The Role andThe Role and
Function of a StockFunction of a Stock
ExchangeExchange
www.StudsPlanet.com
OutlineOutline
• Overview of financialOverview of financial
marketsmarkets
• Institutional infrastructureInstitutional inf...
OverviewOverview ofof FinancialFinancial
MarketsMarkets
• Two types of financial markets
• Money markets
• Capital markets...
The Hierarchy of Markets
Money market
Government bond
market
Corporate bonds &
equities
Asset backed
securities &
derivati...
Financial Market
Money market
Capital
market
Primary
market Second
ary
market
Commercial
banks
Firms raise
capital
Investo...
Market infrastructureMarket infrastructure
• Stock exchangeStock exchange
• Clearing and settlementClearing and settlement...
InstrumentsInstruments
• EquitiesEquities
• BondsBonds
Most popular investing
instruments
Stocks and shares
Bonus issues
R...
IntermediariesIntermediaries
• Brokerage housesBrokerage houses
• Stock brokersStock brokers
• AdvisorsAdvisors
Hand in Ha...
Regulation & SupervisionRegulation & Supervision
AA few questionsfew questions
• Ever wondered how the capitalEver wondere...
The Regulator
• Foremost authority presiding over the
capital markets
• With mission to promote and maintain
Fair, efficie...
Role and Functions ofRole and Functions of
a stock exchangea stock exchange
Established for theEstablished for the
purpose...
Role and Functions ofRole and Functions of
a stock exchange cont’da stock exchange cont’d
• Provides a market for the trad...
Role and Functions of
a stock exchange cont’d
Provides a physical location
for buying and selling
securities that have bee...
Role and Functions of
a stock exchange cont’d
Establishes rules for fair
trading practices and
regulates the trading
activ...
Role and Functions ofRole and Functions of
a stock exchangea stock exchange cont’dcont’d
The exchange itself does
not buy ...
FairFair
The exchange assuresThe exchange assures
that no investor will havethat no investor will have
an undue advantage ...
Efficient marketEfficient market
This means that ordersThis means that orders
are executed andare executed and
transaction...
TransparencyTransparency
Investor make informedInvestor make informed
and intelligent decisionand intelligent decision
abo...
Transparency cont’dTransparency cont’d
Listed companies mustListed companies must
disclose information indisclose informat...
Transparency cont’dTransparency cont’d
Required information includeRequired information include
stock price, corporatestoc...
Doing businessDoing business
People who buy or sell
stock on an exchange do
so through a broker
www.StudsPlanet.com
Doing business cont’dDoing business cont’d
The broker takes your order
to the floor of the exchange
looks for a broker
rep...
Some type of ordersSome type of orders
• Limit orderLimit order
• Market orderMarket order
• Day orderDay order
• OpenOpen...
PricePrice
At any point in time, the
price of previously
issued stock is
determined by the ebb
and flow of supply and
dema...
Listing requirementsListing requirements
There are specificThere are specific
requirements for allowing arequirements for ...
Benefits of listing
• Visibility
• Market support
• Investors confidence
• Increased demand for products and
services
• Ov...
Once tradedOnce traded
• Aura of reliabilityAura of reliability
• Accuracy in reportingAccuracy in reporting
financial dat...
Delisting
Stock exchange can delist companies
for a number of reasons including :-
• Merger with another company
• Solvenc...
Desirable Characteristics
of a stock market
Liquidity
Ability to sell an asset
quickly at a fairly
known price Low
transac...
Desirable Characteristics
of a stock market cont’d
• Availability of information
Market efficiency
• Prices react quickly ...
Financing the exchangeFinancing the exchange
• Transaction fees paid by members forTransaction fees paid by members for
ea...
Major challenges for theMajor challenges for the
ExchangesExchanges
• Cross border trading
• Issuers and investors are
exp...
•Regulatory improvementRegulatory improvement
Transparency and CorporateTransparency and Corporate
GovernanceGovernance
Co...
Owners
Board of
Directors
Managers
Ownership of the
company is by the
public in the form of
shares one share,
one vote
Boa...
www.StudsPlanet.com
Kinds of BrokersKinds of Brokers
 Commission BrokerCommission Broker
 JobberJobber
 Floor brokerFloor broker
 Taraniwa...
