.3.3.4 Member Firm Regulation
  
• 9.3.3.4 Market Surveillance
  
• 9.3.5 Listing requirements - NYSE
  
• 9.3.5.1 Introduction
  
• 9.3.5.2 Domestic companies - minimum numerical standards for equity
  listings
  
• Table 4: NYSE listing requirements
  
• 9.3.5.3 Aggregate market value (102.01B)
  
• 9.3.5.3.1 For listings at time of IPOs
  
• 9.3.5.3.2 Significant concentration of stock
  
• 9.3.5.4 North American companies
  
• 9.3.5.5 Financial standards (102.01C)
  
• 9.3.5.5.1 Pre-tax earnings
  
• 9.3.5.5.2 Adjustments
  
• 9.3.5.5.2.1 Application of use of proceeds
  
• 9.3.5.5.2.1.1Pay off existing debt
  
• 9.3.5.5.2.1.2Funding an acquisition
  
• 9.3.5.5.2.2 Acquisitions and dispositions
  
• 9.3.5.5.2.3 Exclusion of merger or acquisition related costs recorded under
  pooling of interests
  
• 9.3.5.5.2.4 Exclusion of charges or income specifically disclosed
  
• 9.3.5.5.2.5 Exclusion of impairment charges on long-lived assets (goodwill,
  property, plant, and equipment, and other long-lived assets)
  
• 9.3.5.5.2.6 Exclusion of gains or losses associated with sales of a
  subsidiary's or investee's stock.
  
• 9.3.5.5.2.7 Exclusion of in-process purchased research and development
  charges
  
• 9.3.5.5.2.8 Regulation S-X Article 11 adjustments
  
• 9.3.5.5.2.9 Exclusion of the cumulative effect of adoption of new accounting
  standards (APB Opinion No.20)
  
• 9.3.5.5.3 Not less than $500,000,000 market capitalisation and
  $100,000,000 in revenues
  
• 9.3.5.5.4 Not less than $1 billion in total worldwide capitalisation and
  $100 million in revenues
  
• 9.3.5.5.5 Adjustments re categorisation and amount
  
• 9.3.5.5.6 Company must be a going concern
  
• 9.3.5.5.7 Affiliated company standard
  
• 9.3.5.5.8 Policy on restated financial statements
  
• 9.3.5.5.8 Policy on reliance on the operating history of acquired companies
  
• 9.3.6 Disclosure and reporting material
  
• 9.3.6.1 Material information
  
• 9.3.6.2 Annual and interim reporting requirements
  
• 9.3.6.3 Notices and publicity
  
• 9.3.7 Listing applications
  
• 9.3.7.1 Introduction
  
• 9.3.7.2 Original listing application of securities other than debt
  securities
  
• 9.3.7.2 Timetable for original listing of securities other than debt
  securities
  
• 9.3.7.2.1 Submission of all information for confidential review of
  eligibility (Para. 104.00)
  
• 9.3.7.2.2 Submission of listing application
  
• 9.3.7.2.3 Supporting documents
  
• 9.3.7.2.3.1 Signed application
  
• 9.3.7.2.3.2 Charter and by-laws
  
• 9.3.7.2.3.3 Resolutions
  
• 9.3.7.2.3.5 Stock distribution schedule
  
• 9.3.7.2.3.6 Certificate of transfer agent
  
• 9.3.7.2.3.7 Certificate of registrar
  
• 9.3.7.2.3.8 Notice of availability of stock certificates
  
• 9.3.7.2.3.9 Public authority certificate
  
• 9.3.7.2.3.10Prospectus
  
• 9.3.7.2.3.11Financial statements
  
• 9.3.7.2.3.12Adjustments to historical financial data
  
• 9.3.7.2.3.13Listing agreement
  
• 9.3.7.2.3.14Memorandum with respect to unpaid dividends, unsettled rights
  and record dates
  
