Brandon Stevens

3:48amJan 19 at 3:48am
Manage Discussion Entry
Brandon Stevens
BUS 629: Financial Forecasting and Budgeting
Week 4 Discussion 1
 
Discuss the evolution of the securities markets, including the impact of the NASDAQ,
CME, ECNs, and foreign exchanges.
            Securities Markets have been around for hundreds of years, traced back to the
French as early as the 12th century. Over time, these markets have evolved and became
larger than ever while becoming a major source of both shareholders, companies and
investors to make money. Early on, the government played major roles in the exchange
but over time, they have excused themselves from participating in operations directly.
Eventually, what started as a way to trade resources and currency has evolved into a
larger role, allowing companies to sell portions of their companies to shareholders in
order to raise capital. In fact, the New York Stock Exchange and NASDAQ are the two
largest stock exchanges on the globe but are operated entirely different. “The biggest
difference between NASDAQ and NYSE is the type of market they are. NASDAQ is a
dealer’s market. What that means is that all participants trade through a dealer rather
than directly with each other. The NYSE on the other hand is an auction market. It allows
individuals to transact with each other on an auction basis” (Wealthface, 2021, para 3).
The impact of NASDAQ on securities markets would be that it offered a different way
for people and companies alike to purchase or sell stocks and is in fact, more user-
friendly. Electronic Communication Networks (ECN) have transformed the securities
markets due to the fact they now allow multiple transactions to occur simultaneously
which removed the for the most part, in person purchasing. Foreign Exchanges have had
an impact on Market Securities simply because they have the ability to amplify gains as
well as losses.        
Explain the role of securities markets in the efficient allocation of capital among issuers
and investors based on the efficient market hypothesis.
            Securities Markets allow companies to utilize their capital to not only raise money
but to also reduce their cash on hand balance. “While high-performing companies
certainly focus on the financial return of individual investments, they also assess the
strategic attractiveness of a business and the extent to which an investment strengthens
their competitive advantage, which is key to producing sustainable high returns” (Pidun
& Stange, 2017, para 7). The efficient market hypothesis states that a share price reflects
all applicable information and that stocks trade at the honest fair prices on exchanges. It
also states that the only way an investor can beat the market is to seek riskier
investments. Based on the efficient market hypothesis, the issuers and investors are
affected by allocational efficiency, or the theory that capital is allocated in the most
beneficial way benefitting both parties. In an efficient market, by allocating capital, the
issuer benefits by offloading capital and gaining investment while the investor benefits
from the proceeds and returns in which that stock may provide.
Evaluate if the presence of dark pools enhances or reduces capital market efficiency.
            Dark Pools are privately ran stock exchanges which are intended for trading large
amounts without public knowledge. While they are highly disputed, they do have some
benfits as well. The biggest positive is that they actually have minimal market impact due
to the public being unable to access the companies involved, size and price of the trade.
A major downfall however is that they can very easily be abused and dude to this, may
result in innacuarate stock market prices. I believe at this moment, Dark Pools do not
affect capital market efficiency however if they continue to grow in the future, they
could impact the market in a negative way due to the inaccuracies they could cause.
Finally, find a real-life company that has made raised capital in 2020 and discuss the
method used.
            One of the biggest stories of 2020 saw SpaceX, headed by Elon Musk, become
the first private company to send humans to the International Space Station (ISS). While
Elon Musk is among the richest people on the planet, this would have not been possible
without some heavy investments. In 2020, SpaceX raised over $1.9 billion dollars
through venture funding. Venture Capital is simply private equity that investors finance
into a company with whom they see potential in.  
References
NYSE vs NASDAQ: What are the differences? Wealthface. (2021, December 22). Retrieved
January 19, 2022, from https://wealthface.com/blog/nyse-vs-nasdaq/
Pidun, U., & Stange, S. (2017, March 27). The Art of Capital Allocation. United States - EN.
