IV The New Issue Market

a) Complete the text with the best alternative from the box.

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

c) Reread the text more carefully to find the answer to the question: What can guarantee the success of the issue?

PART II. FINANCE

The mere buying of securities traded on the (1)_______ does not create new capital. The

stock exchange does not itself (2)_____ new shares to the public. Fresh capital is provided

through the mechanism known as the New Issue Market (ринок нових емісій).

The Market has no outward formal organization or fixed (3) ____________ of business.

Nevertheless it functions efficiently on the basis of a number of institutions working
together: issuing houses (емісійний дім/банк), joint-stock banks, merchant banks,
insurance (4)____, stockbrokers, underwriters and others.

Issuing houses have become very active in the New Issue Market recently. An issuing house is a financial firm specializing in the issuing or floating (випуск акцій через біржу)

of new (5)____ for governments, municipalities and companies. Although this activity is

not directly connected with the Stock Exchange, the Exchange is vitally interested in the activities of issuing houses; and the people who own and operate issuing houses have

often been (6)____ of stock exchanges. The issuing house undertakes that the whole of a

new issue of securities should be sold and makes all necessary arrangements for it.

It is charged with the entire 'handling' procedure (виконання всіх формальностей) of the issue: this includes the arrangements for banks, other financial houses to share in

the (7) ____ (only in a few cases do issuing houses underwrite the entire amount

themselves); arrangements for the drawing up and publication of the prospectus.

Yet, even the most careful and competent handling will not (8)_______ the success of an

issue. This depends on the attitude of the (9)_____ public, who will be guided very much by

the reputation of the issuing house itself.

Issuing houses make arrangements with underwriters, who guarantee, for a (10)________,

that if the public does not (11)______ fully to the new issue the underwriters take up the

remaining shares or stock.

Underwriting is a process whereby a group of investment bankers agree to purchase a
new security issue at a (12)____ price and then offer it for sale to the general public.

V The History of the Foreign Exchange Market. Use the words in the box to complete the text about the foreign exchange market.

watermark	promissory notes	barter	coinage
sound money	gold reserves	mint	banknotes
fiduciary issue	monetary policy	issue	forgery

In the days before money was created, traders exchanged one type of goods for

another. This was called (1)____ trade. Later, countries produced units made of gold. This

was called (2)____ and was produced in a (3)____. Originally, the total value of metal coins

produced by a country was backed by its (4)____ and was called (5)____. However, in some

countries the amount of gold held by a country does not correspond to the value of coins
in circulation, but may instead represent securities. This system is called the (6)_______.

UNIT 6. FOUR MARKETS

15 — 4-789

The main disadvantage of using money made of metal was that it was difficult to
transport. So, traders began using documents which promised to pay a sum of money in
return for goods. These documents were called (7)______.

Banks also began to (8) _____ papers to clients to confirm that they had deposited

money in the bank. These papers were issued in standardised amounts and were called (9)

To prevent (10)____, or the copying of banknotes, banks adopted a number of security

devices such as a design on the sheets of paper used to make money. This design is called

a(H)_.

Nowadays, each country has its own system of safeguarding the currency. This system
is called (12)____.

VI. Foreign Exchange Terms. Look at the words in the box and write them under their definitions.

legal tender	devaluation	the Royal Mint	coinage
sound money	intervention	Bretton Woods system	intaglio
fiduciary issue	fluctuate	promissory note	issue

1. The acceptable form of currency in a country.

2. To move up and down.

3. A written promise to pay an amount of money to another party.

4. Money with dependable value, backed by gold reserves.

5. To put into circulation.

6. British agent producing coins by stamping metal.
7 Towering the value of a nation's currency.

8. The participation of a government or bank to cause change.

9. A set of monetary units made of stamped metal.

10. A method of fixing the major currencies against the dollar, used until 1973.

11. A method of producing banknotes which creates a complex design and is difficult to counterfeit.

12. The production of money backed by securities, not gold.

VII. Bulls, Bears and Stags.

a) Choose the best word to complete the text.

b) Describe the chief varieties of speculators on the stock exchange.