Upcoming SlideShare
Loading in...5
×

Stock exchange

173

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
173
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
18
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Stock exchange

  1. 1. The Role andThe Role and Function of a StockFunction of a Stock ExchangeExchange www.StudsPlanet.com
  2. 2. OutlineOutline • Overview of financialOverview of financial marketsmarkets • Institutional infrastructureInstitutional infrastructure • Role and functions of stockRole and functions of stock exchangeexchange www.StudsPlanet.com
  3. 3. OverviewOverview ofof FinancialFinancial MarketsMarkets • Two types of financial markets • Money markets • Capital markets • Primary market • Secondary market www.StudsPlanet.com
  4. 4. The Hierarchy of Markets Money market Government bond market Corporate bonds & equities Asset backed securities & derivatives Gov’t T Bills www.StudsPlanet.com
  5. 5. Financial Market Money market Capital market Primary market Second ary market Commercial banks Firms raise capital Investors trade securities issued in primary market debt equity Public Private placement Short term instruments Primary Mkt Inst Stock excha nge Credit unions Insurance cos NIS Supporting agents www.StudsPlanet.com
  6. 6. Market infrastructureMarket infrastructure • Stock exchangeStock exchange • Clearing and settlementClearing and settlement • Education and trainingEducation and training • Investors’ protectionInvestors’ protection • Rating agencyRating agency www.StudsPlanet.com
  7. 7. InstrumentsInstruments • EquitiesEquities • BondsBonds Most popular investing instruments Stocks and shares Bonus issues Rights issues Corporate Government www.StudsPlanet.com
  8. 8. IntermediariesIntermediaries • Brokerage housesBrokerage houses • Stock brokersStock brokers • AdvisorsAdvisors Hand in Hand Beharry stockbrokers Trust company GuyAmerica www.StudsPlanet.com
  9. 9. Regulation & SupervisionRegulation & Supervision AA few questionsfew questions • Ever wondered how the capitalEver wondered how the capital markets workmarkets work • Who sets the rulesWho sets the rules • What does the stock exchange doWhat does the stock exchange do • What is the role of the stock brokerWhat is the role of the stock broker • How to become a registered brokerHow to become a registered broker www.StudsPlanet.com
  10. 10. The Regulator • Foremost authority presiding over the capital markets • With mission to promote and maintain Fair, efficient , secure and transparent market and to facilitate the orderly development of the stock exchange www.StudsPlanet.com
  11. 11. Role and Functions ofRole and Functions of a stock exchangea stock exchange Established for theEstablished for the purpose of assisting,purpose of assisting, regulating and controllingregulating and controlling business of buying,business of buying, selling and dealing inselling and dealing in securitiessecurities www.StudsPlanet.com
  12. 12. Role and Functions ofRole and Functions of a stock exchange cont’da stock exchange cont’d • Provides a market for the trading ofProvides a market for the trading of securities to individuals andsecurities to individuals and organizations seeking to investorganizations seeking to invest their saving or excess fundstheir saving or excess funds through the purchase of securitiesthrough the purchase of securities www.StudsPlanet.com
  13. 13. Role and Functions of a stock exchange cont’d Provides a physical location for buying and selling securities that have been listed for trading on that exchange www.StudsPlanet.com
  14. 14. Role and Functions of a stock exchange cont’d Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules www.StudsPlanet.com
  15. 15. Role and Functions ofRole and Functions of a stock exchangea stock exchange cont’dcont’d The exchange itself does not buy or sell the securities, nor does it set prices for them www.StudsPlanet.com
  16. 16. FairFair The exchange assuresThe exchange assures that no investor will havethat no investor will have an undue advantage overan undue advantage over other market participantsother market participants www.StudsPlanet.com
  17. 17. Efficient marketEfficient market This means that ordersThis means that orders are executed andare executed and transactions are settledtransactions are settled in the fastest possiblein the fastest possible wayway www.StudsPlanet.com
  18. 18. TransparencyTransparency Investor make informedInvestor make informed and intelligent decisionand intelligent decision about the particular stockabout the particular stock based on informationbased on information www.StudsPlanet.com