• 9.3.7.2.3.15Registration form under the Securities Exchange Act of 1934
  
• 9.3.7.2.4 Printing of application
  
• 9.3.7.2.4.1 Printing costs
  
• 9.3.7.2.5 Registration under the Securities Exchange Act of 1934
  
• 9.4 Suspension and delisting
  
• 9.4.1 Introduction
  
• 9.4.2 Delisting specific classes of shares
  
• 9.4.3 Continued listing
  
• 9.4.3.1 Distribution criteria for capital or common stock, (802.01A)
  
• 9.4.3.2 Numerical criteria for capital or common stock (802.01B)
  
• 9.4.3.3 Applying the market capitalisation test
  
• 9.4.3.4 Affiliated companies
  
• 9.4.3.5 Funds, REITs and limited partnerships
  
• 9.4.3.6 Preferred stock and guaranteed railroad stock
  
• 9.4.3.7 Price criteria
  
• 9.4.3.8 Other criteria (802.01D)
  
• 9.4.3.8.1 Reduction in operating assets and/or scope of operations
  
• 9.4.3.8.2 Bankruptcy and/or liquidation
  
• 9.4.3.8.3 Authoritative advice received that security is without value
  
• 9.4.3.8.3 Registration no longer effective
  
• 9.4.3.8.4 Proxies are not solicited for all meetings of stockholders
  
• 9.4.3.8.5 Agreements are violated
  
• 9.4.3.8.6 Payment, redemption or retirement of entire class, issue or
  series
  
• 9.4.3.8.7 Operations contrary to public interest
  
• 9.4.3.8.8 Audit committee not maintained
  
• 9.4.3.9 Conclusion on suspensions and delistings
  
• 9.4.4 Evaluation and follow-up procedures for domestic companies
  
• 9.4.5 Procedure for delisting
  
• 9.4.5.1 Notice of delisting
  
• 9.4.5.2 Request for review
  
• 9.4.5.3 Non-issuance of request
  
• 9.4.5.4 The review
  
• 9.4.5.5 Public hearings on delisting action
  
• 9.4.5.6 Application to the Securities and Exchange Commission to withdraw a
  security from listing
  
• 9.4.5.7 Delisting of multiple classes of securities
  
• 9.4.5.8 Voluntary transfer to another exchange by company that falls below
  criteria for continued listing
  
• 9.4.5.9 Withdrawal from listing and registration under the Securities
  Exchange Act of 1934
  
• 9.5 Enforcement
  
• 9.5.1 Introduction
  
• 9.5.2 Arbitration
  
• 9.5.2.1 Introduction
  
• 9.5.2.2 The system
  
• 9.5.3 Mediation
  
• 9.5.3.1 Introduction
  
• 9.5.3.2 The mediation process
  
• 9.5.3.3 Benefits of mediation
  
• 9.6 Chapter conclusion

10 Regulation and access to the US equity market - the Nasdaq and

electronic trading

• 10.1 Introduction
  
• 10.2 The Nasdaq vs the NYSE
  
• 10.2.1 NYSE
  
• 10.2.2 Nasdaq
  
• 10.2.2.1 The role of market maker
  
• 10.3 Electronic trading
  
• 10.3.1 Introduction
  
• 10.3.2 SuperDOT
  
• 10.3.3 Electronic Communications Networks (ECNs)
  
• 10.3.3.1 Introduction
  
• 10.3.3.2 Instinet
  
• 10.3.3.3 Island
  
• 10.3.3.4 SelectNet
  
• 10.3.4 Small Order Execution System (SOES)
  
