What is the “Direct Listing” Process on Wall Street?

On The “Direct Listing” Process

[By staff reporters]


Direct Listings Once Looked Like a Threat to Traditional IPOs. Now They're  an Option for the Few. | Barron's


We’ve talked about Wall Street, IPOs, the OTC market and secondary public offerings before. So, now may be a good time to discuss the direct public listing.

The Direct Public Listing

Companies that want to do a public listing may not have the resources to pay underwriters, may not want to dilute existing shares by creating new ones or may want to avoid lockup agreements. Companies with these concerns often choose to proceed by using the “direct listing” process, rather than an IPO.

Direct Listing Process (DLP) is also known as Direct Placement or Direct Public Offering (DPO)

In DLP, the business sells shares directly to the public without the help of any intermediaries. It does not involve any underwriters or other intermediaries, there are no new shares issued and there is no lockup period.

The existing investors, promoters and even employees holding shares of the company can directly sell their shares to the public.



However, the zero- to low-cost advantage also comes with certain risks for the company, which also trickle down to investors.

For example there is no support or guarantee for the share sale, no promotions, no safe long-term investors, no possibility of options like greenshoe and no defense by large shareholders against any volatility in the share price during and after the share listing.


The greenshoe option is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than originally planned by the issuer if the demand proves particularly strong.

MORE: https://money.usnews.com/investing/stock-market-news/articles/direct-listing-vs-ipo

Conclusion: Your thoughts are appreciated.


Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™


About Securities “Shelf Registration”

Join Our Mailing List

A Primer for Physician Investors and Medical Professionals

By: Dr. David Edward Marcinko; MBA, CMP™ http://www.CertifiedMedicalPlanner.org


[PART 5 OF 8]

Dr. Marcinko with ME-P Fans

NOTE: This is an eight part ME-P series based on a weekend lecture I gave more than a decade ago to an interested group of graduate, business and medical school students. The material is a bit dated and some facts and specifics may have changed since then. But, the overall thought-leadership information of the essay remains interesting and informative. We trust you will enjoy it.


A relatively new method of registration under the Act of ’33 is known as shelf registration. Under this rule, an issuer may register any amount of securities that, at the time the registration statement becomes effective, is reasonably expected to be offered and sold within two years of the initial effective date of the registration. Once registered, the securities may be sold continuously or periodically within 2 years without any waiting period for a registration to clear issuers generally like shelf registration because of the flexibility it gives them to take advantage of changing market conditions.

In addition, the legal, accounting, and printing costs involved in issuance are reduced, since a single registration statement suffices for multiple offerings within the 2 year period. In effect, what the issuer does is register securities that will meet its financing needs for the next 2  years. It issues what it needs at the current time, and puts the balance on the shelf” to be taken off the shelf as needed.


The purchase of common stock in an IPO (initial public offering) is facilitated through of the members an investment bank underwriting syndicate or selling group. This is known as the primary market and the proceeds of sale go directly to the issuing company. Six months later however, if a doctor wants to sell his shares, this would be accomplished in the secondary market. The term secondary market refers to trading in outstanding issues as the proceeds do not go to the issuer, but to the current owner of the securities, such as the physician investor.

Therefore, the secondary market provides liquidity to doctors who acquired securities in the primary market. After a doctor has acquired securities in the primary market, he wants to be able to sell the securities at some point in the future in order to acquire other securities, buy a house, or go on a vacation. Such a sale takes place in the secondary market. The medical investor’s ability to convert the asset (securities) into cash is heavily dependent upon the secondary market. All investors would be hesitant to acquire new securities if they felt they would not subsequently have the ability to sell the securities quickly at a fair price in the secondary market.

Securities Act of 1934

Every trade of stocks and bonds that is not a purchase of a new issue is a trade that takes place in the secondary market. The market place for secondary trading is the stock exchanges and the over-the-counter (OTC) market, and is governed by the Securities Act of 1934, which actually created the Securities and Exchange Commission (SEC) and outlines the powers of the SEC to interpret, supervise, and enforce the securities laws of the United States. The Act of 34 is very broad and governs the sales of securities, including the regulation of securities markets exchanges, OTC markets, broker/dealers, their employees, the conduct of secondary markets, the extension of credit in the purchase and sale of securities, and the conduct of corporate insiders (officers and directors and holders of more than 10% of the outstanding stock). The Act also prohibits fraud and manipulative and deceptive activities in securities transactions

The Stock Exchanges

A stock exchange is a private association of brokers. The main purpose of an exchange is to provide a central meeting place for its member-brokers. This central meeting place is called the floor. It is on the floor that the members trade in securities. It is important to remember that a stock exchange itself does not own any of the securities that are traded on its floor. Nor does it buy or sell any of the securities traded on the exchange. Instead, the securities are owned by member firms, customers, or perhaps, by the exchange member firm itself.

It is also important to remember that a stock exchange does not establish or fix the price at which any security is traded on the exchange. The price is determined in a free and open auction type of trading. It depends on the supply and  demand relationship of that security at a particular time. In other words, if sellers of a stock are offering to sell more shares of that stock than buyers want to buy, the price of that stock will tend to go down. On the other hand, if buyers want to buy more shares of a stock than the sellers are offering to sell, the price of that stock will tend to go higher because of the strong demand.

Any discussion of stock exchanges has to focus on the NYSE, which is by far the largest and most important of the exchanges. There are two exchanges referred to as national stock exchanges, the NYSE and the American Stock Exchange (AMEX). In addition to these two national exchanges, there are several regional stock exchanges including the Philadelphia Exchange, the Chicago Exchange (formerly Midwest), the Pacific Exchange, the Boston Exchange, and the Cincinnati Exchange. Stocks that are traded on an exchange are referred to as listed stocks. The term “listed on an exchange” means that the issue is eligible for trading on the floor of the exchange.

How does a stock become listed? The issuing company, having decided that they wish the prestige and broad visibility of being listed on the NYSE, applies to the exchange for listing. A critical condition for listing is that the issuer agrees to solicit proxies from those common stock shareholders unable to attend shareholder meetings. Once the securities have been accepted for listing (trading) on an exchange, the issuer must continue to meet certain requirements which are not quite as stringent as the original listing requirements, and may be de-listed if the firm ceases to solicit proxies on its existing voting stock, or meet other minimal requirements.

Physically, the exchange brings together buyers and sellers on a trading floor. The NYSE floor is larger than several football fields and is divided into 19 trading posts. Eighteen of the posts are horseshoe or U-shaped stations 100 square feet in area. The nineteenth post (post number 30) is in the northwest corer and really isn’t a post at all; it’s just an area where the inactive stocks trade.

The Specialist

Specialists are experts in trading one or more specific stocks at their particular post on the exchange floor. Their activity is vital to the maintenance of a free and continuous market in the specific issues they represent. They are responsible for conducting the auction at the post. Everyone interested in buying the stock calls out a price and the shares go to the highest bidder. The buyers compete, but there is only one seller. Unlike the usual auction market, the auction on the floor of the exchange is a two way auction with some brokers seeking to buy at the lowest possible price for their doctor clients and other brokers trying to sell at the highest possible price for their doctor clients. When two brokers, one representing a buyer and one a seller, agree on a price, a sale is made. The specialist functions in a dual capacity as a dealer and as a broker. As a dealer or principal, he buys and sells for his own account and risk to maintain a fair and orderly market in the stocks in which he specializes.

For example, if a commission broker approaches the specialist at the post with a buy or sell order, and there are no other brokers in the crowd, that is currently interested in buying or selling the stock, the specialist will buy the stock from that commission broker (if it’s a sell order) for his own account or sell the stock from his inventory (if it’s a buy order). Perhaps, he may even be able to fill the order from his specialist’s book?


Specialist’s Book

This is done by using the specialist’s book of buy orders (bids), marked on the left hand page, or sell orders (offers) on the right. There is a book for each stock in which the specialist specializes. The pages are ruled and are usually printed with fractional stock points at regular intervals to permit easy insertion of orders. The orders are entered in the book by the specialist according to price and in the sequence in which they are received at the post. He notes the number of shares, putting down 1 for 100 shares, 2 for 200 shares, etc. He also notes the name of the member firm placing the order and if the order is Good Till Cancelled (GTC), or not. When orders are executed, they are executed in the same order recorded in the book at that particular price.

The specialist’s book also keeps track of all orders “away from the market ” (limit orders and stop orders) in his book. The book is organized with all buy orders on the left hand side of the page and all sell orders on the right hand side. In the absence of bids and offers from the “trading crowd” on the floor, the specialist can quote the best available market for the security by announcing the highest bid and the lowest offer (ask). The best bid is always the highest buy limit order on his book and the best offer (ask) is always the lowest sell limit on his book. In addition to quoting the best price, he will also give the “size of the market ” which is determined by the number of shares being bid for and offered at the respective best bid and best ask prices. The quote is price and size. When asked to quote the market for a security, the specialist disregards any stop orders on his book since those orders do not become activated until triggered by another trade. One thing to remember is that since most doctors place stop orders to hedge (protect) against a price movement adverse to their interests, most stop orders are entered with the fervent wish that they never be executed.

On stop and limit orders placed below the market, the specialist is required to reduce the price of those orders on the ex-dividend (ex-split, ex-rights) date. The two critical things to remember are: what types of orders are reduced and by how much? The specialist will reduce all GTC (open) buy limit and sell stop orders on an ex-date. You may remember this with the acronym BLISS where the BL equals buy limit and the SS equals sell stop. The only time either of these orders will not be reduced is if the medical client turned in DNR (do not reduce) instructions.

The price of the order is then reduced by enough to equal or exceed the amount of the dividend.

If we go back to the example approaching the specialist to buy or sell stock and there is no one in the “crowd”, the specialist will first give the commission broker a quote from his book. That quote will be the highest bid price (the highest priced limit order to buy on his books) and the best asked price {the lowest priced sell limit on his books). If the commission broker is willing to buy at the lowest ask or offering price on the specialist’s book, then a trade will take place; if the commission broker is looking to sell and is willing to accept the highest bid price on the specialist’s book then, again, a trade will take place. It is the responsibility of the specialist to maintain an orderly market and to keep the spread between the bid and asked prices as narrow as possible. If the spread between bid and asked is too wide to generate market activity, the specialist will act on his own account.

If the specialist is presented with sell orders at the post and he has no buyers, he must bid at least 1/8 of a point higher than the best bid on his books. If he has buyers and no sellers, then he must offer stock from his inventory at a price at least, 1/8 of a point below the lowest offer on his book.

Why? It’s because the specialist cannot “compete” with public orders and if his bid matched a customer’s bid or his offer matched a customer’s offering or ask price, he would be considered to be ” competing”.  Since the specialist is required to bid higher and ask lower than the best public orders on his book, the spread is narrowed. That is why it is said that the specialist acts in a dual capacity, as a dealer and as a broker. When buying and selling for his own account, he is acting as a dealer. The specialist acts as a broker when he executes limit orders left with him by commission brokers. When these limit orders are executed out of the specialist’s book (the doctor’s limit price is reached), the specialist uses a priority, parity, and precedence system, as to which order is executed first. These rules, like most others, are designed to give preference to the general public, not to members of the exchange, on a first come first served basis.

Walking Through a Trade

To see how the transactions are actually handled on the floor of an exchange, let us assume that an order to buy 100 shares of General Electric has been given by a doctor customer to the registered representative (stock broker), of a member firm in Atlanta. The order is a market order (an order to buy at the lowest possible price at the time the order reaches the floor of the exchange). This order is telephoned by direct wire, or computer, to the New York office of the member firm, which in turn telephones its order to its clerk on the floor of the exchange.

Each member firm has at least one member of the exchange representing them making trades on the floor. Each one of these members is assigned a number for identification. When the floor clerk receives the order to purchase the General Electric, he causes his member’s call number to appear on 3 large boards situated so that one is always in view. These boards are constantly watched brokers so that they will know when wanted at the phone, since there’s too much noise on the floor to use a paging system. Seeing his number on the board, the broker hurries to his telephone station or cell phone and receives the order to buy 100 shares of G.E. “at the market”. Acting as a commission broker, he immediately goes to the post where G.E. is traded and asks “how’s G.E”, of the specialist?

Part 4: Underwriting US Government Securities Issues


Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com


LEXICONS: http://www.springerpub.com/Search/marcinko

PHYSICIANS: www.MedicalBusinessAdvisors.com

PRACTICES: www.BusinessofMedicalPractice.com

HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731

CLINICS: http://www.crcpress.com/product/isbn/9781439879900

ADVISORS: www.CertifiedMedicalPlanner.org

BLOG: www.MedicalExecutivePost.com

Product DetailsProduct DetailsProduct Details

Product Details  Product Details

Product DetailsProduct Details

Product Details

What are OTC “PINK” Sheets?


By Dr. David E. Marcinko MBA CMP®

SPONSOR: http://www.CertifiedMedicalPlanner.org

CMP logo

Pink sheets are an over-the-counter (OTC) market that connects broker-dealers electronically. There is no trading floor and the quotations are also all done electronically. Since there is no central trading floor or stock exchange like the New York Stock Exchange (NYSE), the pink sheet-listed companies do not have the same criteria to fulfill as the companies listed on national stock exchanges. Many stocks listed on the pink sheets are low-priced penny stocks that trade for under $5 a share.

CITE: https://www.r2library.com/Resource/Title/0826102549

Pink sheets got their name because the original pink sheets listing the stocks were actually printed and distributed on pink pieces of paper. Trading over-the-counter (OTC) refers to the process of how securities listed on the pink sheets are traded through a broker-dealer network.

MORE: https://en.wikipedia.org/wiki/OTC_Markets_Group

Pink Sheets | Explanation | Examples with Advantages and Disadvantages


Thank You


About the Third and Fourth Stock Trading Markets

On OTC and Private Transactions


By Dr. David Edward Marcinko MBA


Join Our Mailing List

In most cases, a market maker of a stock in the NASDAQ system must report his trade in 90 seconds, but there is another circumstance in which the trade must be reported. This is called the third market, and is defined as transactions in exchange listed securities in the OTC market.

For example, even though IBM is listed on the NYSE, an OTC market marking firm can acquire the IBM stock and begin to make a market for it just like an OTC stock. All of these trades are considered the third market, and are reported to the Consolidated Quotation System (CQS) within 90 seconds of the trade.

Fourth Market

The fourth market is defined as private transactions made directly between large investors, institutions such as banks, mutual funds, and insurance companies without the use of a securities firm.

In other words, fourth market trading is usually one institution swapping securities in its portfolio with another large institution. From the stock broker’s viewpoint, there is one problem with the fourth market.


Since no broker/dealer is involved, no registered representative is involved and there is no commission to be earned. These trades are reported on a system called Instinet. This is advantageous to larger medial foundations or institutional investors.


And so, your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Understanding Over the Counter (OTC) Markets

A Decentralized, Dealer-2-Dealer Market

By Dr. David Edward Marcinko MBA



Securities are bought and sold every day by physicians and other investors who never meet each other. The market impersonally enables transfer (or sale) of securities from individuals who are selling to those who are buying. These trades may occur on an organized exchange such as the New York Stock Exchange, or, a decentralized, dealer to dealer market, which is called the over-the-counter (OTC).  Any transaction that does not take place on the floor of an exchange, takes place over-the-counter.

A Negotiated Market

The over-the-counter market is a national negotiated market, without a central market place, without a trading floor, composed of a network of thousands of brokers and dealers who make securities transactions for themselves and their customers. Professional buyers and sellers seek each other out electronically and by telephone and negotiate prices on the most favorable basis that can be achieved. Often, these negotiations are accomplished in a matter of seconds, there is no auction procedure comparable to that on the floor of an exchange.

The over-the-counter market is far the largest market in terms of numbers of securities issues traded. There are over 40,000 issues on which regular quotations are published OTC, while there are less than 5,000 stocks listed on all securities exchanges. There are frequently days when the reported volume of over-the-counter trades exceeds that of the NYSE. What really is the over-the-counter market? Is it where securities of inferior quality trade? Here is a list to remember of the types of securities traded exclusively over-the-counter:

  • All Government bonds .
  • All municipal bonds.
  • All mutual funds.
  • All new issues (primary distributions).
  • All variable annuities.
  • All tax shelter programs.
  • All equipment trust certificates.

Of course, the OTC market is also where all of the “unseasoned” issues are traded and most of them are quite speculative, but there certainly are many high quality issues available over-the- counter. Now, let’s take a look at how this over-the-counter market works.

The Market Maker

Whereas, the “main player” on the exchange is the specialist, his OTC counter part, in terms of importance, is the market maker. In the over-the-counter market, many securities firms act as dealers by creating and maintaining markets in selected securities. Dealers act as principals in a securities transaction and buy and sell securities for their own account and risk. Since they do not act as agents or brokers but instead as principals or dealers in securities transactions, they do not receive any commission for their services but instead buy at one price and sell at a higher price making a profit from “mark-up” on the security price. A dealer is said to have a position in a stock when he purchases and holds a security in his inventory. He, of course takes a risk that the market price of the security he holds may decline in value. This is how dealers make money; they buy wholesale and sell it retail, and the physician investor pays retail.

The OTC market bears little resemblance to the one of the mid-sixties. The major difference has been the electronic technological advances as embodied by the NASDAQ system. NASDAQ stands for National Association of Securities Dealers Automated Quotation system. Back in 1966, if you wanted to find out who was the market maker in the particular security you would go to a brightly colored stack of papers called the pink sheets, containing a listing, alphabetically, of over-the-counter stocks and underneath each issue is listed the name of one or more market makers, securities firms willing to trade that stock. After each firm name is the firm’s telephone number and a ‘bid and ask price”, that is, an approximate price representing what the dealer is asking for the stock and is bidding for the stock. 

Back 35-40 years ago, the only way of locating a market maker was by using the pink sheets, while O-T-C traded corporate bonds are quoted on yellow sheets. Under certain conditions, it could take a good deal of effort to try to get the best deal. Today, with the computer that sits on doctor’s desks, or a mobile device or smart-phone, you can push a few buttons and instantaneously see the best bid and the best offer that exists right now on over 5,000 of the most active over-the- counter stocks. Not only that, you can pull up the names of every market maker in that particular stock and the actual (firm) quotes on those securities right now.

Join Our Mailing List

Electronic Sources of Securities Information

Level 1 service, available on the stock broker’s desk top, provides price information only on the highest bid and the lowest offer (the inside market). No market makers are identified, and since this is an inside quote, it may not be used by the registered representative (stock broker) for giving firm quotes. 

Level 2 service provides a doctor subscriber with price information and quotation sizes of all participating registered market makers. When a trader, or medical investor, looks at his computer screen on Level 2, he sees who’s making a market, their firm bid – or – ask; and the size of the market. One can get firm calls from level 2 information.

Level 3 service takes it one step further; and allows registered market makers to enter bid and ask prices (quotes) and quotation sizes into the NASDAQ system and to report their trades. This is the level of service maintained by market makers.


And so, your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com and http://www.springerpub.com/Search/marcinko

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest ME-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Sponsors Welcomed: And, credible sponsors and like-minded advertisers are always welcomed.

Link: https://healthcarefinancials.wordpress.com/2007/11/11/advertise

Product Details  Product Details

%d bloggers like this: