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					 Career Enhancement Project
Industry Research Assignment -
     Dealers and Brokers

                                 by Group 2
                     Members: Simon 50261423
                                 Kit 50322212
                               Philip 50311756
                                Jeffy 50253797
                                  龍 50191570
An individual who is paid a commission for executing customer orders. Person who
acts as an intermediary between a buyer and seller, usually charging a commission. A
broker who specializes in stocks, bonds, commodities, or options acts as agent and
must be registered with the exchange where the securities are traded. Antithesis of

Types of Broker
     Full-service brokers and discount brokers:
     Discount brokers charge far lower commissions than full service brokers. But
     there is a trade-off. If you use a discount broker, you will get little or no
     investment advice, so you must be willing to make your own buy and sell

     A full-service broker, on the other hand, will help you pick investments and
     devise a financial plan. However, it will charge a higher brokerage fee.

     Floor broker and upstairs broker:
     A floor broker executes orders on the floor of the exchange. An upstairs broker
     handles retail customers and their orders.

An entity that stands ready and willing to buy a security for its own account (at its bid
price) or sell from its own account (at its ask price). Used in the context of general
equities. Individual or firm acting as a principal in a securities transaction. Principals
are market makers in securities, and thus trade for their own account and risk.
Antithesis of broker.

                    Comparison between dealer and broker
                                Dealer                   Broker
     Role              Principal/Market Maker     Agent/Intermediary
     Inventory hold              Yes                       No
     Trading            Own account and bear    Clients’ account and no
                              own risk                    risk
     Revenue               Bid-ask spread       Brokerage commission
A specialist “makes a market” in the shares of one or more firms. This task may
require the specialist to act as either a broker or dealer. The specialist’s role as a
broker is simply to execute the orders of other brokers. Specialists may also buy or
sell shares of stock for their own portfolios. When no other broker can be found to
take the other side of a trade, specialists will do so even if it means they must buy for
or sell from their own accounts.

A specialist performs 5 essential functions:
     Manage the auction process. To maintain a fair and orderly market in a
     particular security, the specialist establishes the opening price for his security
     every day. Then, during the day, he quotes the current bid and offer prices to

     Execute orders for floor brokers. The specialist can execute an order
     immediately or hold the order and execute it when the stock reaches the specific
     price requested by the customer. As a dealer, the specialist will buy or sell stock
     from his own inventory to keep the market liquid or to prevent rapid price

     Serve as catalysts. Specialists are the point of contact between brokers with buy
     and sell orders. The specialist acts as a catalyst, bringing buyers and sellers
     together enabling a transaction to take place that otherwise would not have

     Provide capital. If buy orders temporarily outpace sell orders, or conversely if
     sell orders outpace buy orders, the specialist is required to use his firm's own
     capital to minimize the imbalance. This is done by buying or selling against the
     trend of the market until a price is reached at which public supply and demand
     are once again in balance. Usually public order meets public order without
     specialist participation, however, specialists do participate in about 10 percent of
     all shares traded.

     Stabilize prices. To ensure that stock trading moves smoothly, with minimal
     price fluctuation, the specialist will step in against the market trend. Specialists
     buy and sell stock to cushion temporary imbalances and to avoid unreasonable
     price variations.
The Charles Schwab Corporation (NYSE:SCH), through Charles Schwab & Co., Inc.
(member SIPC/NYSE), U.S. Trust Corporation, CyBerCorp, Inc. and its other
operating subsidiaries, is the largest online broker in United State with 8 million
active accounts and US$763 billion in client assets as of March 31, 2003, which 4.2
million accounts and US$296 billion in client assets are came from the online market.
On the other hand, its market share is 27% which far away from the second largest
online broker, E*trade and Waterhouse, which both of them have 12% market share.

Business Area
The main core business areas of Schwab are options, fixed income investment, mutual
fund, and stocks. Clients can use the trading tools called StreetSmart ProTM to make
the trade. Such tool provides the following information:
Nasdaq Level II Quotes, unlimited watch lists, detailed options chains, real-time news
headlines from Dow Jones® and COMTEX News Networks, the day’s leading
gainers, decliners, and volume movers for the Nasdaq or NYSE, etc.

Recent News
In 25 October, 2000, Charles Schwab, Hong Kong, Ltd. announced the opening of its
first storefront branch in Hong Kong's Central business district. The branch is
equipped with the latest in on-line trading and communication technology to provide
full investment services to clients in Hong Kong.

In 21 January, 2001 Charles Schwab & Co., Inc., has been named the winner of five
prestigious accolades in 2000. The awards, announced in December 2000 and January
2001, are "Company of the Year" by Forbes; "Best Internet Brokerage" by Gomez;
"The Top 25 Managers" by Business Week; "Best Company to Work for (5th)" by
Fortune and "Companies Best for Female Executives (2nd)" by Working Women.

In 22 January, 2003, Charles Schwab, announced the official launch of StreetSmart
ProTM, a comprehensive and customizable trading platform, as a strategic move to
further expand its active trader business in Hong Kong and Asia. Despite the
challenging environment last year, Charles Schwab Hong Kong’s active trader
customers remained robust with their investments, with the average annual number of
trades per year increasing by 22 per cent from 2001 to 2002. Average investable assets
for this group of customers also grew by 14 per cent from last year regardless of
market downturn
Wachovia Securities
Wachovia Securities is the fifth largest full service retail broker dealer, based on client
base, in the United States. Excluding the banking business, it has 3.4 million of
active retail client accounts, and is managing retail clients’ assets of $265 billion. As
a non-bank affiliate of Wachovia Corporation, it is not separately listed in any stock

Business Area
Its business area includes discount and full-service brokerage, asset management and
clearing services. It owns memberships of New York Stock Exchange, American
Stock Exchange, NASDAQ, Philadelphia Stock Exchange, Chicago Stock Exchange
and Pacific Stock Exchange.

Financial position
Wachovia Securities has a very healthy financial position, as its parent companies
Wachovia Corp proudly presents its 8.27% tier-1 capital, which is high above the 4%
minimum required in Basel-2 accord. The parent company’s debt rating is also at
good level, as its senior debt rated Aa3 by Moody's Investors Service, A by Standard
& Poor's and A+ by Fitch.

Recent News
On February 19, 2003, Wachovia Corp announced that it would join the retail
brokerage forces with Prudential Financial Inc by setting up a new brokerage firm, in
which Wachovia Corp will have a 62% interest while Prudential will have 38%. This
will create the third largest retail brokerage firm in the country, based on combined
client assets of $537 billion.   The firm will have more than 3,500 brokerage locations
throughout the USA.
Spear, Leeds & Kellogg
Spear, Leeds & Kellogg (SLK) is one of the 7 specialists operating in the prominent
New York Stock Exchange. In terms of the number of common stocks the specialist
handle, SLK is ranked second. And 103 of common stocks handled by SLK are
composed in the S&P 500. The listed companies that have their common stocks
handled by SLK, to name a few, are AIG, AOL Time Warner, IBM, Boeing and NTT
DoCoMo. It is also the specialist in 10 Exchange Traded Fund.

In late 2000, Goldman Sachs Group paid more than $6 million in stock to acquire
SLK, which is considered a very high price, and this made headlines in financial

Other Business
SLK also has businesses in other area, like being market makers in NASDAQ,
providing order management system, called REDIPlus, for institutions, hedge funds
and broker-dealers, and clearing business.

Specialists are restricted by stock exchanges from making a profit from the
knowledge of incoming orders available in their display book. Occasionally,
however, there are scandals that the specialists break the rules. 1998, the NASD fined
SLK for $950,000 after finding that it had intentionally delayed reports of some trades
“to secure a competitive advantage, protect its interests and maximize its profits or
minimize its losses”, according to NASD records. In 2003 April, FleetBoston
Financial Corporation, was fined $150,000 for mishandling customers orders. This
triggered another wave of scrutiny, which also included SLK, and other specialists
like LaBranche, which is the biggest specialist firm on the floor, Van Der Moolen and
Bear Wagner, partly owned by Bear Stearns. So far only FleetBoston was fined.

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