Explains stock exchange in simpler terms

1. STOCK EXCHANGE
EASY WAY TO EARN MONEY
EASY WAY TO LOOSE MONEY
SARAVANAN S

2. WHAT IS STOCK EXCHANGE?
Definition of Stock Exchange:
The securities regulation act of 1956 defined stock exchange as
“an association , organization , or a individual which is established
for the purpose of assisting , regulating , and controlling business in
buying ,selling and dealing in securities.”
Meaning:
The Stock Exchange is nothing but more than a
giant, globally networked, organized market
place where everyday huge sums of money are
moved back and forth, in total 60 Trillion Euro
are traded a year. However this all is done not by
products or cash but Securities. Securities are
rights to assets in form of share.

3. HISTORY OF STOCK EXCHANGE
The stock exchange was established by “East
India company” in 18th century . In India it
was established in 1850 with 22 stock brokers
opposite to town hall Bombay .This stock
exchange is known as oldest stock exchange
of Asia.

4. FEATURES OF STOCK EXCHANGE
 It is an organized market
 It is a securities market
 It is an important constituent of capital market i.e., market for long-term
finance
 It is a voluntary association of persons desirous of dealing in securities
 Stock exchange is a voluntary association, its membership is not open
to everybody
 In a stock exchange, only the members can deal
in i.e., buy & sell securities
 The members of a stock exchange can buy and
sell securities either as brokers for & on behalf
of their clients
 The dealings in a stock exchange are under
certain accepted code of conduct i.e., rules and
regulations

5. IMPORTANT FUNCTION OF STOCK EXCHANGE
 Provide central and convenient meeting places for sellers and
buyer of securities
 Increase the marketability and liquidity of securities
 Contribute to stability of prices of securities
 Equalization of price of securities
 Smoothen price movement
 Help the investors to know the worth of their holdings
 Promote the habit of saving and investment
 Help capital formation
 Help companies and government to raise funds
from the investors
 Provide forecasting service

6. BROKER AND JOBBER
 BROKER:
He is one acts as a intermediary on behalf of others. A
broker in a stock exchange ,is a commission agent who transacts
business in securities on behalf of non members.
 JOBBER:
He is not allowed to deal with the public directly .He deals
with brokers who are engaged with the investors . Thus, the
securities is bought by the jobber from members and sells to
members who are operating on the stock exchange as broker.

7. DIFFERENCES BETWEEN A JOBBER AND A BROKER
JOBBER
 A jobber is an independent
dealer in securities,
purchasing or selling
securities on his own account
 A jobber deals only with the
brokers ,does not deal with
the general public
 A jobber earns profit from his
operations i.e., buying and
selling activities
 Each jobber specializes in
certain group of securities
BROKER
 A broker deals with the
jobber on behalf of his
clients. in other words, a
broker is a middleman
between a jobber and clients
 A broker is merely an agent,
buying or selling securities on
behalf of his clients
 A broker gets only
commission for his dealings
 The broker deals in all types
of securities

8. SPECULATION AND SPECULATOR
 SPECULATION : It is the transaction of members to buy or sell
securities on stock exchange with a view to make profits to
anticipated raise or fall in price of securities.
 SPECULATOR : The dealer in stock exchange who indulge in
speculation are called speculator . They do not take delivery of
securities purchased or sold by them , but only pay or rescue the
difference between the purchase price and sale price . The
different types of speculators are
BULL
BEAR
STAG
LAME DUCK

9. BULL
He is speculator who expects the future raise in price of
securities he buys the securities to sell them at future date at the
higher price.
He is called as bull because his activities resembles as a bull ,
as the bull tends to throw its victims up in the air through its horns.
In simple the bull speculator tries to raise the price of securities by
placing a big purchase orders.

10. BEAR
He is speculator who expects future fall in prices , he does
an agreement to sell securities at future date at the present
market rate .
He is called as bear because
his altitude resembles with bear , as
the bear tends to stamp its victims
down to earth through its paws . In
simple the bear speculator forces of
prices of securities to fall through
his activities.

