2. PRESENTATION
Topics:
Definition of stocks market exchange
Types of stocks in stock market exchange
How do stocks trade
why do companies issue stock?
What sets the prices on a stock exchange?
Function of stock market
characteristics of stock market
Stock market and economy
Requirements by stock exchange
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3. Overview of Stock Market
Stock(Equity) market becomes under the capital
market, capital market provides financial assets
which have a maturity for long time more than one
year
Stock market provides financing through ownership
of securities. The shareholder will take dividend from
its capital invested
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4. Definition of stock Exchange
A stock exchange is a form of exchange which
provides services for stock brokers and traders to
trade stocks, bonds, and other securities.
"Stock exchanges are privately organized markets
which are used to facilitate trading in securities."
"An association, organization or body of individuals,,
established for the purpose of assisting, regulating
and controlling business in buying, selling and
dealing in securities."
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5. Conti……
Stock exchanges provide facilities for issue and
redemption of securities and other financial
instruments, and capital events including the
payment of income and dividends.
Securities traded on a stock exchange include stock
issued by companies, unit trusts, derivatives, Etc.
A stock is a share in the ownership of a company.
Stock represents a claim on the company’s assets and
earnings.
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6. Types of stocks
a) There are two types of different stocks:
1) Common stock.
2)Preferred stocks.
a) Common stock is the type most people purchase. It
represents ownership of a company and a claim on
part of the profits. Investors get one vote per stock.
b) Preferred stocks don’t have the same voting rights,
but investors are usually guaranteed a fixed
dividend. If the company is liquidated, they are
paid off first.
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7. How do stock market trades
Most stocks are traded on exchanges such as the New
York Stock Exchange or NASDAQ. The NYSE is a
physical location whereas NASDAQ is a virtual
market(E_ market).
Exchanges are simply places where buyers and sellers
meet and decide on a price for a stock. Think of it as
a flea market where buyers and sellers come
together and agree on a price for a product.
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8. Why do companies issue stocks
At some point every company needs to raise
money. Companies can either borrow it from
somebody or raise it by selling part of the
company.
By issuing stock, the company does not have to
pay back the money or make interest payments.
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9. What sets price on a stock market
The price is set by the buyer willing to pay the highest
price
The market price will be set by the buyer who can take
best advantage of the asset
Superior information about an asset can increase its
value by reducing its risk
Market forces changes stock prices every day. Share
prices change because of supply and demand. If more
people want to buy a stock (demand) than sell it
(supply) the price goes up. If more people want to sell
than buy, the price goes down.
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10. Function of stock market
1. Facilitates evaluation of securities
2. Continuous and ready market for securities
3. Encourages capital formation
4. Provides safety and security in dealings
5. Regulates company management
6. Facilitates public borrowing
7. Provides clearing house facility
8. Facilitates healthy speculation
9. Facilitates Bank Lending
10. Serves as Economic Barometer
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11. Features of stock market
_Market for securities
_Deals in second hand securities
_Regulates trade in securities
_Allows dealings only in listed securities
_Transactions effected only through members
_Recognition from Central Government
_Specific location
_Financial Barometers
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12. Stock market and economy
Valuable market is when the economy is
doing well, the GDP is growing and stock
prices are rising. The Valuable market
charges ahead.
Market barrier is when the economy is bad,
recession is looming and stock prices are
falling. Market barrier hibernates and moves
slowly.
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13. Requirements by stock exchange
Companies must meet an exchange's requirements to have
their stocks and shares listed and traded there, but
requirements vary by stock exchange:
New York Stock Exchange: To be listed on the New York
Stock Exchange (NYSE) a company must have issued at
least a million shares of stock worth $100 million and must
have earned more than $10 million over the last three
years.
NASDAQ(National Association of Securities Dealers
Automated Quotation System) Stock Exchange: To be listed
on the NASDAQ a company must have issued at least 1.25
million shares of stock worth at least $70 million and must
have earned more than $11 million over the last three years.
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14. Cont…..
London Stock Exchange: The main market of the
London Stock Exchange has requirements for a
minimum market capitalization (£700,000), three
years of audited financial statements, minimum
public float (25 per cent) and sufficient working
capital for at least 12 months from the date of listing.
Bombay Stock Exchange: Bombay Stock
Exchange (BSE) has requirements for a minimum
market capitalization of 250 million
(US$3.8 million) and minimum public float
equivalent to 100 million (US$1.5 million).
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19. The end
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