Chapter 7 Flashcards
Two broad segments of Stock Markets:
- The Organized Stock Exchange
- The Over-the-Counter (OTC) Exchange
principal objective of listing
provide liquidity and marketability
market in which national, state and local governments are the primarily borrowers of funds for highways, education, welfare and other public activities
Public Financial Market
Banks
Insurance Companies
Financial Intermediaries
PSE other term
Pamilihan Sapi ng Pilipinas
buying and selling of shares, currency, or other financial instruments in a single day. the intention is to profit from small price fluctuations - sometimes traders hold shares for only a few minutes.
DAY TRADING
a method of buying shares that involves the day trader borrowing a part of the sum needed from the broker who is executing the transaction
margin-trading
involves selling securities to the general public
Public Offerings
where securities are traded after between investors after securities are sold to public
Financial mangers are given feedback about their performance
SECONDARY MARKET
stock market is known as
barometer of the company’s economy
What Financial Markets Do?
- Raising Capital
- Commercial Transactions
- Price Setting
- Asset Valuation
- Arbitrage
- Investing
- Risk Management
What Financial Markets Do?
In countries with poorly developed financial markets, commodities and currencies may trade at very different prices in different location. As traders in financial markets attempt to profit from this divergences, prices move towards a uniform level, making the entire economy more efficient.
- Arbitrage
POTENTIAL DAY TRADERS SHOULD BE KNOWLEDGEABLE OF THE FOLLOWING
-Market Data
-Scalping
-Margin Trading
-Bid-offer spread
Stock Exchange Supplies: Regulates company’s behaviour through requirements called
listing agreement.
-physical location where stocks buying and selling transactions take place
- The Organized Stock Exchange
stocks are traded on an organized exchange. firms must meet certain minimum criteria.
Listed stocks
What Financial Markets Do?
Market prices offer the best way to determine the value of a firm or of the firm’s asset, or property
- Asset Valuation
What Financial Markets Do?
For firms to build new facilities, replace machinery or expand business in other ways
- Raising Capital
What Financial Markets Do?
Futures, options and other derivatives contracts enable markets to attach a price to risk and they also provide protection against many types of risks such as:
Possibility that foreign currency will lose value against the domestic currency before an export payment is received
risk management
link buyers and sellers by buying and selling securities and stated prices
Dealers
Securities of an entity may be listed at any of the ff. stages:
-at the time of public issue of shares/debentures
-at the time of rights issue of shares/debentures
-at the time of bonus issue of shares/debentures
-shares issued on amalgamation or merger.
strategy in which traders hold their share or financial asset for just few minutes or even seconds
scalping
an entity ( a corporation or mutual organization) which is the business bringing buyers and sellers of stocks and securities together.
Stock Exchange
What Financial Markets Do?
Financial Markets provide price discovery based upon the prices at which individuals are willing to buy and sell them
- Price Setting
matches buyers with sellers of securities
Brokers
a contractual agreement by the borrower to pay the holder of the instrument fixed peso amounts at regular interval (interest and principal) until specified date (maturity date), when a final payment is made.
- Debt Instruments (bonds or mortgage)
Enables money to flow around the world
Global Financial Markets
– maturity is between 1 to 10 years
Intermediate-term Debt Instruments
Funds in a financial market can be obtained by a firm or an individual in two ways:
- Debt Instruments (bonds or mortgage)
- Equity Instruments (common stock or ordinary stock)
POTENTIAL DAY TRADERS SHOULD BE AWARE THAT
Day trading is a high risk occupation
Day trading is stressful
Day trading is expensive
how many listed companies are there
30
market in which large corporations raised funds
Corporate Financial Market
-where shares, bonds and money market instruments are traded using a system of computer screens and telephones.
- The Over-the-Counter (OTC) Exchange
price at which the securities are bought and sold on a recognized stock exchange
official quotation
Advantage of owning a corporation’s equities rather than its debt:
Equity holders benefit directly from any increases in the corporation’s profitability or asset value while debt holders do not share in this benefit because their peso payment is fixed.
mportant financial institution that assists in the initial sale of securities in the primary market
Investment Bank
What Financial Markets Do?
Financial markets provide the grease that makes many commercial transactions possible such as:
-arranging payment for the sale of product abroad
-providing working capital
the pse is overseen by ____
15 member BOD, chaired by Jose T. Pardo
Share brokers are assembled and bought & sold shares.
TRADING RING
When was PSE made
- Manila stock exchange and Makati stock exchange
National Stock exchange created in 1992
Merger of Manila Stock Exchange and Makati stock exchange.
Main index for PSE is the PSEi composed of thirty (30) listed companies
with 15 member of board of directors, chaired by Jose T. Pardo
Philippine Stock Exchange
Stock Exchange Supplies: Large volumes are possible in these markets because of two things:
ease of settlement
Guarantee of trades
large volumes are possible in these markets because of two things:
- ease of settlement
- guarantee of trades
difference between a price at which a share is sold, and that at which it is bought
bid-offer spread
Main disadvantage of owning a corporation’s equities rather than its debt:
Equity holder is a residual claimant. The corporation must pay all its debt holders before it pays its equity holders.
A recognized stock exchange is recognized by
SEC
Two Important Functions of Secondary Markets:
- They make the financial instruments more liquid. The increased liquidity of these instruments then makes them more desirable and thus easier for the issuing firm to sell in the primary market.
- They determine the price of the security that the issuing firm sells in the primary market. The higher the security’s price in the security market, the higher will be the price that the issuing firm will receive for a new security in the primary market, hence, the greater amount of capital it can raise. Therefore, conditions in the secondary market are the most relevant corporations issuing securities.
Where the sale of securities is said to be made by way of a new issue
PRIMARY MARKET
What Financial Markets Do?
Stock and bond markets provide an opportunity to earn a return on funds that are not needed immediately, and to accumulate assets that will provide an income in the future
- Investing
the busier ones, generally, have important attributes that smaller markets often lack:
liquidity
transparency
reliability
legal procedures
suitable investor protection and regulation
low transaction costs
admission of securities to dealings on a recognized stock exchange of any incorporated company, central and stage governments, quasi-governmental and other financial institutions/corporations
listing
negotiated sale involving a specific buyer
Private Placements
the current trading information for each day trading market
market data
The forces of change
Technology
Deregulation
Liberalization
Consolidation
Globalization
claims to share in the net income (income after expenses and taxes) and the assets of a business
Equities often make periodic payments (dividends) to their holders and are considered long-term securities – no maturity date
Owning a stock means that you own a portion of the firm, thus, have the right to vote on issues important to the firm and to elect its directors
- Equity Instruments (common stock or ordinary stock)
Bonds
Stock markets
Financial Markets
Meeting place for people, corporations and institutions that either need money or have money to lend or invest
Financial Markets
claims to share in the net income (income after expenses and taxes) and the assets of a business
Equities often make periodic payments (dividends) to their holders and are considered long-term securities – no maturity date
Owning a stock means that you own a portion of the firm, thus, have the right to vote on issues important to the firm and to elect its directors
- Equity Instruments (common stock or ordinary stock)
Function of Financial Markets
getting people together by moving funds from those who have a surplus of funds to those who have a shortage of funds
a platform to buy and sell shares in certain listed companies.
Stock Exchange Supplies