Retrieved January 19, 2022,
from https://www.bcg.com/en-us/publications/2017/corporate-development-finance-
function-excellence-art-of-capital-allocation
Micah Wilson
10:51amJan 19 at 10:51am
Manage Discussion Entry
        The securities market has been around for a long time and it is the system that
interconnects between its participants.  "Federally sponsored credit agencies are
governmental units that issue their securities on a separate basis from those securities
sold directly by the U.S. Treasury. Some of the largest sponsored credit agencies are
involved in mortgage lending to the U.S. housing market" (Block, Hirt & Danielson,
2019).  The financial market has come a long way from where it started with all the
companies where their securities are bought and sold.  Many people have benefited
from these securities and so many have not had the same luck as others.  However,
there are many securities that a company has that can benefit its stockholders.  They
deal with different stocks and bonds that affect the market and how the company is
doing financially.  People also benefit from the different dividends of a company and
they can use this for their success.  In 1971, NASDAQ was founded as the first stock
market, and today they are one of the largest successors.  CME, ECNs and other foreign
markets have came along over the years to be successful as well.  These different
markets may be affected by the economy, businesses and other things that may struggle.
This all depends on the demand of products that are out there.
        "A market in which prices always fully reflect available information is an "efficient"
market. The Efficient Market Capital Hypothesis (ECMH), a theory asserting the
efficiency of American capital markets, has occupied a prominent place in the economics
and finance literature of the last decade" (Saari, 1977).  Even years ago the securities
market in efficient allocation of capital among its issuers and investors were still being
successful.  Their capital is used reduce balances that have been placed on products.
Using this process, many investors are constantly buying and selling their assets that way
they can weigh the chances that are involved.  They need to make sure the present
market is where it needs to be in order to make the changes that they make. 
        According to Forbes, dark pools market are "legal and regulated by the SEC, but
they've sparked concerns from regulators before (and at-home traders more recently)
because they can give the few institutional traders who execute the majority of dark-
pool trades unfair informational advantages that can be used to front trades" (Ponciano,
2021).  I believe that dark pools reduce capital in the market efficiency because of how
the market works.  Especially in this day and age, there are many people who can create
a "private stock" and then steal the money from the investors.  There are so many
chances that are being taken when dealing with dark pools because of so many people
who have possibly lost money.  If someone invests in a company, there are certain
credentials that these companies should make accessible for the ones who are wanting
to invest.  investments need to be confirmed by someone before the transaction is
processed.
        There are many markets that jumped and made more profits than ever in 2020.
One of the companies that has made raised capital in 2020 was Tesla.  Tesla has come
out as one of the larger stocks that have increased so much over the past couple years.
In 2020, they delivered more than 500,000 vehicles which gave them nearly 700% gains.
The more they sell, the more they are worth.  Elon Musk has become a name that
everyone knows and he is using his knowledge for SpaceX and making it his goal to make
so much more money in his future.  They have continued to make more cars and other
models that draw customers in to buy their battery powered vehicles.  They have
continued to grow over the past few years and during the pandemic, when other
companies were seeing a decrease, Tesla continued to see their stocks rise.
Block, S. B., Hirt, G. A., & Danielsen, B. R. (2019). Foundations of financial management
(17th ed.). McGraw-Hill Higher Education.
Ponciano, J. (2021). SEC 'Looking Closely' at 'Dark Pools'-Here's What They Are and
Why Reddit Traders are Rallying. Retrieved
from: https://www.forbes.com/sites/jonathanponciano/2021/08/04/sec-looking-
closely-at-dark-pools-heres-what-they-are-and-why-reddit-traders-are-rallying/?
sh=5e385dec2e42
Saari, C. P. (1977). The Efficient Capital Market Hypothesis, Economic Theory and the
Regulation of the Securities Industry. Stanford Law Review, 29(5), 1031–
1076. https://doi.org/10.2307/1228142