Eeb Presentation to gASCI
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Transcript of Eeb Presentation to gASCI
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The Role andFunction of a Stock
ExchangeBy
Enid E Bissember
GASCI
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Outline
Overview of financial
markets Institutional infrastructure
Role and functions of stockexchange
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Overview ofFinancial
Markets
Two types of financial markets
Money markets Capital markets
Primary market
Secondary market
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The Hierarchy of Markets
Money market
Government bondmarket
Corporate bonds &equities
Asset backed
securities &
derivatives
Govt T Bills
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Financial Market
Money marketCa
pital
market
Primary
market Second
ary
market
Commercial
banks
Firms raise
capitalInvestors
trade
securitiesissued in
primary
market
debt
equity
PublicPrivate
placement
Short term
instruments
Primary
Mkt Inst
Stockexch
ange
Credit
unions
Insurance
cosNIS
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Market infrastructure
Stock exchange
Clearing and settlement Education and training
Investors protection Rating agency
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Instruments
Equities
Bonds
Most popular investing
instruments
Stocks and shares
Bonus issues
Rights issues
Corporate
Government
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Intermediaries
Brokerage houses
Stock brokers
Advisors
Hand in Hand
Beharry
stockbrokers
Trust companyGuyAmerica
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Regulation & Supervision
Afew questions
Ever wondered how the capitalmarkets work
Who sets the rules
What does the stock exchange do
What is the role of the stock broker How to become a registered broker
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The Regulator
Foremost authority presiding over thecapital markets
With mission to promote and maintainFair, efficient , secure and transparentmarket and to facilitate the orderly
development of the stock exchange
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Role and Functions of
a stock exchange
Established for thepurpose of assisting,
regulating and controllingbusiness of buying,
selling and dealing insecurities
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Role and Functions of
a stock exchange contd
Provides a market for the trading of
securities to individuals and
organizations seeking to invest
their saving or excess funds
through the purchase of securities
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Role and Functions of
a stock exchange contd
Provides a physical location
for buying and selling
securities that have beenlisted for trading on that
exchange
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Role and Functions of
a stock exchange contd
Establishes rules for fair
trading practices andregulates the trading
activities of its members
according to those rules
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Role and Functions of
a stock exchange contd
The exchange itself
does not buy or sell thesecurities, nor does it
set prices for them
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Fair
The exchange assures
that no investor will havean undue advantage over
other market participants
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Efficient marketThis means that ordersare executed andtransactions are settledin the fastest possible
way
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Transparency
Investor make informed
and intelligent decisionabout the particular stock
based on information
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Transparency contd
Listed companies must
disclose information intimely, complete andaccurate manner to the
Exchange and the publicon a regular basis
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Transparency contd
Required information include
stock price, corporate
conditions and developments
dividend, mergers and joint
ventures, and managementchanges etc
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Doing business
People who buy or sell
stock on an exchange doso through a broker
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Doing business contd
The broker takes your order
to the floor of the exchange
looks for a brokerrepresenting someone
wanting to buy/sell
If a mutually agreeable price
is found the trade is made
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Some type of orders Limit order
Market order
Day order Open
All or none
Any part Good through
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Price
At any point in time, theprice of previously
issued stock isdetermined by the ebb
and flow of supply anddemand
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Listing requirements
There are specificrequirements for allowing a
public company to list itssecurities on the Stock
Exchange these are set out
in the legislation
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Benefits of listing
Visibility
Market support
Investors confidence
Increased demand for products and
services Overall increase in profitability
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Once traded
Aura of reliability
Accuracy in reportingfinancial data
Reputation Strength
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Delisting
Stock exchange can delist companiesfor a number of reasons including :-
Merger with another company Solvency problems
Name change company asked to beremoved
Failure to comply with exchange rules
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Desirable Characteristics
of a stock market
Liquidity
Ability to sell an assetquickly at a fairly
known price Low
transactions costs
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Desirable Characteristics
of a stock market contd
Availability of information
Market efficiency
Prices react quickly to new
information
Small price fluctuations Narrow price spread
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Financing the exchange
Transaction fees paid by members foreach order executed
Fees paid by firms when their securitiesare originally listed
Annual fees by firms
Entrance fees from new members sale of historic trading and market
information
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Major challenges for the
Exchanges
Cross border trading
Issuers and investors are
expanding their horizons beyond
their home markets
Investors becoming much moredemanding
Regulatory improvement
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Regulatory improvementTransparency and Corporate
Governance
Corporate
Governance
Protection to
minority
Shareholders
Disclosure
Enhancemarket
confidence
Strong
industry
regulator
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Owners
Managers
Ownership of the
company is by the
public in the form ofshares one share,
one vote
Board is elected byshareholders to
represent the best
interests of the owners
Board hires and fires the
management of the
company
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