• 10.3.4.1 Introduction
  
• 10.3.4.2 Restrictions on SOES users
  
• 10.4 Level I, II, and III Access - Nasdaq security quotes
  
• 10.4.1 Level I
  
• 10.4.2 Level II
  
• 10.5 Regulatory requirements
  
• 10.5.1 Introduction
  
• 10.5.2 Listing requirements
  
• Table 5: Nasdaq national market listing requirements
  
• 10.5.2.1 Discretionary authority
  
• 10.5.3 Hearings and appeals
  
• 10.5.4 Notifications
  
• Table 6: Guide to notification
  
• 10.5.4.1 Classing new securities
  
• 10.5.4.2 Listing of additional shares
  
• 10.5.4.3 Stock splits/stock dividends
  
• 10.5.4.3 Cash dividend and distribution notices
  
• 10.5.4.4 Change in transfer agent or depositary
  
• 10.5.4.5 Change in number of shares outstanding
  
• 10.5.4.6 Change in company name
  
• 10.5.4.7 Change in trading symbol
  
• 10.5.4.8 Disclosure of material news
  
• 10.5.4.8.1 StockWatch
  
• 10.5.4.8.2 Prior notification of material news
  
• 10.5.4.8.3 Material notification categories
  
• 10.5.4.8.4 Trading halts
  
• 10.5.4.8.5 Releasing material news during regular and extended trading
  hours
  
• 10.5.4.8.6 Responding to requests for information
  
• 10.5.4.8.7 Unusual circumstances
  
• 10.5.4.8.8 Unusual market activity
  
• 10.5.4.9 Guide to periodic reporting requirements
  
• Table 7: Periodic filing and notification requirements
  
• 10.6 Chapter conclusion

11 Regulation and access to the US equity market - the American Stock

Exchange (AMEX)

• 11.1 Introduction
  
• 11.2 AMEX listing requirements
  
• 11.2.1 Quantitative requirements
  
• Table 8: AMEX listing requirements
  
• 11.2.2 Qualitative requirements
  
• 11.2.2.1 Corporate governance standards
  
• 11.2.2.2 Conflicts of interest
  
• 11.2.2.3 Independent directors and audit committee
  
• 11.2.2.4 Quorum
  
• 11.2.2.5 Shareholder approval
  
• 11.2.3 Reporting and disclosure requirements.
  
• 11.2.3.1 Filing requirements
  
• 11.2.3.2 Annual reports
  
• 11.2.3.3 News dissemination
  
• 11.2.3.3.1 Immediate public disclosure of material information
  
• 11.2.3.3.2 Thorough public dissemination
  
• 11.2.3.3.3 Clarification or confirmation of rumours and reports
  
• 11.2.3.3.4 Response to unusual market action
  
• 11.2.3.3.5 Unwarranted promotional disclosure
  
• 11.2.3.3.6 Insider trading
  
• 11.2.3.3.7 Receipt of written delisting notice
  
• 11.3 Chapter conclusion

12 Major US equity markets - Fee comparisons

• 12.1 Introduction
  
• 12.2 Entry fee comparison - Major US stock markets
  
• Table 9: Entry fee comparison - Major US stock markets
  
• 12.3 Annual fee comparison - Major US stock markets
  
• Table 10: Annual fee comparison: Major US stock markets
  
• 12.4 Five year fee comparison: Major US stock markets
  
• Table 11: Five year fee comparison: Major US stock markets
  
• 12.5 Non-US share and ADR Initial fee comparison: Major US stock markets
  
• Table 12: Non-US share and ADR Initial fee comparison: Major US stock
  markets
  
• 12.6 Non-US share and ADR annuall fee comparison- Major US stock markets
  
• Table 13: Non-US share and ADR annual fee comparison - Major US stock
  markets
  
• 12.7 Ten-year ADR fee comparison - Major US stock markets
  
• Table 14: Ten-year ADR fee comparison - Major US stock markets
  
• 12.8 Chapter conclusion

13 International listings - access to new

• 13.1 Introduction
  
• 13.2 Benefits and drawbacks of a secondary listing
  
• 13.2.1 Pros
  
• 13.2.2 Cons
  
• 13.3 United States
  
• 13.3.1 General requirements
  
• 13.3.1.1 Public offer and listing requirements
  
• 13.3.1.2 ADR shares
  
• 13.3.1.3 Material misstatements
  
• 13.3.1.4 Due diligence
  
• 13.3.1.5 Accounting and audit standards
  
• 13.3.2 Listing rules
  
• 13.3.2.1 NYSE
  
• 13.3.2.2 Nasdaq
  
• 13.3.2.3 American Stock Exchange (AMEX)
  
• 13.4 Europe
  
• 13.4.1 The Eurolist
  
• 13.4.1.1 Benefits of Eurolist
  
• 13.4.1.2 Eligibility for listing
  
• 13.4.2 The Investment Services Directive
  
• 13.4.3 EASDAQ
  
• 13.4.4 Paris Stock Exchange
  
• 13.4.4.1 The Official Market
  
• 13.4.4.1.1 The ordinary procedure, (procEdure ordinaire)
  
