Unit 4. Exchanges

X. Writing Practice. Write a short summary about money markets. Use the opening phrases from Appendix1.

UNIT 3. MONEY MARKETS

DISCUSSION Discuss in what way politics can affect market fluctuations in your country.

READING EXCHANGES

An exchange is an organized meeting of persons in a permanent appointed place with the aim of buying and selling. The trading there is governed by certain rules and is limited to members of the exchange, who are known as brokers. There are two main types of exchanges: the Com­modity Exchange and the Stock Exchange.

Commodity Exchange (or produce exchange) is a market in which com­modities (raw materials and some manufactured goods) are bought and sold for immediate or future delivery. Commodity markets/exchanges have been established in important cities of Great Britain, the USA and other countries for trading in cotton, wool, timber, wheat, hides and skins and other such commodities. It is not necessary for the commodities to be physically exchanged; only rights to ownership need to be.

In Great Britain there are, for example, the Coal Exchange, the Timber Exchange, the Home and Foreign Produce Exchange and others, of which the following are world known: the Metal Exchange, the Wool Exchange, the grain market in the Baltic Exchange; furs are sold in Beaver House, the diamond trade is centered in Hatton Garden, and tea and rubber have their home in Plantation House. This building also accommodates the London Commodity Exchange dealing with cocoa and coffee, sugar and spices, vegetable oils and jute. London has important commodity markets arising partly from its industrial and colonial history, and partly from the nature of its foreign trade.

Outside London there are two commodity markets in Liverpool: the Cotton Exchange and the grain market. In the USA the best known are the Board of Trade in Chicago (corn), the New York Produce Exchange, the New York Cotton Exchange, the New York Coffee and Sugar Exchange.

PART II. FINANCE

The old practice of auctioning commodities from warehouse in which samples could be inspected beforehand has become less important. An efficient system of grading and modern systems of communication have enabled the practice of CIF trading to develop. A buyer can buy a com­modity in the country of origin for delivery CIF to a specified port at which he can off-load for direct delivery to his own premises. This method saves warehousing costs and auction charges. However, many auctions still take place in London, e.g. tea, wool and furs. The market not only enables commodities to be sold spot or for delivery at some specified time and place, but it also includes a market in futures. This latter enables mer­chants to avoid the effect of price fluctuations by buying for forward deli­very. Main terminal markets are situated in London and New York.

Stock Exchanges are places where securities, stocks and bonds are sold and bought. The most famous stock exchanges are the Royal Exchange in London and New York Stock Exchange.

The London Stock Exchange has a unique method of operation in that it divides its members into brokers and jobbers. The brokers do business with the public, but the jobbers do business only with brokers, and with each other. On the Stock Exchange the business of buying and selling shares is called dealing and a transaction is called a deal.

The fluctuations of prices on exchanges influences to a great extent the prices of the various commodities on the world market.

VOCABULARY to govern - керувати, регулювати

NOTES Commodity Exchange - товарно-

сировинна біржа Stock Exchange - фондова біржа timber -деревина hides - шкіри jute - джут

to auction - продавати з аукціону grading - класифікація

CIF (cost, insurance, freight) - СІФ

(вартість, страхування, фрахт)

warehousing costs - складські витрати

charges - витрати, видатки

spot - бірж, реальний товар; товар за

касовими угодами

terminal market - ринок продажу товарів

за готівку: терміновий біржовий ринок

{Великобританія)

EXERCISES

Answer the following questions:

1. What are the two main types of exchanges?

2. What commodities are traded on produce markets?

3. What are the largest commodity markets in the world?

4. What is the 'CIF trading'?

5. What is traded on stock exchanges?

6. What is the difference between brokers and jobbers?

II. How would you explain the following jobs to a six-year-old child?

bond dealer; personnel manager; stockbroker; trade union organizer; internal auditor; market researcher

III. Give every word combination collectively pertaining to each word listed below. Market, exchange, commodity, currency, investment.

UNIT 4. EXCHANGES

IV Find pairs of opposites in the list.

