Financial Literacy Initiative- Campus Outreach Program by: South Asian Federation of Exchanges (SAFE). Financial Markets – Operations of Stock Exchange. What is Financial System?.
Financial Markets –
Operations of Stock Exchange
1.Money market is a place where banks deal in short term loans in the form of commercial bills and treasury bills. But capital market is a place where brokers deal in long term debt and equity capital in the form of debenture and shares.2.In money market maturity date of repayment may after one hour to 90 days. But in capital market, loans are given for 5 to 20 years and if issue of shares by co. , its amount will repay at winding of company . But investors have right to sell it to other investors if they need the money.3.Rate of interest in money market is controlled by SBP or central bank of any country. But capital market’s interest and dividend rate depends on demand and supply of securities and stock market’s conditions. Stock market regulator is in the hand of SECP.4.Main dealer of money market s are commercial banks like MCB, NBP and other financial institutions. Main dealers are all the public and private ltd. Co. and investors. 5.In Pakistan, money market is famous with dealing of money fund and banker’s acceptance instruments. But capital market in Pakistan is famous with KSE, LSE & ISE and stock regulator is Securities & exchange commission of Pakistan (SECP).
(1) Primary Market
The market for new shares of securities. A primary market is one in which a borrower issues new securities in exchange for cash from an investor (buyer).
(2) Secondary Market
Once new securities have been sold in the primary market, an efficient manner must exist for their resale. Secondary markets give investors the means to trade existing securities
Amsterdam Stock Exchange (first
Stock exchange) was created and
it began official trading shares of
Dutch East India Company
In France, courtiers de change
(first Brokers) traded in debt
and government securities
Unofficial share markets existed across
Europe where brokers would meet outside
or in coffee houses to make trades
In Bruges (Belgium) commodity traders
gathered in house of “Van der Burse”.
That meeting was called “Bruges Bourse”.
That idea spread in neighboring countries
and bourses were formed in various places
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Sub-continent of India
Before Independence there were many stock exchanges established in sub-continent during 1800s. In 1934 Lahore Stock Exchange was formed but it was closed after partition and later on merged with Delhi Stock Exchange. Karachi Stock exchange was founded in 1947.
Europe & Others
By early 1700s there were fully operational stock exchanges in France and England. America followed in the later part of the century by signing Buttonwood Agreement. Other parts of the world followed later in 19th century. There are now a large number of stock exchanges in the world.
Raising Capital for business
Facilitating company growth
Mobilizing saving for investment
Barometer of the economy
Redistribution of wealth
Creating investment opportunities for small investors
Stock Exchange’s Regulations:
Ministry of Finance
Securities & Exchange Commission of Pakistan
State Bank of Pakistan
Federal Board of Revenue
Ex-Dividend Dates: When a company declares a dividend, it sets a record date when you must be on the company's books as a shareholder to receive the dividend.
Earning per share (EPS):A profitability indicator calculated by dividing the net after-tax earnings (earnings available to common shareholders) during a period by the average number of shares outstanding at the end of that period.
Stop-Loss Order:An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. Also known as a "stop order" or "stop-market order".
Demand & Supply
Economy & Politics
Earnings of Companies
Customers of ISE
ISE has a base of investors as compare to other Exchanges
Understand the nature of Stock Investment before making any investment decision.
Always Invest Through a Registered Broker of the exchange.
Diversify your investment to a possible extent.
Keep Complete record of your Investments.
Maintain your own CDC account for the safe custody of your shares.
The key to making money in stocks is not to get scared out of them.