The corporate securities market in Ukraine

 

Foreigner: What’s your opinion of the present-day position of the corporate securities market in Ukraine?

Ukrainian: The market is still rather weak and sluggish. Compared with Western markets the number of actively traded stocks is small, liquidity is limited. Share prices of many corporations are going down.

Foreigner: It’s not surprising. The market, due to the situation in Ukraine, is not attractive to investors. Foreign investors are cautious about sinking big money into Ukraine.

Ukrainian: The situation is embarrassing, particularly because it is recognized that the stock market stimulates economic development.

Foreigner: In this connection, what measures are going to be taken to encourage the process of the securities market development?

Ukrainian: There’s no simple answer to this question. Attempts are being made to create international electronic networks for long-distance trading in shares. We’ve started trading in the world major stock markets.

Foreigner: Do Ukrainian commercial banks play an active role in the development of the stock market?

Ukrainian: Yes, they possess the required capital, developed infrastructure and highly qualified personnel. Very often they act as dealers in the primary market.

 

Vocabulary

corporate securities market – ринок корпоративних цінних паперів

sluggish – млявий

cautious – обережний

to sink money – вкладати, інвестувати гроші.

possess – володіти

 

Read the dialogue, translate the Ukrainian remarks into English and act it out.

 

Foreigner: We know that the board of directors of your steel plant announced the decision to issue new shares. Why was the decision made? How much are you going to raise?

Ukrainian: Наша компанія є другою за величиною (second largest) виробником сталі в нашій країні. Якщо збори акціонерів схвалять рішення директорів, то через два місяці ми здійснимо розміщення наших нових акцій. Ми плануємо отримати 100 мільйонів доларів і використати їх на модернізацію та розширення виробництва.

Foreigner: What rules will you have to comply with? Is the listing procedure complicated?

Ukrainian: У відповідності з нашим законодавством, компанії, що прагнуть здійснити випуск своїх акцій, повинні бути зареєстровані на біржі та зареєструвати свої акції для їх допуску на біржу. У нас існують визначені вимоги у відношенні розміру випуску акцій, числа акціонерів, прибутку підприємств і т.д.

Foreigner: So you are registered on the Stock exchange. Was it difficult to get registered?

Ukrainian: Ні, при нашому першому розміщенні акцій ми представили звичайний комплект документів, що містив уставні документи компанії, проект емісії та нашу фінансову звітність.

Foreigner: In my opinion, it may not be the best possible time for the placement. Do your shareholders welcome the idea?

Ukrainian: Так, вони впевнені, що наші акції будуть користуватися великим попитом. Ми розраховуємо на західних інвесторів, з якими ми уже багато років співпрацюємо.

 

3. Make up a dialogue on the following:

 

1.Speak with your friend about the development of the stock markets in the world. Confide to interesting facts of the development of the stock market in Ukraine.

2.Speak about the defining role of the computerization in the functioning of the stock market nowadays.

 

B. COMMUNICATIVE SITUATIONS

1. Round-table discussion:

· Is the stock market/stock exchange important to industry and the government?

· What part does the speculator play on the stock exchange?

· Do you own any shares? If so, say why. If not, explain your decision.

2. Make a short essay on the following:

a) People engaged at the stock exchange: market makers, bulls, bears, stags, speculators, specialists.

b) Existing types of stock exchange.

c) Stock market indices.

3. Prepare a short talk on the following:

· The connection between the riskiness of securities and their rates of return. How can risk be reduced through diversification?

· Classification of markets.

¨READ AND DISCUSS

1. a) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Name the problems of emerging markets mentioned in the text and say which of them are typical of Ukraine.

In 1990 the fastest rising stock markets in... world were those emerging in the developing countries. There are now more than 50 Stock exchanges in... developing world: some are insignificant or dormant, others are active and growing.

It was once widely presumed that poor demand for securities would be the biggest handicap to... emergence of stock markets in the developing world. There were not enough potential buyers in developing countries. However, it is now evident that there is generally... adequate demand for securities, in both the primary and secondary markets, arising both from speculative interest and from... portfolio needs of financial institutions.

Even if the emerging stock markets have some demand-side difficulties,... more general, continuing and severe problem has been....insufficient supply of securities^ The chief, markets problem in developing countries is that the secondary; market for bonds and shares is often inactive. There are often not enough buyers and sellers to make... steady market. Quite often institutional stockholders hold securities firmly matched against their future liabilities rather than engaging in frequent trade. When institutions do enter... secondary market they may try to buy or sell m large lots, thus making a big price disturbance. As institutions amass large blocks of shares they may be tempted to exercise their market power, especially in... field of corporate takeovers.

