MARKET MAKING:

Market-making is aimed at infusing liquidity in securities that are not frequently traded on
stock exchanges. A market-maker is responsible for enhancing the demand supply situation
in securities such as stocks and futures & options (F&O). To understand this concept better,
it would be helpful to have an idea about the existing screen based electronic trading
system. In this system, orders placed by buyers and sellers are matched by a computer
system (run by stock exchanges).
JOBS OF MARKET MAKER:
Without sufficient liquidity, markets would become more inefficient because there may not
be a buyer/seller to transact with, even at what should be the market price.
Market-designated market makers provide liquidity by submitting both bids and asks on
certain securities. This helps ensure transactions can occur at the market price.
By submitting bids below ask prices, the market maker can make money.
The difference between the highest bid and the lowest ask price is called the bid-ask
spread.
Terms:
Bid: The submitted price at which the trader is willing to buy.
Ask: The submitted price at which the trader is willing to sell.
Liquidity: Availability of cash over short term: ability to service short-term debt.
Bid price: the amount offered by a buyer
Bid-ask spread: the difference between the prices quoted for an immediate sale and
an immediate purchase

H.P AND COMPAQ MERGER:

Following are the points of H.P and Compaq merger:

HP & Compaq suffer similar risks of standing still.
Face the challenge of a shrinking market.
Increase competition with major competitors like IBM, DELL.
Cut costs by US $3billion annually within 3years & increase earnings for
shareholders
Merger will enhance business segments as individual and complimentary each other
like supply chain.
REASON:

HP STRENGTHS:
Strong reputation for innovation and quality.
Strong in UNIX servers.
HP WEAKNESSES:
Vague direction of working.
Weak in server market that has profit potential.
COMPAQ STRENGTHS:
Known for information technology.
Hardware business huge.

COMPAQ WEAKNESSES:
Dell had strong position in online business.
At time of merger, it had inventory.

UNDERWRITER:

Definition:
The procedure by which an underwriter brings a new security issue to the investing public in
an offering. In such a case, the underwriter will guarantee a certain price for a
certain number of securities to the party that is issuing the security (in exchange for a fee).
Thus, the issuer is secure that they will raise a certain minimum from the issue, while the
underwriter bears the risk of the issue.
OR
The process of insuring someone or something.
DUTIES OF UNDERWRITER:

Calculating the risk.
Deciding how much should be paid out.
Writing policies and adding specific conditions when required.
Processes renewal policies and makes adjustments to payroll, rates and premiums;
prepares certificates of insurance.
Reviews and evaluates applications for workers compensation insurance;
determines appropriate classifications based on the type and nature of work
performed.

STRUCTURED PRODUCT:

Most Structured Products have a fixed maturity and may or may not pay an interest rate or
coupon rate. Structured Products also frequently cap or limit the upside participation in the
market measure, particularly if the investment offers a full return of principal at maturity, or
an enhanced rate of interest. Any return of principal at maturity would be subject to the
issuers ability to repay. Structured Products are usually created to meet specific needs that
cannot be met from the standardized financial instruments available in the markets.
They can be used as:
An alternative to a direct investment
A part of the overall asset allocation
A risk-reduction strategy in a portfolio
Structured Products can be issued in various forms, including publicly offered and privately
placed debt securities, publicly offered and privately placed pooled investments (such as
closed end-funds and trusts), and certificates of deposit. Some Structured Products are
listed on securities exchanges, while others trade in over-the-counter secondary markets