An LCD computer projector, or a television monitor, must be used to project a PowerPoint generated stock listing which
everyone in the class can clearly view.
The class is divided into four brokerage groups.
One member from each brokerage group serves as the broker, while all the other members are investors. The brokerage groups
are as follows:
Nesbitt Burns
Charles Schwab
Merrill Lynch
TD Waterhouse
The teacher serves as the "Floor Supervisor." The Floor Supervisor announces when the market is open and when it is closed.
The Floor Supervisor also receives (immediately upon the completion of a trade) buy and sell orders which have been initialed by
a broker. The Supervisor uses these completed buy/sell orders to constantly update the Stock Listing.
Each broker is issued 20 shares of stock which they will release to their investors within the Initial Public Offering (IPO).
Each broker is also issed $100.00 as their IPO fee (5% of the face value of the stock at the time of the IPO.) The IPO
assignments are as follows:
Nesbitt Burns: Genex Corp.
Charles Schwab: CyberComm Corp.
Merrill Lynch: Trinity Motors Corp.
TD Waterhouse: Shimmer Oil Corp.
Each investor is issued $660.00, consisting of four bills in each of the following denominations:
$100.00, $50.00, $10.00, and $5.00.
Trading in the Primary Market:
During the IPO, the stock is said to be in the "primary market." At this stage
all stock is traded for $100.00 per share, and the brokers receive no
transaction fee from the investors. Investors can purchase stock from any of
the four companies.
However, investors can only buy direct from their own broker. If they wish to purchase stock from another broker, then they must ask
their broker to complete the transaction on their behalf.
Once the stock has been released to the investors it has graduated from the "primary" market to the "secondary" market.
Trading in the Secondary Market:
At this point, if an investor wishes to invest in a company, then the investor must purchase stock from a current stock holder.
Investors cannot trade directly with each other. Rather, investors must use their respective stock brokers to facilitate a trade.
For example, if investor A from the Charles Schwab group wishes to purchase a certain stock from investor B, who is in the
TD Waterhouse group, then the Charles Schwab broker must contact the TD Waterhouse Broker. The two brokers facilitate the trade -
exchanging the stock for the money. At this point each broker will be paid $5.00 for facilitating the trade. Brokers will
receive a $5.00 transaction fee from their own clients whenever they facilitate a buy or sell order.
When an investor wishes to buy a stock, they complete a buy order and give it to their broker. The broker then circulates
around his/her own clients as well, as the other brokers, to see if there are any investors who would be willing to sell the
particular stock. Brokers cannot speak directly with an investor from another brokerage group. Rather, each broker will
negotiate with their respective clients to see if they can find a price at which the clients will agree to trade.
Once a trade is completed, the broker who was handling the buy order will initial the buy order, and give it to Floor Supervisor.
The Floor Supervisor will close the market after a set time (for example, ten minutes). The class will then take a moment to
observe the closing prices at the end of the trading day. Each investor should maintain a relative sense of how his/her
portfolio is performing.
The Floor Supervisor will then advance the PowerPoint to the news slide for that particular trading day. The class will
read the news and make decisions about which stock they might wish to buy and sell based on the information presented in the news
articles.
The Floor Supervisor will then return the PowerPoint presentation to the Stock Listings, and
open the market for
another trading day.
Repeat steps 9 - 14 for each of the eight trading days.
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