Wechsler & Co., Inc. - Page 6

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          securities as demanded to provide increased liquidity, especially           
          where there is a temporary imbalance between buy and sell orders            
          from investors.                                                             
               Convertible bonds are hybrid instruments; typically they are           
          subordinated debentures with a fixed interest rate, a fixed                 
          maturity, and an ability to be converted into the issuer’s stock            
          at the holder’s option.  Bonds generally have been and remain               
          thinly traded.                                                              
               A hedge in convertible bonds typically consists of a long              
          position in the bonds and a short position in the underlying                
          common stock into which the bonds can be converted, which is                
          intended to be market neutral (i.e., to have the combined bond              
          and stock positions not generate major additional profits or                
          losses even with large moves in the overall markets).                       
               Before moving to Mt. Kisco in December 1992, petitioner had            
          as many as 53 employees in its New York City office.  Until                 
          December 1992, petitioner had its own “back office” operation in            
          which petitioner’s staff “cleared” securities (i.e., moved the              
          actual certificates in sales transactions), kept records and                
          accounts of trades, sent and received confirmations, and                    
          maintained records otherwise required by the SEC, securities                
          exchanges, and the National Association of Securities Dealers               
          (NASD).                                                                     







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