STOCK EXCHANGE

EASY WAY TO EARN MONEY

EASY WAY TO LOOSE MONEY

SARAVANAN S

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.

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.

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

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

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.

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

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

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.

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.

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.

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.

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

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”.

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

OVER-THE-COUNTER EXCHANGE OF INDIA

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

The OTCEI is a national, ringless and computerized stock exchange. It

was established in october,1990.it started its operation in september,1992.

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

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

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

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

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.

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.

General Market Advice:

HAPPY INVESTMENT WITH LOTS OF PROFITS