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Market Secondary Market Third Market Fourth Market


(IPO) (OTC)

(Organized Markets)

An initial public offering (IPO) or stock market launch is a type of public offering where shares of a company are sold to the general public for the first time. IPOs are often issued by smaller, younger companies seeking the capital to expand But can also be done by large privately owned companies looking to become publicly traded Publicly traded companies seeking to start a new project.

Initial public offerings are used by companies to raise expansion capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises. A company selling shares is never required to repay the capital to its public investors. Advantage of IPO is that company would be able to generate large amount of funds from the general public.

Advantages could be
Enlarging and diversifying equity base Enabling cheaper access to capital Increasing exposure, prestige, and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions (potentially in return for shares of stock) Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.

Disadvantages could be

Significant legal, accounting and marketing costs, many of which are ongoing Requirement to disclose financial and business information Meaningful time, effort and attention required of senior management Risk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and customers. Loss of control and stronger agency problems due to new shareholders

Dutch Auction Investment Banker Underwriter / Underwriting syndicate Prospectus Underwriters provide several services, including help with correctly assessing the value of shares (share price), and establishing a public market for shares (initial sale). Who can be the underwriter?

Green shoe option Eating Stock Shelf rule / Shelf registration

A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts between buyers and sellers, usually for a commission. A market maker, on the other hand, is an intermediary that is willing and ready to buy and sell securities for a profitable price. Bid price is the price on which the dealer wishes to buy shares Ask price is the price on which the dealer wishes to sell shares Market maker or dealer is also a broker. Investors should make sure that there is a clear separation between a broker and a market maker.

Blue chip stocks are the stocks of a company with good record of earnings and dividends payouts. The blue chip companies are well known by the investors. Brokerage firms earn commissions on executed trades, sales loads on mutual funds, profits from securities sold from inventory, underwriting fees and administrative account fees Full service broker Discount broker

Market Limit Stop

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Central Depository Company (CDC) Account Central Depository Company of Pakistan Limited (CDC) provides custodial services for shares. It ensures efficient handling and transfer of shares.

Types of CDC Accounts Main Account for Brokers ( a gateway account) House Account (a family account of the Broker) Sub-Account (An investor account with CDC through Broker)

An individual investor can also open a CDC Account. Investor Account Services. (Facilitating the Investors to open their independent CDC Accounts) Initial Account Opening Fee: Rs.500/Annual renewal Fee Rs.500/-

Earlier it was Badla Financing by various private investors. Due to the crash in financial markets of Pakistan the marginal financing is adopted. To secure the risk of the investors as well as the risk of the brokers.

In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange). This risk can arise if the holder has done any of the following:
Borrowed cash from the counterparty to buy financial instruments Sold financial instruments short

You are advised to study the existing Corporate structure of NCCP, CDC, and Stock Exchange. Write about one page on each of the organization and also draw flow diagrams if necessary