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Part 2

Monday 13 December 2010

Stock Exchange

Stock Exchange

Stock Exchange
"Stock Exchange" is an entity provides trading facilities for stock brokers on behalf of Investors and traders to trade stocks and other securities. The products traded on a stock exchange include stocks (shares), derivatives (futures and options), currency(Forex), other financial instruments and investment bonds. In simple words, Exchange the ownership of "Shares" from Seller to Buyer. The term "bourse" came from the Latin bursa meaning a bag.
Stock Exchange

About Stock Exchange
Meaning of Stock Exchange is a central location for trading record keeping , modern markets keep the records in electronic mode. Now "Technology" increased speed and reduced cost of transactions. Trade on an exchange is bytrading members only.
The initial public offering of stocks to investors is by definition done in the primary market and subsequent trading is done in the secondary market in bourse. A stock exchange is often the most important component of a stock market system. Usually no compulsion to issue stock via the stock exchange or regular trading on the exchange, such trading is said to be off exchange or over-the-counter. Stock exchanges are part of a world market for securities exchange.
Companies requires fulfill the listing norms, the set of conditions set by a stock exchange upon companies that want to be listed on that exchange, such conditions include minimum number of shares outstanding, minimum market capitalization, minimum annual income and god business track record.

Types of Stock Exchanges
Exchanges may divided based on trading options. Currency traded types is "Forex", forward contracts are called Futureexchanges, commodity exchanges offers commodity trading.

Stock Exchange Ownership
Stock exchanges originally owned by group of entities like government bodies, Financial institutions, member stock brokers and mutual organizations. In this way the mutual organization becomes a corporation, with shares listed on a stock exchange.

Role of Stock Exchanges:
Capital Raising
The Stock Exchange provide facility to raise capital for business expansion through selling of shares to the investing public or private.

Savings in stocks investment
When people savings and invest in shares, it leads to rational allocation of resources into funds and various developmental projects, reduce idle deposits with banks, are mobilized to promote business activity with benefits for several economic sectors such as infrastructure, agriculture, commerce and industry leads stronger economic growth and higher productivity.

Company Growth
Companies stake acquisitions as an opportunity, hedge against volatility, increase its market share and other necessary business assets. A merger or take over through the "Stock Market" is one of the simplest and transparent.

Profit share
Professional stock investors get benefit through dividends and stock price appreciation that may result in capital gains and investment opportunities for small investors

Corporate governance
Generally improve their management financial standards and efficiency in order to satisfy the demands of these shareholders and public corporations by public stock exchanges and the government. According to regulations perfect management of records than privately held companies. When poor financial or managerial records are known by the stock investors, the stock leads to lose value.

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