The Role and Function of a Stock Exchange презентация

Содержание

The Role and Function of a Stock Exchange By Enid E Bissember GASCI

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GASCI Seminar 2005

Слайд 2The Role and Function of a Stock Exchange
By
Enid E Bissember
GASCI

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GASCI Seminar 2005
Outline
Overview of financial markets
Institutional infrastructure
Role and functions

of stock exchange

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Overview of Financial 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 bond market
Corporate bonds &

equities

Asset backed securities & derivatives

Gov’t T Bills

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Financial Market
Money market
Capital market
Primary market
Secondary

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 exchange

Credit unions

Insurance cos

NIS

Supporting agents

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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 company
GuyAmerica

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Regulation & Supervision
A few questions
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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Role and Functions of a stock exchange
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 cont’d
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 cont’d
Provides

a physical location for buying and selling securities that have been listed for trading on that exchange

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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

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Role and Functions of a stock exchange cont’d
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 cont’d
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 cont’d
Required information include stock price, corporate conditions and

developments dividend, mergers and joint ventures, and management changes etc

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Doing business
People who buy or sell stock on an

exchange do so through a broker

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Doing 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

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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, 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
Increased demand for products and

services
Overall increase in profitability

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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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Desirable Characteristics of a stock market
Liquidity



Ability to sell

an asset quickly at a fairly known price Low transactions costs

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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

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Financing the exchange
Transaction fees paid by members for

each order executed
Fees paid by firms when their securities are 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 more demanding


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Regulatory improvement Transparency and Corporate Governance
Corporate
Governance
Protection to
minority
Shareholders

Disclosure

Enhance market

confidence

Strong industry regulator

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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

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