1.	a) deal	b) speculation	c) mortgage	d) bargain
2.	a) loss	b) yield	c) revenue	d) profit
3.	a) shares	b) commodities	c) bills	d) orders
4.	a) rates	b) activities	c) prices	d) profitability
5.	a) prophecy	b) planning	c) forecast	d) prediction
6.	a) settlement	b) active	c) delivery	d) market
7.	a) "bulls"	b) "stags"	c) "sheep"	d) "bears"
8.	a)exchange	b) fair	c) shop	d) market
9.	a) printed	b) issued	c) subscribed	d) designed
10.	a) commission	b) price	c) premium	d) rate

The buying of something cheap at one time for the purpose of selling the same thing

dearer at another time is (1)_____. Whilst in a sense all deals are speculations, the term is

generally limited to circumstances where (2) _______ is made because the same thing has

different prices at different times. Anyone who does so is said to be a speculator. A speculator on the stock exchange is a person who backs the judgments he makes about

PART II. FINANCE

likely developments by buying or selling shares. The chief varieties of speculators on the stock exchange are known as 'bulls', 'bears' and 'stags'.

A speculator may buy (3)____, for which he cannot or does not wish to pay at the time,

in the hope that 'during the account', i. e. before the date of payment, the price will have
risen and he can then sell them at a profit. A buyer who buys like this in the hope of a rise
in (4)___ is a 'bull'.

Bears are pessimistic speculators who expect a fall in share prices. They therefore sell any shares they have now, and even shares they do not have, because, if prices fall as expected, the shares will be available in a few hours or a few days at lower prices than at present.

In both cases the success of the speculation depends both on a correct (5)________ of the

security price movement and on a sufficiently long time interval before payment or delivery must be made. It quite often happens that 'bulls' or 'bears' are wrong in their anticipations, or that they are convinced that by holding out even beyond settlement day they could still make a profit.

To meet this case a delaying procedure has been evolved which allows the speculators

to let their bargains stand over until the following (6)______ day. This is known as 'contango'

or 'continuation'. Arrangements for such 'carry-overs' are made on the first day of the new account which is known as 'Contango Day!

(7) ___ are speculators who operate in the 'new issues' (8) _________ rather than on the

Stock Exchange, although they must use the Stock Exchange before they can realize any

profit. What a stag does is to apply for shares that are just being (9)_______ and are likely to

be oversubscribed. He does not want to keep the shares, or invest in the company that is issuing them, but simply to make a profit out of the issue. The stag expects that the stock,

upon issue, will quickly rise to a (10)_____ in the market, and he will then sell his stock at a

profit. The activities of 'stags' have been greatly reduced in recent years.

WORDS YOU MAY NEED

bull - «бик», покупець цінного папера, що грає на підвищення bear - «ведмідь», продавець цінного папера, що грає на зниження stag - спекулянт, що купує цінні папери при оголошенні підписки, сподіваючись продати їх з прибутком після початку торгівлі на вторинному ринку speculation - спекуляція, продаж цінних паперів для одержання прибутку account - операційний період на фондовій біржі anticipation - очікування

contango - відтермінування платежу за угодою

carry-over - відтермінування угоди contango day - перший день розрахункового періоду на Лондонській фондовій біржі

new issue - новий випуск (цінних паперів)

shares that... are likely to be over-sub­scribed - акції, підписка на які, як очікується, перевищить пропозицію premium - премія (сума, на яку ціна, виплачена за акцію, перевищує її номінальну вартість)

VIII. Group Work. In small groups discuss the following discussion questions and report to the class.

1. What is a bond?

2. How do you assess the Ukrainian Bond market?

3. How are emerging bond markets developing? What problems are they facing?

4. How are bond placements arranged?

IX. Writing Practice. Write a short description of the four markets. Use the opening phrases from Appendix 1.

UNIT 6. FOUR MARKETS

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