1. boom	a)setback
2. trend downward	b) demand
3. rally	c) reached its peak
4. supply	d) slump
5. touched its lowest	e) the least heavily weighed
6. turned firmer	f) upswing
7. fall	g) turned softer
8. the most heavily weighed	h) rise
9. minor metals	i) dull market
10. active market	j) fluctuations in prices
11. steady prices	k) base metals

V Stock Exchange Terminology. Match the words in the box with the correct definitions.

bear	broker	quotation	over-the-counter
yield	interest	odd lot	bearer bonds
bull	proxy	dividend	blue chip

1. A person or firm which buys and sells securities.

2. A share of the company's profit which is paid to the shareholders.

3. An individual who sells a security and hopes to buy it back for a lower price.

4. The price given for buying or selling a security.

5. The shares with the highest status as an investment.

6. A written authorisation by a shareholder for another person to vote on his behalf.

7. A market for buying and selling stock or bonds among brokers.

8. A percentage return on an investment in stocks or bonds.

9. The payment made to bondholders in return for the loan of money.

10. Fewer than 100 shares of stock.

11. Securities which are registered without any register of ownership.

12. An individual who buys a security and hopes to sell it at a higher price.

VI. Organised Markets. Choose the best alternative to complete the text.

1.	a) gears	b) rules	c) patterns	d) symbols
2.	a) bargaining	b) trade	c) market	d) party
3.	a) direct	b) currency	c) stock	d)produce
4.	a) commodity	b) stock	c) futures	d) foreign trade
5.	a) organised	b) active	c)bid	d) wholesale
6.	a) controls	b) issues	c) places	d) deals
7.	a) present	b) future	c) past	d) service
8.	a) bears	b) investors	c) traders	d) governors
9.	a) acts of God	b) inflation	c) loss	d) crises
10.	a) boom	b) gilts	c) consumer	d) financial

Organized markets are usually held in premises where business is transacted according

to a prescribed set of (1) ______. Sometimes only members are admitted to the (2) ________.

Organised markets or (3) _____ exchanges have been established for cotton, wool, tea,

coffee, wheat, rubber, timber, tin, copper and some other commodities. Thus there are

such (4)___ exchanges as Sugar Exchange, Metal Exchange, Wheat Exchange and others.

There are two types of (5)____ markets:

PART II. FINANCE

• spot market

• forward or futures market.

Spot market (6)____ in actuals, the actual physical product, for immediate delivery.

In forward or futures markets the commodity can be bought or sold for delivery at

some time in the (7)____. Forward prices can be higher or lower than the spot prices. In a

forward or futures market traders take an option to buy or to sell the product in the future.

(8) ___ know that prices can change, so they hedge by balancing their buying and

selling of actuals and futures to protect themselves against (9)______.

Organised markets include (10) _____ markets, which in their turn include the stock

exchange and foreign exchange market.

VII. SEAQ. Use the words in the box to complete the text about SEAQ below.

security	stocks	market makers	services
corporate	screens	computerised	brokers
database	commissions	operations	purchasing

This is a (1) _____ dealing system and stands for the Stock Exchange Automated

Questions. (2)____ now deal in (3)____ and shares over the telephone at their own dealing

desks. (4)___ and selling prices are displayed on their (5)______. This new system provides

added (6) ___ for investors because all deals are recorded on a (7) _________. In 1986, the

London Stock Exchange made several changes in its (8)________. First of all, in March, it

offered overseas and (9)____ membership to banks and insurance companies. At the same

time minimum (10)____ were abolished. This now enables clients to negotiate freely with

their (11)___ about charges for (12)____.

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

1. What role do financial markets play today?

2. What are the major financial markets today?

3. How can financial markets be classified?

4. Discuss the activities of commodity brokers. Do they remind you of mere speculation?

IX. Writing Practice. Write a letter to the commodity brokers whose services you often use

concerning the forthcoming fur auction and xour desire to purchase some furs through them.

UNIT 4. EXCHANGES

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