Speculation has been common in most of the emerging stock markets and very noticeable because of … thinness of the markets. While the opportunity for speculation is one of the chief attractions of any stock market, the line between speculation and sharp practices is something hard to draw.

Priviliged placements, insider trading, short selling and other questionable practices have occurred throughout the developing world.

In these circumstances,... pure theory of international trade suggests that stock markets would not be viable in all countries but would cluster at a few points of... globe, determined by the location of factor skills and time zones.

Words you may need:

dormant – сплячий, бездіяльний

presume – припускати, вважати

handicap – нестача, перепона, перешкода

steady market – стійкий ринок

large lots – великі лоти

big price disturbance – істотне коливання цін

amass – накопичувати

takeover – поглинання (однієї компанії іншою)

thinness of the market – вузькість ринку

speculation – спекуляція (торгівля цінними паперами з метою отримання прибутку)

sharp practice – шахрайство, обдурювання

insider trading – незаконні операції із цінними паперами на основі „внутрішньої” інформації про діяльність компанії емітента

short selling – „короткий” продаж

viable – життєздатний

cluster – групуватись

 

2.a) Supply the prepositions where necessary.

b) Write down 3-5 questions about the text.

c) Describe the trends in the major equity markets mentioned in the text

 

Equity Market

In return... the use of their funds, investors in a corporation are issued certificates, or securities. Corporate securities represent claims … the assets and future earnings of the firm. Corporate securities take the form... either common stock or preferred stock.

In 1980 the US equity market was the largest domestic equity market in the world and was three times larger than its nearest rival, the Japanese market. During 1990 there were periods when the capitalization of the Tokyo Stock Exchange was higher than the NYSE. These relative values can fluctuate quite dramatically. For example, the Tokyo Stock Exchange market capitalization fell... 29% in the mid two quarters of 1990. The London Stock Exchange only fell by 17%... this period. As a result, the value rankings are not stable over short periods. However, one can see the rapid rise of the Tokyo stock exchange... the 1980s, the relative decline of US stock markets, and the slow but sure growth of London and the other European stock exchanges.

The UK has a large domestic and international equity market relative to the size of its economy. This market is the most international in terms of foreign companies listed and the extent... foreign equities traded. In contrast, German equity markets are small relative... the size of the economy. The UK, Canadian and the US domestic capital markets are very similar... each other in that many domestic firms are quoted and equity is a significant form of finance. However, most of the smaller domestic capital markets can be characterized as consisting... very few firms which are widely publicly held. Small group and family holdings predominate and new equity issues are avoided for fear... losing control.

 

Words you тaу need:

common stock – звичайні акції

dramatically – різко

ranking – ранжування, класифікація

relative to – відносно

holding – володіння (акціями)

predominate – переважати

 

3.a) Open the brackets putting the verbs in the correct form.

b) Describe the changes on the London Stock Exchange brought about by Big Bang.

 

The London Stock Exchange (LSE) (to be) the principal market for the trading of equities, other corporate securities and government debt in the UK.

London equity market (to have) the third largest turnover in the world, after Tokyo and New York. Organized dealing in stocks and shares in London (to start) at the end of the 17th century, when much of it (to take) place in the coffee houses in the City of London. At the beginning of the 19th century the London Stock Exchange (to obtain) its constitution and a building of its own.

Now it is a dealership market: the great majority of customer orders (to transact) with a market maker who quotes prices it all times at which he stands ready to buy or sell. In this respect it (to differ) sharply from the more common public auction markets such as New York, Tokyo or Paris where the bulk of customer trades cross directly with each other. The market (to undergo) substantial change at the time of Big Bang in 1986, and its current structure is modelled in part on that of NASDAQ, the US over-the-counter market.

Prior to 1986, membership of the stock exchange (to restrict) to partnerships. Member firms (to be) either brokers or jobbers. Brokers were not allowed to trade on their own account: they (to act) as agents for their customers, and transacted their orders with jobbers. The commission structure was fixed. Jobbers were obliged to make a two-way market in securities, and (to deal) with brokers as principals. They were prohibited from dealing directly with customers. Dealing (to take) place on the floor of the exchange.

The changes which were instituted in the period up to October 1986 were designed to liberize the activities on the stock exchange: the rule restricting membership of the exchange to partnerships (to remove); fixed commissions were scrapped; the separation between broking and jobbing (to end); member firms became broker-dealers, free to act as agents and as principals. Those who wished to do so the opportunity (to take) to modernize the trading and quote dissemination system. A computerized system (to install) which showed the price quotes of all market in all stocks. Trades had to be reported electronically within five minutes.

The effects of Big Bang (to be) generally beneficial for customers dealing in size in liquid stocks.