• 13.4.4.1.2 The public offering procedure, (offre publique de vente)
  
• 13.4.4.2 Mutual recognition
  
• 13.4.4.3 Nouveau MarchE
  
• 13.4.5 Frankfurt
  
• 13.4.5.1 Listing eligibility requirements
  
• 13.4.5.2 Continuing obligations
  
• 13.4.5.3 Mutual recognition
  
• 13.5 Asia
  
• 13.5.1 Hong Kong
  
• 13.5.1.1 Eligibility listing requirements
  
• 13.5.2 Tokyo
  
• 13.5.2.1 Eligibility listing requirements
  
• 13.5.3 Singapore
  
• 13.6 Chapter conclusion

14 Equity market indices

• 14.1 Introduction
  
• 14.2 What is an index?
  
• 14.3 Measuring markets
  
• 14.3.1 Average stock prices
  
• 14.3.2 Price-based weighting
  
• 14.3.3 Market capitalisation
  
• 14.4 Anyone can create an index
  
• 14.4.1 The Dow Jones Industrial Average (DJIA)
  
• 14.4.1.1 Benefits
  
• 14.4.1.2 Drawbacks
  
• 14.4.1.3 Investing in DJIA
  
• 14.4.2 The Standard & Poor's 500 Index
  
• 14.4.2.1 Benefits
  
• 14.4.2.2 Drawbacks
  
• 14.4.2.3 Investing in S&P 500.
  
• 14.4.3 The Nasdaq Composite Index
  
• 14.4.3.1 Benefits
  
• 14.4.3.2 Drawbacks
  
• 14.4.3.3 Investing
  
• 14.4.4 The Wilshire 5000 Total Market Index (Formerly the Wilshire 5000
  Equity Index)
  
• 14.4.4.1 Benefits
  
• 14.4.4.2 Drawbacks
  
• 14.4.5 The Russell 2000 Index
  
• 14.4.5.1 Benefits
  
• 14.4.5.2 Drawbacks
  
• 14.4.5.3 Investing
  
• 14.4.6 FTSE index
  
• 14.4.6.1 Benefits
  
• 14.4.6.1.1 Global Equity Indices
  
• 14.4.6.1.2 Domestic, X-Border & Partner Indices
  
• 14.4.6.1.3 UK Indices
  
• 14.4.6.1.3.1The FTSE UK Index
  
• 14.4.6.1.3.1.1FTSE All-Share
  
• 14.4.6.1.3.1.2FTSE 100
  
• 14.4.6.1.3.1.3FTSE 250
  
• 14.4.6.1.3.1.4FTSE Small Cap
  
• 14.4.6.1.3.1.5FTSE TMT
  
• 14.4.6.1.3.1.6FTSE UK Style
  
• 14.4.6.1.4 Bond indices
  
• 14.4.7 Other indexes
  
• Table 15: Major world indices
  
• 14.5 Chapter conclusion

15 Derivative products

• 15.1 Introduction
  
• 15.2 Options
  
• 15.2.1 Introduction
  
• 15.2.2 What are options?
  
• 15.2.3 Calls
  
• 15.2.4 Puts
  
• 15.2.5 Participants in the options market
  
• 15.2.6.1 Speculation
  
• 15.2.6.2 Hedging
  
• 15.2.6.3 Employee stock options
  
• 15.2.7 Types of options
  
• 15.2.7.1 Short-term options
  
• 15.2.7.1.1 American options
  
• 15.2.7.1.2 European options
  
• 15.2.7.2 Long-term options
  
• 15.2.7.3 Exotic options
  
• 15.3 Futures
  
• 15.3.1 What is a future?
  
• 15.3.2 Specifications of a future
  
• 15.3.2.1 Commodity
  
• 15.3.2.2 Size
  
• 15.3.2.3 Price fluctuation
  
• 15.3.2.4 Trading months
  
• 15.3.2.5 Expiration date
  
• 15.3.2.6 Deliverable grade
  
• 15.3.2.7 Deliverable location
  
• 15.3.2.8 Settlement mechanism
  
• 15.3.3 Why use futures?
  
