A stock exchange establishes a marketplace for trading securities and provides infrastructure to facilitate transactions between buyers and sellers. It establishes rules for fair trading, regulates members, and ensures transparency through disclosure requirements for listed companies. A stock exchange provides liquidity and price discovery as the constant buying and selling of shares determines their price through the forces of supply and demand. It benefits both investors and companies through increased market access, confidence, and profitability.

1. The Role andThe Role and
Function of a StockFunction of a Stock
ExchangeExchange
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2. OutlineOutline
• Overview of financialOverview of financial
marketsmarkets
• Institutional infrastructureInstitutional infrastructure
• Role and functions of stockRole and functions of stock
exchangeexchange
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3. OverviewOverview ofof FinancialFinancial
MarketsMarkets
• Two types of financial markets
• Money markets
• Capital markets
• Primary market
• Secondary market
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4. The Hierarchy of Markets
Money market
Government bond
market
Corporate bonds &
equities
Asset backed
securities &
derivatives
Gov’t T Bills
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5. Financial Market
Money market
Capital
market
Primary
market Second
ary
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
excha
nge
Credit
unions
Insurance
cos
NIS
Supporting
agents
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6. Market infrastructureMarket infrastructure
• Stock exchangeStock exchange
• Clearing and settlementClearing and settlement
• Education and trainingEducation and training
• Investors’ protectionInvestors’ protection
• Rating agencyRating agency
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7. InstrumentsInstruments
• EquitiesEquities
• BondsBonds
Most popular investing
instruments
Stocks and shares
Bonus issues
Rights issues
Corporate
Government
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8. IntermediariesIntermediaries
• Brokerage housesBrokerage houses
• Stock brokersStock brokers
• AdvisorsAdvisors
Hand in Hand
Beharry
stockbrokers
Trust company
GuyAmerica
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9. Regulation & SupervisionRegulation & Supervision
AA few questionsfew questions
• Ever wondered how the capitalEver wondered how the capital
markets workmarkets work
• Who sets the rulesWho sets the rules
• What does the stock exchange doWhat does the stock exchange do
• What is the role of the stock brokerWhat is the role of the stock broker
• How to become a registered brokerHow to become a registered broker
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10. 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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11. Role and Functions ofRole and Functions of
a stock exchangea stock exchange
Established for theEstablished for the
purpose of assisting,purpose of assisting,
regulating and controllingregulating and controlling
business of buying,business of buying,
selling and dealing inselling and dealing in
securitiessecurities
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12. Role and Functions ofRole and Functions of
a stock exchange cont’da stock exchange cont’d
• Provides a market for the trading ofProvides a market for the trading of
securities to individuals andsecurities to individuals and
organizations seeking to investorganizations seeking to invest
their saving or excess fundstheir saving or excess funds
through the purchase of securitiesthrough the purchase of securities
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13. 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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14. 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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15. Role and Functions ofRole and Functions of
a stock exchangea stock exchange cont’dcont’d
The exchange itself does
not buy or sell the
securities, nor does it
set prices for them
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16. FairFair
The exchange assuresThe exchange assures
that no investor will havethat no investor will have
an undue advantage overan undue advantage over
other market participantsother market participants
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17. Efficient marketEfficient market
This means that ordersThis means that orders
are executed andare executed and
transactions are settledtransactions are settled
in the fastest possiblein the fastest possible
wayway
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18. TransparencyTransparency
Investor make informedInvestor make informed
and intelligent decisionand intelligent decision
about the particular stockabout the particular stock
based on informationbased on information
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19. Transparency cont’dTransparency cont’d
Listed companies mustListed companies must
disclose information indisclose information in
timely, complete andtimely, complete and
accurate manner to theaccurate manner to the
Exchange and the publicExchange and the public
on a regular basison a regular basis
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20. Transparency cont’dTransparency cont’d
Required information includeRequired information include
stock price, corporatestock price, corporate
conditions and developmentsconditions and developments
dividend, mergers and jointdividend, mergers and joint
ventures, and managementventures, and management
changes etcchanges etc
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21. Doing businessDoing business
People who buy or sell
stock on an exchange do
so through a broker
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22. Doing business cont’dDoing 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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23. Some type of ordersSome type of orders
• Limit orderLimit order
• Market orderMarket order
• Day orderDay order
• OpenOpen
• All or noneAll or none
• Any partAny part
• Good throughGood through
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24. PricePrice
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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25. Listing requirementsListing requirements
There are specificThere are specific
requirements for allowing arequirements for allowing a
public company to list itspublic company to list its
securities on the Stocksecurities on the Stock
Exchange these are set outExchange these are set out
in the legislationin the legislation
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26. Benefits of listing
• Visibility
• Market support
• Investors confidence
• Increased demand for products and
services
• Overall increase in profitability
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27. Once tradedOnce traded
• Aura of reliabilityAura of reliability
• Accuracy in reportingAccuracy in reporting
financial datafinancial data
• ReputationReputation
• StrengthStrength
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28. 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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29. 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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30. 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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31. Financing the exchangeFinancing the exchange
• Transaction fees paid by members forTransaction fees paid by members for
each order executedeach order executed
• Fees paid by firms when theirFees paid by firms when their
securities are originally listedsecurities are originally listed
• Annual fees by firmsAnnual fees by firms
• Entrance fees from new membersEntrance fees from new members
• sale of historic trading and marketsale of historic trading and market
informationinformation
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32. Major challenges for theMajor challenges for the
ExchangesExchanges
• Cross border trading
• Issuers and investors are
expanding their horizons beyond
their home markets
• Investors becoming much more
demanding
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33. •Regulatory improvementRegulatory improvement
Transparency and CorporateTransparency and Corporate
GovernanceGovernance
Corporate
Governance
Protection to
minority
Shareholders
Disclosure
Enhance
market
confidence
Strong
industry
regulator
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34. 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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35. www.StudsPlanet.com

36. Kinds of BrokersKinds of Brokers
 Commission BrokerCommission Broker
 JobberJobber
 Floor brokerFloor broker
 TaraniwallaaTaraniwallaa
 Odd lot dealerOdd lot dealer
 BudliwallaBudliwalla
 ArbitrageurArbitrageur
 Security dealersSecurity dealerswww.StudsPlanet.com