Tuesday, June 18, 2019

Role and Functioning of Stock Markets Coursework

Role and Functioning of Stock Markets - Coursework ExampleMoreover, securities marts are further broken down into a particular commercialise and a secondary market. Astock marketis a private or public market for the trading ofstocks or sharesin companies at anagreed upon price. These accommodate securities listed on astock exchangeas well as those traded privately, also known as over the counter securities. Astock marketis also known as an equity market (Papadopoulos, 2010). Primary Market and its Role Primary market is the market in which newly listed companies issue their shares to be traded for the first time, changing hands from the newly listed company to the investors, mostly these first time investors are institutional investors for example pension funds, investment banks, credit unions. This care for allows a company, the issuers of stocks, to acquire bully by crack their stocks to investors who in return would supply the capital required. Thereby making primary market that part of capital markets that deals with the issuance of new securities. Privately or Publicly listed Companies, governments or public sector institutions can obtain funding for there projects in this way. Security dealers execution as a bridge to link lender to the borrower of the fund. The process of marketing new shares is called underwriting. The new stock issue is called an initial public offering (IPO). Dealers advance a commission that is part of the price of the security offering. (Papadopoulos, 2010). Secondary Market and its Role The secondary market is an organized marketplace for securities. After the initial offering it is through this market that the general public gets the opportunity to be a stakeholder in a company. Licensed broker assist in the buying selling of these securities, along with the exchanges specialized trading system, in accordance with the rules and regulations established by the exchange (Alfaro, Chanda, Kalemi-Ozcan, and Sayek, 2004). When i t comes to secondary market, investors in this market purchase securities from other investors in the market, quite an than from the issuing company. In any secondary market transaction the cash proceeds go to the investors rather than the entity of which the original securities belonged to. The prices of the securities in this market are impelled by the forces of supply and demand, this rule applies to every stock available for trading (Demirguc-Kunt and Levine, 1996). Overview of the functions of Stock Market There are severalfunctions of stock market that makes it an inherent part of the economy. It most important role is the channelling of funds or transferring of capital from investors to users of capital. This role of stock exchanges allows corporations looking to raise capital for enhancing their productive capabilities from investors in the primary market. The secondary market facilitates trade between buyers and sellers of stock and thereby enabling the investors to reac h the true price of the stock or commodity. This feature of stock market is known as continuous pricing function. This feature enables interested parties to know at any time, what the price of a stock is. Price quotes can be accessed through financial websites and financial channels. This allows investors to assess the worth of their investment in a particular stock (Kale, Dyer, and Sing, 2002). Stock market also plays the role of fairish pricing. The workings of the stock market enable buyers and

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