Eeb Presentation to gASCI

7/28/2019 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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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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Provides a physical location

for buying and selling

securities that have beenlisted for trading on that

exchange


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Establishes rules for fair

trading practices andregulates the trading

activities of its members

according to those rules


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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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Eeb Presentation to gASCI

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