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Outline
Overview of financial markets Institutional infrastructure Role and functions of stock exchange
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Two types of financial markets Money markets Capital markets Primary market Secondary market
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Govt T Bills
Money market
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Financial Market Primary Mkt Inst Primary market Capital market Insurance cos NIS Second ary market Investors trade securities issued in primary market
Money market Commercial Credit banks unions Short term instruments debt
equity
Public Private placement www.StudsPlanet.com
Market infrastructure
Stock exchange Clearing and settlement Education and training Investors protection Rating agency
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Instruments
Equities
Most popular investing instruments
Stocks and shares Bonus issues Rights issues
Bonds
Corporate Government
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Intermediaries
Brokerage houses
Hand in Hand Beharry stockbrokers Trust company GuyAmerica
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Ever wondered how the capital markets 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 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
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Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities
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Role and Functions of a stock exchange contd Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules
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The exchange itself does not buy or sell the securities, nor does it set prices for them
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Fair
The exchange assures that no investor will have an undue advantage over other market participants
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Efficient market This means that orders are executed and transactions are settled in the fastest possible way
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Transparency
Investor make informed and intelligent decision about the particular stock based on information
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Transparency contd
Listed companies must disclose information in timely, complete and accurate manner to the Exchange and the public on a regular basis
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Transparency contd
Required information include stock price, corporate conditions and developments dividend, mergers and joint ventures, and management changes etc
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Doing business
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Limit order Market order Day order Open All or none Any part Good through
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Price
At any point in time, the price of previously issued stock is determined by the ebb and flow of supply and demand
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Listing requirements There are specific requirements for allowing a public company to list its securities on the Stock Exchange these are set out in the legislation
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Benefits of listing
Visibility Market support Investors confidence
Once traded
Aura of reliability Accuracy in reporting financial data Reputation Strength
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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
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Liquidity
Ability to sell an asset quickly at a fairly known price Low transactions costs
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Owners
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
Managers
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Kinds of Brokers
Commission Broker Jobber Floor broker Taraniwallaa Odd lot dealer Budliwalla Arbitrageur www.StudsPlanet.com Security dealers