STOCKS AND SECURITIES

Stocks are shares of ownership in a corporation.

When you become a stockholder or shareholder of
a company, you become part-owner of that
company. Securities, on the other hand, are proof
of ones ownership or indebtedness in a company.
Examples of securities are treasury bills and
commercial papers, which are considered as short-
term and are traded in the money market; and
stocks and bonds, which are long-term and traded
in the capital market. Securities are easily bought
and sold in the stock market.
STOCK MARKET
Stock arket or E!uity arket as it is otherwise
known, simply put is a market place, for the buying
and selling of shares of di"erent companies that
are listed in the market, including pri#ately traded
stocks.
WHERE CAN I BUY OR SELL SHARES OF
STOCKS AND/OR BONDS?
$n the %hilippines, the only operating stock
exchange is the %hilippine Stock Exchange &%SE'.
$ts main function is to facilitate the buying and
selling of stocks and other securities through its
accredited trading participants.
PHILIPPINE STOCK EXCHANGE
(he %hilippine Stock Exchange, $nc. &%SE or
Exchange' is a pri#ate non-pro)t and non-stock
organi*ation created to pro#ide and maintain a fair,
e+cient, transparent and orderly market for the
purchase and sale of securities such as stocks,
warrants, bonds, options and others.
HISTORY
Manila and Makati Stock Exchanges
anila Stock Exchange &SE' is founded in arch
,-./; )rst stock exchange in the %hilippines and
one of the oldest in 0sia and akati Stock
Exchange &kSE' is established in ay ,-12; the
second course to operate in the country
Incorporation of the PSE
3ecember .2, ,--. marked a milestone for the
%hilippine capital markets when the SE and kSE
were uni)ed to become the %SE. $n 4une ,--5, the
Securities and Exchange 6ommission conferred to
the %SE the status of a Self-7egulatory
8rgani*ation.
Other Highlights
$n .99,, or a year after the Securities 7egulation
6ode of .999 was enacted, the %SE was
reorgani*ed and transformed from a non-stock,
member-go#erned organi*ation into a shareholder-
based, re#enue-generating corporation. 8n
3ecember ,:, .992, %SE shares were listed by way
of introduction. $n .99;, the %SE ac!uired the
Securities 6learing 6orporation of the %hilippines to
become its wholly owned subsidiary.
PSE MANAGEMENT
8ne of the non-broker members heads the
Exchange, appointed by the <oard as the %resident
and 6hief Executi#e 8+cer &6E8'. (he %resident,
along with the professional management of the
%SE, executes the policy determinations of the
<oard and ensures that the Exchange is operating
e+ciently. $t carries out for the members, listed
companies and exchange system to ensure that
stock market operation in the %hilippines is kept
within the standards of fairness, transparency,
professionalism, trust and integrity. 0dditionally, it
sets the rules and regulations of the Exchange,
monitors its implementation and ensures that the
in#esting public is gi#en protection in the
transaction of their in#estments. (he Exchange
also ensures that all legal re!uirements under the
6orporation 6ode and the 7e#ised Securities 0ct
are met.
WHAT ARE THE TYPES OF SECURITIES THAT I
CAN BUY IN THE STOCK MARKET?
ost of the issues listed in the %SE are common
stocks. 8ther types of securities such as preferred
stocks, warrants, %37s and bonds are also traded.
Common Stock = (hese are usually purchased
for participation in the pro)ts and control of
ownership and management of the company.
>olders of common stocks ha#e #oting rights. (hey
are also entitled to an e!ual pro rata di#ision of
pro)ts without preference or ad#antage o#er
another stockholder. >owe#er, they ha#e the last
claim on di#idends and are the last to collect in
case of corporate li!uidation.
P!"#"!!"$ Stock = $ts name is deri#ed from
preference gi#en to the holders of these stocks
o#er holders of common stocks. >olders of
preferred stocks are entitled to recei#e di#idends,
to the extent agreed upon, before any di#idends
are paid to the holders of common stocks.
>owe#er, preferred stocks usually ha#e a speci)ed
limited rate of return or di#idend and a speci)ed
limited redemption and li!uidation price.
C%& A Stock - are shares that can be bought or
sold solely by ?ilipino in#estors.
C%& B Stock - are shares that can be bought or
sold by both ?ilipinos and foreign in#estors.
B%'" C()* - are the share of stable, pro)table,
and well-known public companies. (hey ha#e a
long history of steady re#enues and di#idend
payments. (hey exhibit more modest but
dependable returns and are relati#ely of lower risk.
W&!!&nt + 0 corporation can also raise additional
capital by issuing warrants. 0 warrant, normally
issued on a detachable basis, allows its holders the
right, but not the obligation, to subscribe to new
shares at a set price during a speci)ed period of
time. $t is usually pro#ided free of charge and
traded separately in the securities market.
P()%)**)n" D"*o)t R"c")*t ,PDR- = 0 %37 is a
security which grants the holder the right to the
deli#ery or sale of the underlying share, and to
certain other rights including additional %37 or
ad@ustments to the terms or upon the occurrence
of certain e#ents in respect of rights issues, capital
reorgani*ations, o"ers and analogous e#ents or the
distribution of cash in the e#ent of a cash di#idend
on the shares. %37s are e#idences or statements
nor certi)cates of ownership of a foreignAforeign-
based corporation. ?or as long as the %37s are not
exercised, the shares underlying the %37s are and
will continue to be registered in the name of and
owned by and all rights pertaining to the shares
shall be exercised by the issuer.
Sm&%%.D"mom)n&t"$ T!"&'!/ Bon$ ,SDT.