The stock exchange (to be) the competent listing authority for the UK. The main requirements for having a listing in London are a 3-year-audited track record, a capitalization in excess of £700,000, at least 25 per cent of which must be in public hands, and the submission of appropriate listing particulars. In addition the company (to require) to release all necessary information for shareholders and to the public to appraise the position of the company at all times. Companies have to pay to the exchange a fee on listing and an annual fee thereafter. The stock exchange (to be) a private limited company owned by its individual members.

The London Stock Exchange increasingly (to affect) by the legislation of the European Community. This process has the aim of creating a single European securities market.

 

Words you may need:

dealership market – ринок, на якому працюють дилери

order – наказ

the bulk – більша частина

Big Bang – реорганізація Лондонської фондової біржі 27 жовтня 1986р.: скасування мінімальних фіксованих комісій, допуск на біржу банків та іноземних закладів, дозвіл членам біржі поєднувати функції брокера та джобера

NASDAQ = National Association of Securities Dealers Automated Quotations – автоматичні котирування Національної асоціації дилерів по цінним паперам

prior to – до, раніше

two-way market – ринок, на якому постійно котуються ціна покупця та ціна продавця

prohibit – забороняти

principal – принципал

institute – вводити, встановлювати

scrap – викидати через непотрібність

dissemination – розповсюдження (інформації, знань)

market maker – брокерська фірма, що постійно котує цінні папери

track record – інформація про діяльність фірми (банку та ін.)

capitalization – капіталізація

in excess – понад

appraise – оцінювати

fee – внесок

 

 

4. a) Fill each gap with a suitable word from the box below.

b) Sum up text in 5-7 sentences and present your summary in class.

c) Say what you have learned about trading on the New York Stock exchange.

 

stockholders	start	exchange	conduct
traded (2)	meets	assigned	transactions
data	types	work	membership
funds	foundation	putting	securities
sellers	trading	free	founded
exchanges

The New York Stock Exchange

 

The New York Stock Exchange (NYSE) is the oldest and largest of the _________. It is a universal symbol of econotnic freedom. Three out of five Americans through this institution share in the strength
and growth of the __________enterprise system. On a typical day about $6 billion worth of shares are _______on the NYSE.

Trades between buyers and __________ of securities are arranged by brokers. Brokers act as agents, _________ buyers in touch with sellers but not taking title to the securities. They represent on the floor different customers: mutual funds, investment funds, pension __________ and small investors. Brokers’ day is a non-stop gathering of information.

The NYSE has 1366 members. A broker can join the exchange only by buying a __________ or "seat", that costs as much as half a million dollars. There are different ___________of members. Commission

brokers are partners in brokerage firms who carry out trades for the firm’s clients. Besides, there are specialists, who are__________ to a specific stock or bond and assist commission brokers in trading that
stock or bond. Specialists buy stock for their capital, they ensure that a buyer meets a seller and a seller _______ a buyer. Today, some 2200 stocks and more than 100 bond issues are _________ on the Exchange. Each stock is traded in one individual spot which brings all orders together in one place.
The New York Stock Exchange was __________in 1792. when merchants met to formalize rules and hours for__________. Business flourished. Trading three times a day gave way to an all-day auction market. At first each post auctioned only a handful of__________.Then a handful grew into a hundred. But the underlying principles have never changed. The unique structure of the auction system has been its strength and cornerstone since its ___________.

New sophisticated technology has altered the stock exchange __________.The army of clerks was replaced by highspeed computers, which allows to keep track of all __________, to report the transactions to customers immediately, to bring orders to the trading posts electronically and to execute them. Computers are used for what they can do best: to move data around, to store _________, and provide information to people. All trades are performed electronically.

To prevent the system from the abuse the exchange has enforced rules governing ethical ___________ and established a "stock-watch" electronic system, allowing to control and analyse instantly all trade on the _______.

Governors, who are appointed from the rank of brokers and specialists, watch the market and see to it that all buyers interested in a particular security could from an equal footing, only in that case they open the stock trade. All this makes people trust the exchange. 50 million Americans have become _________. The NYSE is not just a place, it's a way of doing business.

Words you may need:

universal – всесвітній, всезагальний

to take title (to) – отримувати право власності (на що-небудь)

commission broker – комісійний брокер

specialist – спеціаліст (член фондової біржі, що спеціалізується на одному чи декількох видах цінних паперів)

flourish – процвітати

to give way (to) – поступатися

post – „пост”, місце в торговій залі біржі

cornerstone – наріжний камінь

to keep track – відслідковувати

abuse – зловживання

instantly – миттєво

from the rank of … – із рядів...

equal footing – рівні умови

 

5. a) Read the text below quickly and name organizations involved in the issues.

b) Reread the text more carefully to find the answer to the question: