A watch list is a collection of information about various securities that are monitored by brokers, stock exchanges, or regulatory agencies for various reasons, including potential takeovers, new securities issuances, and irregular activity.
The watch list is a collection of information about various values. Often a brokerage, stock exchange, or some type of government regulatory agency maintains this list of securities. Securities are placed on the watch list based on several different factors that make the broker or reason for the exchange believe that the issuing company or entity should be monitored for some reason.
One of the reasons a company and its stock may be placed on a watch list is due to the existence of circumstances that make the corporation ripe for an acquisition. Brokers who have clients who currently own shares in the corporation will want to monitor for any signs that corporate raiders are trying to buy up available shares of the stock, or employ other means to gain control of the company, such as a buyout. Placing the company on the brokerage’s watch list helps ensure that the broker can alert investors to relevant events as they occur, and possibly protect their clients from investment loss.
Along with takeover bids, companies that are considering issuing new securities or shares may also find their way onto a watch list or two. Regulatory agencies will closely monitor the activity to ensure the issue is dealt with in accordance with applicable laws and regulations. Brokers will want to know the status so they can inform their clients of the status of the new issue and perhaps receive orders to execute a buy once the stock hits the market. A stock exchange may also be interested in the details of the launch and the impact that the new securities could have on market conditions.
Irregular activity can also lead to a company’s stock being placed on a watch list. When the stock appears to be performing in a way that is not in line with current market trends, brokers, exchanges, and regulatory agencies will want to monitor the activity closely to understand what is really taking place. Often the uneven performance of a given stock heralds some changes in the market that may soon become widespread. When this is the case, brokers and exchanges that have observed the impact on a company’s stock will be in a better position to anticipate the effect that similar circumstances will have on other stocks and securities.
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