Itself may be perfectly healthy even as its stock decreases in worth

M arket Components

A primary issuance of stock by a corporation is done through an investment banker. Investment

Bankers — companies such as Merrill Lynch, Morgan Stanley, or Salomon Brothers — have the

Expertise to know the right time and the proper terms under which an offering can be made. The

Banker underwrites the issue. Underwriting means that the banker gives the corporation a guarantee

Of success in selling the stocks or bonds and also agrees to retain any that are not sold. If the

Issue is quite large, several investment bankers may form a syndicate and divide the offering between

Themselves.

The secondary market for securities is much larger than the primary market. The institutions

That handle secondary trading are the stock exchanges, brokerage houses (investment bankers),

And the over-the-counter (OTC) market. The OTC market is also called the third market when it

Refers to trades in listed securities. (There is also a fourth market — trades in securities, without the

Use of brokers, between buyer and seller institutions.) There is also a computerized network called

The Instanet System, which is a subscription service used by institutional investors to make anonymous

Bids, offers, and trades.

The greatest volume of trading is done by the exchanges. In the United States the New York