• 15.3.3.1 Producers
  
• 15.3.3.2 Commodity users
  
• 15.3.3.3 Speculators
  
• 15.3.4 Difference between futures and forwards
  
• Table 16: Difference between futures and forwards
  
• 15.3.5 Knowing when to buy or sell futures
  
• 15.3.5.1 Fundamental analysis
  
• 15.3.5.2 Technical method
  
• 15.3.5.2.1 Seasonal
  
• 15.3.5.2.2 Cyclical
  
• 15.3.6 Futures conclusion
  
• 15.4 Warrants
  
• 15.4.1 What is a warrant?
  
• 15.4.2 Difference between warrants and call options
  
• 15.5 Convertible securities
  
• 15.5.1 What are convertible securities?
  
• 15.5.2 Why are convertible securities issued?
  
• 15.5.3 Benefits of Convertible Securities
  
• 15.5.3.1 Regular income
  
• 15.5.3.2 Capital appreciation potential
  
• 15.5.3.3 Less volatile than stocks
  
• 15.5.3.4 Opportunity for equity participation
  
• 15.5.3.5 Redemption priority
  
• 15.5.3.6 Diversity.
  
• 15.5.4 Risks of convertible securities
  
• 15.5.4.1 Volatility
  
• 15.5.4.2 Lower interest rates
  
• 15.5.4.3 Defaults
  
• 15.5.4.4 Call provision
  
• 15.5.4.5 Complexity
  
• 15.6 Chapter conclusion

16 Highlights in recent equity trends

• 16.1 Financial markets - in general
  
• 16.1.1 Consumer spending
  
• 16.1.1.1 US
  
• 16.1.1.2 Europe
  
• 16.1.2 Policies supporting demand
  
• I6.2 Equity markets
  
• 16.2.1 Broad indices have plunged further
  
• 16.2.1.1 US
  
• 16.2.1.2 Euro
  
• 16.2.2 Technology stocks
  
• 16.2.2.1 US and UK
  
• 16.2.2.2 France
  
• 16.2.2.3 Germany
  
• 16.2.3 Financial companies
  
• 16.2.3.1 Europe
  
• 16.2.3.2 US
  
• 16.2.4 Is the bear market coming to an end
  
• 16.3. Foreign exchange markets and emerging economies
  
• Chart 6: Exchange rates relative to the US dollar - Weekly data until 7
  Mar-03
  
• 16.3.1 Have foreign investors lost their appetite for US securities?
  
• Chart 7: Exchange rates relative to the US dollar - Weekly data until 7
  Mar-03
  
• 16.4 Chapter conclusion

17 International equity markets post-war in Iraq

• 17.1 Introduction
  
• 17.2 Geopolitics
  
• 17.3 Interest rates will remain low
  
• Chart 8: Global yield curves - 31 March 2003
  
• 17.4 Central bank induced liquidity will bolster capital markets
  
• 17.5 Pension plan funding spur increased demand for securities
  
• 17.6 Alleviation of geopolitical concerns
  
• Chart 9: Gold bullion $/Troy ounce
  
• Chart 10: Brent crude $/Barrel
  
• Chart 11: Composite BAA yield
  
• 17.7 Fervour for increased market regulation will decrease
  
• 17.8 The president's third year: non-obstructive legislative agenda
  
• 17.9 Relative valuations remain compelling
  
• Table 16: S&P500 Earnings
  
• Chart 12: Earnings yields vs bonds
  
• Chart 13: Non-financial corporate earnings
  
• 17.1 The fog of war lifts
  
• Chart 14: MSCI World and the Iraq war
  
• Chart 15: FTSE All-Share - Iraq War vs Persian Gulf war
  
• 17.11 The real "United" Nations
  
• Chart 16: MSCI world country indices - 31 March 2003
  
• Table 17: Equity returns of major markets , Q1 2003
  
• 17.12 Current portfolio positioning
  
• 17.13 Hedging portfolios

18 Conclusion