  19. 19. Transparency cont’dTransparency cont’d Listed companies mustListed companies must disclose information indisclose information in timely, complete andtimely, complete and accurate manner to theaccurate manner to the Exchange and the publicExchange and the public on a regular basison a regular basis www.StudsPlanet.com
  20. 20. Transparency cont’dTransparency cont’d Required information includeRequired information include stock price, corporatestock price, corporate conditions and developmentsconditions and developments dividend, mergers and jointdividend, mergers and joint ventures, and managementventures, and management changes etcchanges etc www.StudsPlanet.com
  21. 21. Doing businessDoing business People who buy or sell stock on an exchange do so through a broker www.StudsPlanet.com
  22. 22. Doing business cont’dDoing business cont’d The broker takes your order to the floor of the exchange looks for a broker representing someone wanting to buy/sell • If a mutually agreeable price is found the trade is made www.StudsPlanet.com
  23. 23. Some type of ordersSome type of orders • Limit orderLimit order • Market orderMarket order • Day orderDay order • OpenOpen • All or noneAll or none • Any partAny part • Good throughGood through www.StudsPlanet.com
  24. 24. PricePrice At any point in time, the price of previously issued stock is determined by the ebb and flow of supply and demand www.StudsPlanet.com
  25. 25. Listing requirementsListing requirements There are specificThere are specific requirements for allowing arequirements for allowing a public company to list itspublic company to list its securities on the Stocksecurities on the Stock Exchange these are set outExchange these are set out in the legislationin the legislation www.StudsPlanet.com
  26. 26. Benefits of listing • Visibility • Market support • Investors confidence • Increased demand for products and services • Overall increase in profitability www.StudsPlanet.com
  27. 27. Once tradedOnce traded • Aura of reliabilityAura of reliability • Accuracy in reportingAccuracy in reporting financial datafinancial data • ReputationReputation • StrengthStrength www.StudsPlanet.com
  28. 28. Delisting Stock exchange can delist companies for a number of reasons including :- • Merger with another company • Solvency problems • Name change company asked to be removed • Failure to comply with exchange rules www.StudsPlanet.com
  29. 29. Desirable Characteristics of a stock market Liquidity Ability to sell an asset quickly at a fairly known price Low transactions costs www.StudsPlanet.com
  30. 30. Desirable Characteristics of a stock market cont’d • Availability of information Market efficiency • Prices react quickly to new information • Small price fluctuations • Narrow price spread www.StudsPlanet.com
  31. 31. Financing the exchangeFinancing the exchange • Transaction fees paid by members forTransaction fees paid by members for each order executedeach order executed • Fees paid by firms when theirFees paid by firms when their securities are originally listedsecurities are originally listed • Annual fees by firmsAnnual fees by firms • Entrance fees from new membersEntrance fees from new members • sale of historic trading and marketsale of historic trading and market informationinformation www.StudsPlanet.com
  32. 32. Major challenges for theMajor challenges for the ExchangesExchanges • Cross border trading • Issuers and investors are expanding their horizons beyond their home markets • Investors becoming much more demanding www.StudsPlanet.com
  33. 33. •Regulatory improvementRegulatory improvement Transparency and CorporateTransparency and Corporate GovernanceGovernance Corporate Governance Protection to minority Shareholders Disclosure Enhance market confidence Strong industry regulator www.StudsPlanet.com
  34. 34. Owners Board of Directors Managers Ownership of the company is by the public in the form of shares one share, one vote Board is elected by shareholders to represent the best interests of the owners Board hires and fires the management of the company www.StudsPlanet.com
  35. 35. www.StudsPlanet.com
  36. 36. Kinds of BrokersKinds of Brokers  Commission BrokerCommission Broker  JobberJobber  Floor brokerFloor broker  TaraniwallaaTaraniwallaa  Odd lot dealerOdd lot dealer  BudliwallaBudliwalla  ArbitrageurArbitrageur  Security dealersSecurity dealerswww.StudsPlanet.com
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×