Gregg Siegel
Business Communications Copywriter

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National Association of Securities Dealers: 

"Stock Markets: Why and How"

Draft Video Script


Screen starts black, with words STOCK MARKET in center screen. A series of basic questions answered by this presentation "pop in" around the screen, such as "Why are stock markets important?" "How do stock markets work?" "How do you read the stock tables?" "How do I buy a stock?" "What is a prospectus?" etc.


On the audio track,  silence is gradually overtaken by emerging crisp, clean sounds of nails being driven into wood. We see nothing but title shot for several seconds; scene gradually opens and continues under introductory narration.


Montage of scenes reflecting growth and jobs. Construction workers pounding nails into a wooden building frame--an expansion to an adjacent store. Stockboys putting out goods in a grocery store. Workers on a busy auto assembly plant. Office with a lot of activity and phones ringing. Beams being carried to a skyscraper-in-progress, store with "Now Hiring" sign in window, etc.


A free market economy depends on the growth and expansion of its businesses, as well as the constant creation of new businesses, in order to prosper. Whether the corner grocery store or the largest multi-national corporation, the more successful the business, the more jobs it can create, and the more it can contribute to the economy.


In order to start-up or expand, all businesses need capital, ready money that can be invested to fuel growth through the purchase of equipment, the opening of new

locations or facilities, or the hiring of new employees.



Businessperson working on an adding machine and studying the tape. A man in a suit enters and they shake hands.

There are a number of ways to acquire the capital for a business venture. Many an entrepreneur has dipped deep into his or her savings to turn a good idea into a business. Others have brought in friends or relatives as investors, or sought investors through ads or referrals. Many more have turned to banks. All of these methods have their advantages and disadvantages.


Animated graphic is presented as narration below continues. CAPITAL FORMATION is across the top, with STOCK MARKETS below it. On left side of screen is icon representing  "company," on right side is icon representing "public." "Money" flows from public to company, "ownership" flows from "company" to "public." At appropriate time, CAPITAL FOR GROWTH appears near "company" icon, OWNERSHIP RIGHTS AND PRIVILEGES, DIVIDENDS, VOTING appear respectively near "public" icon. (Note that unless otherwise displayed, underlined terms, in addition to being emphasized by the narrator, should be superimposed briefly on screen as they are spoken.)


In most capitalist societies, a sophisticated infrastructure for capital formation has been established: carefully regulated stock markets.


Simply speaking, a company acquires

the capital it needs by selling portions of itself--or shares--to the general public.


In return for their capital contributions, each shareholder becomes the owner of a small part of the business. Each is entitled to a proportional return on the company's future success, such as through the increase in the market value of each share, or through the payment of dividends, a distribution of profits. And, each shareholder is entitled to a proportional say in the overall operation and management of the business, such as by voting for members of the company'sBoard of Directors.


"Company" and "public" icons merge toward center screen to become "public company". This grows, filling screen until black. We then open in a busy underwriters' office.


The sale of stock that enables a company to go public is called an initial public offering, orIPO.It is sponsored by one or more underwriters, investment companies specializing in issuing new stock and in turn making it available to the public. The underwriting process is carefully monitored by the Security and Exchange Commission and other regulatory bodies, such as the National Association of Securities Dealers and the New York Stock Exchange, and must meet strict legal requirements.


One of the underwriters is leafing through a newspaper as he's on the phone. At appropriate time, we get a close up of a page with several tombstones, which we scan. Then, at appropriate time, we zoom in tight on word "prospectus" in one or several offerings.


One of the simpler requirements relates to the advertising of the availability of new stock issues. They can only be promoted by a simple announcement ad informally called a "tombstone" because of its sparse layout and bold black border. Tombstones, like all advertisements for investment opportunities, must, by law, offer investors a copy of the prospectus, a formal document disclosing detailed information about the company, its products, its plans, its finances and the risks associated with investing in it.

Continuation of previous animated graphic, with dollars flowing from public company icon into icons representing "jobs" and "expansion," which in turn send additional dollars into an "economy" icon.


If the initial public offering is successful, the business will get the capital it needs to start up or expand its operations, creating new jobs and stimulating the economy. It will also get a number of new owners who stand to profit from its success.


At end of previous narration, "public" icon splits off and separates again from "public company". "Public" icon separates into several "individual investor" icons. "Stock" icons and "money" icons flow among them, with arrows. The "company" icon remains in the background.


In order for the shares of the company to entice investors, there usually must be a ready market for them. That is, an investor should be able to quickly liquidate, or sell his shares for cash. The means to do this is the secondary market, which is what most people think of when they think of the stock market. The secondary market--as reported in the newspaper every morning--relates to the transfer of stock from one investor to another. For the most part, the company that originally issued the stock is no longer involved in these transactions.


Rising music and "busy market" visuals similar to what we used in "Nasdaq Video"--electronic ticker, shifting computer screens, hands on phones, etc.


After the IPO, most stocks enter the secondary market and fluctuate in price as investors buy and sell shares. These fluctuations are related to the relative supply and demand for the stock in the open market. News about the company and its industry, rumors, general economic news and investor fears are all factors that can move stock prices higher or lower. The price of the stock is not strongly tied to its book value--the actual net value of the assets of the company. These can and do differ widely.


Animated bar graph comparing average annual return of stocks and other investments. (We'll need to discuss which ones, and during what time period, in order to present a fair and accurate comparison.)


In the long term, stocks overall have provided an average return of more than 10% a year--attractive when compared to the rates currently offered by savings accounts and money-market funds. However, unlike those investments, stocks will not always appreciate; losing a portion of the investment is always a possibility. Investors must be prepared to handle risk and be able to leave their investment for a longer period of time in order to take advantage of the potential for more attractive gains.


Heading FACTORS IN CHOOSING A STOCK, with bullets appearing at appropriate intervals:

¥ anticipated growth, ¥ products, ¥ markets, ¥ management strength, ¥ fundamental measurements.


In choosing a company in which to invest, investors look to the company's future growth prospects by studying its products, its markets and the quality of its management. They may also look at a number of key measurements to determine if the company's current stock price represents fair value.


"Fundamental measurements" bullet becomes heading, with "black board style" figures going through the calculation of a typical PE ratio. For example, stock price=$65, earnings per share =$6.50, Price/Earnings Ratio=10=Multiple.


The price/earnings--PE ratio, also called the multiple, is the market price of the stock divided by its earnings per share. In general, investors look for low multiples, but in the case of very young companies with high growth potential, high PEs are acceptable.


Blackboard is erased, and similar calculation is done for debt/equity ratio. For example, equity= $600 million, debt= $30 million, d/e ratio =.05.


Another common measurement is the debt/equity ratio, a number which compares what a company owns to what it owes its creditors. This is often a strong indication of financial health.


Scene fades from animated blackboard to live legal pad, where same numbers we just saw are written. Zoom out to generic investor at desk looking over the calculations he's just done on his legal pad. Seeming satisfied, he reaches for his phone. We see his stockbroker pick up at other end, and they "talk."


Once an investor chooses the stock or stocks to be purchased, he places an order with a stockbroker, a professional licensed to make the trade. In addition to the price of the shares, the investor pays the broker a commission for his services. Commissions charged by full-service, discount and deep-discount brokers vary widely, and are usually indicative of the differing levels of advice, research and similar "additional" services offered by the brokerage.


As their conversation continues, at some point zoom in on "antique" stock certificate framed and hanging on broker's wall.


After the transaction is settled, the investor may receive a formal stock certificate. Although a beautiful, ornate document, it is primarily a receipt, and a vestige of a pre-electronic age. These days, most investors prefer not to have a certificate issued and instead leave their purchases in "street name," stored electronically in their broker's account.


Zoom out, back to investor and stock broker.


The advantage to the investor is that he can call the broker and sell the stock immediately, without having to physically deliver the certificate. He also doesn't have to worry about its loss.


Broker gets quotes from the screen in front of him, and relays them to investor on phone.


You can track your investments by getting quotes--current prices--from your broker, or by checking the results of the prior day's trading in the stock tables of your morning paper.


They hang up, we are back in investor's office. He opens the paper on his desk and turns to stock market section. We see the "NASDAQ NATIONAL MARKET" heading, and scan down, stopping, perhaps, at MCI or other stock that pays dividends. Zoom in close up to each column as it is described below.


Each stock is listed by its name or a convenient abbreviation. Most listings will provide the range of the stock--its closing high and low over the course of the past 52-week period.


Next to the stock's name is the dividend it pays, if any. This is profit that the company distributes to its investors, per share, per year, usually paid out in quarterly intervals. Many young companies are not yet profitable, or use their profits to fuel future growth, so they don't pay dividends.


Next is the PE ratio, an important number discussed earlier. Following are measures of the previous day's activities: the number of shares traded, usually expressed in hundreds; the stock price on the last trade of the day; and the change in that price since the close of the previous trading day. Most stock prices and changes are expressed in eighths of a point; each eighth equals 12.5¢. And, of course, each point equals one dollar.


Zoom back out so larger section of newspaper is visible. Scan NASDAQ heading, then NYSE and AMEX.


When looking for your stock, you'll notice that stocks are grouped under several different market headings. The actual trading of the stocks takes place on the stock market at which the particular company is listed.


Animated graphic with heading U.S. STOCK MARKETS, and columns AUCTION-BASED and SCREEN-BASED, with NASDAQ, NYSE and AMEX placed appropriately.


Stock markets are made up of stockbrokers and dealers who transact business and bring together buyers and sellers. There are several national and regional stock markets in the United States, but they fall within two broad categories, auction-based systems and screen-based systems.


AUCTION-BASED gets larger and becomes heading. Animated graphic represents action described below. Ambient sounds of country auctioneer and gavel may be used, if it can be done tastefully. "Sold" is heard toward the end of segment. Alternatively, ambient sounds of trading floor can be used, if permissible.


The older type is the auction-based system, best characterized by the New York Stock Exchange. At the NYSE, all transactions occur in a giant room, called a trading floor. On the floor are a number of horseshoe-shaped trading posts, each  overseen by a specialist. When you place an order for a particular stock, the order goes to your broker's floor representative, who physically walks up to the appropriate trading post, where a number of other representatives with buy and sell orders on that stock are continuously congregating. The buyers and sellers shout out prices until, through a hand signal or a shouted "sold," the transaction is consummated.


Previous noisy scene shifts to (relative) quiet of market maker office. Animated description of trading floor fades into modern computer screen, full of trading information. Heading is SCREEN-BASED MARKET.


Stock exchanges established in modern times opt for a "screen-based" approach, to take full advantage of today's sophisticated computer and telecommunications technologies.


Zoom out of computer screen to wider shot of market maker office. Prominent is electronic ticker, with symbols and prices of NASDAQ companies flow by under NASDAQ heading.


The first screen-based system was the NASDAQ National Market System, (Mark to confirm) established in 1971. Today, nearly half of all shares traded in the U.S. are on NASDAQ. And, NASDAQ represents far more companies than any other stock market in the world.


Montage of office activity. Zoom in on different brokers on the phone, and quick cuts to people they are talking to.

Screen-based markets like NASDAQ offer investors a number of benefits.

For example, NASDAQ takes advantage of the efficiencies of a competitive market. Each stock has several--sometimes as many as 50--market makers, who all sell the same stock to brokers and investors. They compete for orders based on price and service. This is in contrast to the auction-based system, where each stock has only one specialist making the market and setting the price.


Screen-based systems also eliminate the need for buyers and sellers to congregate in one room. Transactions can be consummated immediately via modem, from anywhere in the world, and information about the trade goes out to all parties in real time, simultaneously, to all points of the globe.


Shot of individual broker and computer screen, bid/ask columns can be seen for a particular stock. Broker is on the phone with a customer, who we see, possibly in cut away, looking pleased. Broker hits a key and "Order Confirmed" or similar phrase is seen on screen.


Another differentiater is the management of the spread, the difference between the sell offer, or ask, and the buy offer, or bid. All stocks have spreads. In an auction-based system, the spread is often invisible, with all asks and bids consolidated into a single quote presented by the specialist. In a screen-based system, the broker can plainly see the spread, and the potential investor can factor it into his or her buying decision.


Montage of NASDAQ stocks' corporate logos (and products?)--MCI, Microsoft, McCormick, Intel, etc.


Since the 1970s, there has been a perception that old, established companies are traded on the New York Stock Exchange, and young, emerging companies are traded on NASDAQ. It's true that young growth companies are still attracted to NASDAQ, but the original young growth companies that started on NASDAQ are today giants in their industries--MCI, Microsoft, Apple, Intel and many others. And although many of them have grown large enough to be listed anywhere, they have made the screen-based NASDAQ their market of choice.


Map of the world. Words AUCTION-BASED appear at points corresponding to places mentioned, quickly shifting into words SCREEN-BASED. SCREEN-BASED appears at points corresponding to emerging economies mentioned. As word NASDAQ is spoken, screen goes black with just NASDAQ in blue.


Today, venerable stock markets in London, Paris, Toronto and other major cities around the globe are modernizing their systems to include more screen-based approaches. Japan is calling its new trading system JASDAQ, and new stock markets being created in emerging economies in Argentina, Korea and Taiwan are likewise using NASDAQ as a prototype.


Screen is black, with NASDAQ logo only visual. Silence for a few seconds. Then, paralleling opening, we hear the crisp, clean sounds of nails being driven into wood. Scene gradually opens and continues under closing narration. Montage of different scenes reflecting growth and jobs. The last few, however, are internationally based.


The speed, reliability and efficiency of the screen-based system have made it the model to be followed. Its success, and the success of its listed companies, have served to build investor confidence, spur investment and strengthen the capital formation process in the United States and in countries around the globe--creating jobs and driving growth in mature economies, and giving emerging ones an important head start.


It's a process anyone can be part of. By investing in stocks through IPOs or the secondary market, small investors are further shoring the free market system--and, potentially, sharing in the profits generated by its growth and success.


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Gregg Siegel

Business Communications Copywriter

Better writing. Less hassle.