11. STAG {DEER}
He operates in new issue of market . He is just like a
bull speculator . He applies large number of shares in the issue
market only by paying , application money , allotment money. He
is not a genuine investor because , he sells the allotted securities at
the premium and makes profit. In simple he is cautious in his
dealings . He creates an artificial rise in prices of new shares and
makes profits.

12. LAME DUCK
He is speculator when the bear operator finds it difficult to deliver
the securities to the consumer on a particular day as agreed upon , he
struggles as a lame duck in fulfilling his commitment . This happens
when the prices do not fall as expected by the bear and the other party is
not willing to postpone the settlement to the next period.

13. Largest stock exchanges
IN THE WORLD
 LONDON STOCK EXCHANGE
 NEW YORK STOCK EXCHANGE
 SHANHAI STOCK EXCHANGE
 AUSTRALIA STOCK
EXCHANGE
 TOKYO STOCK EXCHANGE
 HONG KONG STOCK
EXCHANGE
 TORONTO STOCK EXCHANGE
 DEUTSCHE BORSE
 BM&F BOVESPA
 NASDAQ OMX STOCK
EXCHANGE
IN INDIA
 NATIONAL STOCK EXCHANGE
 BOMBAY STOCK EXCHANGE
 CALCUTTA STOCK EXCHANGE
 COCHIN STOCK EXCHANGE
 MULTI COMMODITY
EXCHANGE
 DERIVATIVES EXCHANGE
 OTC EXCHANGE
 PUNE STOCK EXCHANGE
 INTERCONNECTS EXCHANGE

14. LONDON STOCK EXCHANGE
It was the first stock exchange established by east India
company in 18th century in London. The top gainer of LONDON
STOCK EXCHANGE is “Blue chip shares”.

15. BOMBAY STOCK EXCHANGE
It is oldest and first stock exchange of India established in the year
1875. First it was started under banyan tree opposite to town hall of
Bombay over 22 stock brokers. The top gainer in BSE is 100 companies
in that GMR infra is first

16. OVER-THE-COUNTER EXCHANGE OF INDIA
The OTCEI is a national, ringless and computerized stock exchange. It
was established in october,1990.it started its operation in september,1992.
Features of OTCEI
1. It is a nation-wide stock exchange. Its operational all over India.
2. It is a ringless stock exchange. The trading ring(i.e., trading Place) commonly
found in a traditional stock exchange is not found in it.
3. It is a computerized stock exchange
Advantages of OTCEI
1. It helps the investors to have easy and direct access to the
stock exchange
2. It helps investors to get fair prices for their securities
3. It provide safety to the investors
4. To provide computerized trading system
5. To provide investors a convenient, efficient and
transparent mode of investment

17. SECURITIES AND EXCHANGE BOARD OF INDIA
Function Of SEBI
 Regulating the business in stock exchange and any other
securities markets.
 Promoting and regulating self-regulatory organization.
 Registering and regulating the work of collective investment
scheme, including mutual funds.
 Prohibiting fraudulent and unfair trade practices relating to
securities market.
 Promoting education, and training of intermediaries of securities
market

18. Power of SEBI
Power to approve the bye-laws of stock exchange
Power to inspect the books of accounts
Power to grant license to any person for the purpose of dealing in
certain areas.
Power to delegate powers exercisable by it.
Power to try directly the foliation of certain provision of the company
Act

19. HOW TO DEAL AND INVEST IN STOCK EXCHANGE
In order to deal with a securities one as to have an account called
Demat a/c or Trading a/c. It is just like a bank account. Same
procedure of opening the bank account is followed to open the a/c.
But all the banks does not give this facility of opening the account ,
only few banks provide this facility. After demat a/c or Trading a/s is
opened then the securities is bought and sold. The banks which gives
facility of demat a/c in India is
 ICICI Bank
 Citi Bank
 Bank of Baroda

20. General Market Advice:
1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share are the key.
8. Look for the dividend paying record.

21. General Market Advice:
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding
asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is
to grow.
13. Buy when everyone is selling and sell
when everyone buys.
14. Invest a fixed amount each month.

22. HAPPY INVESTMENT WITH LOTS OF
PROFITS