Bon$- = (he S3( <onds are long-term and
relati#ely risk-free debt securities issued by the
<ureau of (reasury &<(r' of the 7epublic of the
%hilippines. (he bond is a certi)cate of
indebtedness of the 7epublic of the %hilippines to
the owner of the S3(-<onds.
INDICES AND COMPONENTS
(he %SE has eight constituent indicesB
%SE 0ll Shares $ndex &0CC'
%SE 6omposite $ndex &%SEi'
%SE ?inancials $ndex &?$D'
%SE >olding ?irms $ndex &>3E'
%SE $ndustrial $ndex &$D3'
%SE ining and 8il $ndex &-8'
%SE %roperty $ndex &%78'
%SE Ser#ices $ndex &SF6'
(he %SEi is the main index of the %SE, while the 0ll
Shares $ndex is the broader index of the exchange.
(he remaining six indices are sector indices based
on a companyGs main source of re#enue. 0lthough
listed in an index, companies are listed on the %SE
under the ?irst <oard, Second <oard or the Small
and edium Enterprises <oard based on market
capitali*ation.
0s of ?ebruary 1, .9,2, the %hilippine Stock
Exchange has 2;; listed companies with a total
market capitali*ation of HSI.::., billion. (here are
also ,2; trading participants registered at the %SE.
HOW ARE SHARES AND SDT.BONDS BOUGHT
OR SOLD?
$f you wish to buy shares of stocks or S3(-<onds,
you must ha#e a stockbroker who will do this for
you. 0 stockbroker is a person or a corporation
authori*ed and licensed by the Securities and
Exchange 6ommission &SE6' and %SE to trade
securities.
In0"t)n1 P!oc"$'!"2
6hoose a stockbroker. (he %SE has a complete list
and information about all its trading participants
who are authori*ed and !uali)ed to trade either
e!uity or debt securities for you. (his list is also
a#ailable on the Exchanges website and the %C3(
directorys Eo#ernment and <usiness listings
yellow pages under the category of stock and bond
brokers.
Jou shall be re!uired to open an account and
)ll-out a 7eference 6ard and to submit
identi)cation papers for #eri)cation. (he
stockbroker will then assign a trader or agent to
assist you in either buying or selling any listed
security. 3iscuss with the trader what stocks to buy
or sell.
Ei#e the order to your brokerAtrader, and then
get the acknowledgment receipt.
?or e!uity transactionsB 3eli#er the Stock
6erti)cate if you are selling or pay within the
settlement date &2 days from date of transaction' if
you are buying. Some brokers may re!uire you to
pay with post-dated checks upon ordering.
?or S3(-<onds transactionsB Selling in#estors
must open a 7oSS account under his brokers sub-
account and instruct his bank-underwriter to
transfer the share to this account. <uying in#estors
must also open an account with a <(r accredited
bank and pay the appropriate amount of
transaction to the settlement bank on the trade
date.
Jou shall recei#e from your broker either the
proceeds of sale your stocks &after 2 days for
e!uities and on the date of trade for S3(-<onds' or
proof of ownership of stocks you bought
&con)rmation receipt and in#oice'. $f you wish to
ha#e a physical certi)cate of the e!uities you
bought, @ust gi#e instructions to your broker and
pay the re!uired upliftment fee. <uyers of S3(-
<onds will only be gi#en a con)rmation slip in lieu
of the bond certi)cates.
Jou can purchase shares of stock either
through $%8 &$nitial %ublic 8"ering' or through the
open market. Shares sold through $%8s are o"ered
for the )rst time to the public by the company
&primary market' whereby proceeds of the sale go
directly to the company. Shares of listed or publicly
traded companies are bought during trading &open
market'. (hese shares ha#e since been transferred
from one owner to another &secondary market' and
proceeds of the sales do not go directly to the
company but to the owners of the shares.
T(" T!&$)n1 C/c%"
common, preferred & warrant
0ll e!uity transactions, whether buying or
selling has a settlement period of (K2 &trading day
K 2 working days'. (his means that a seller should
be able to deli#er the stock certi)cate, if any, to his
broker and the buyer must ha#e paid the cost of
transaction to his broker within 2 working days
after the trade was done. >istorically, settlement
was done manually &./-day cycle'. With the ad#ent
of scripless trading wherein settlement is done #ia
the book-entry-system &thru %hilippine 6entral
3epository or %63', transactions are settled on the
third day after trade date. Hnder this system, the
in#estor has the option to hold on to his certi)cate
&uplift' or deposit &lodge' this certi)cate in %63
through his broker-participant account.
S3(-<onds transactions, howe#er, are settled
on the same day when the trade is transacted
&(K9'. (here shall be no physical transfer of bond
certi)cates. (he transfer of securities shall be
conducted electronically by the <(rs 7egistry of
Scripless Securities &7oSS'. 8n the other hand,
cash settlement will be coursed through the %SEs
two settlement banks namely, E!uitable-%6$ <ank
and 7i*al 6ommercial <anking 6orporation.
WHAT IS THE MINIMUM AMOUNT NEEDED TO
IN3EST IN THE STOCK MARKET?
E!uity trading is done by board lot or round lot
system. (he <oard Cot (able determines the
minimum number of shares one can purchase or
sell at a speci)c price range. (herefore, the
minimum amount needed to in#est in the stock
market #aries and will depend on the market price
of the security as well as its corresponding board
lot. %rices of stocks mo#e through a scale of
minimum price Luctuations.
8n the other hand, the minimum amount of
S3(-<onds that an in#estor can buy if %h%
:,999.99.