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Lawrence Brian R. Labasan

CBE Instructor
* Primary Market
The Primary Market consist of
underwrites, issuers, and instruments. They raise
cash for the issuing company. Primary market is
where the new securities are created.
The issuing houses, investment bankers,
and brokers act as the channels of distribution
for a new issue. They take responsibility for
selling the stocks to the public.

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* Types of issues
- Public issue – a method of raising funds through
the issuance of shares to investors in the
primary market by companies.
- Preferential issue means when listed
companies issue securities to a selected group
of persons. It may be financial institutions,
mutual funds or high net worth individuals.

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* Types of issues
- Rights issues means an issue of capital offered
by a company to its existing shareholders
through a letter of offer. In other words, a listed
company issues fresh securities only to its
existing shareholders.

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- Underwriter – is a company or other entity that
administers the public issuance and distribution of
securities from a corporation or other issuing body.
- Underwriting Agreement- The underwriting
agreement contains the details of the transaction,
including the underwriting group's commitment to
purchase the new securities issue, the price that
the underwriting group will pay to the issuing
corporation and the initial resale price.

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* Secondary Markets
Secondary markets deals with securities
which have already been issued and are owned
by investors. The buying and selling of securities
already issued and outstanding take place in the
stock exchanges.

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* Stock Exchange
The stock exchange is a centralized
market for buying and selling stocks where price
is determined through supply-demand
mechanisms.

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1. Providing Liquidity and Marketability to
Existing Securities
2. Pricing of Securities
3. Safety of Transactions
4. Contributes to Economic Growth
5. Spreading Equity Cult

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Providing Liquidity and Marketability to
Existing Securities
Stock exchange is a market place where
previously issued securities are traded. Various
types of securities are traded here on regular
basis.

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Pricing of Securities
A stock exchange provides platform to
deal in securities. The forces of demand and
supply work freely in the stock exchange. In this
way, prices of securities are determined.

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Safety of Transactions
Stock exchanges are organized markets.
They fully protect the interest of investors. Each
stock exchange has its own laws and bye-laws.
Each member of stock exchange has to follow
them and if any member is found violating them,
his membership is cancelled.

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Contributes to Economic Growth
A stock exchange provides liquidity to
securities. This gives the investor a double
benefit-first, the benefit of the change in the
market price of securities can be taken
advantage of, and secondly, in case of need for
money they can be sold at the existing market
price at any time.

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Spreading Equity Cult
Share market collects every type of information
(more particularly about their economic condition) in
respect of the listed companies. Generally, this
information is published or in case of need anybody can
get it from the stock exchange free of any cost.
In this way, the stock exchange guides the
investors by providing various types of information.
Consequently, the number of shareholders in companies
is increasing continuously. Thus, the stock exchanges are
playing a vital role in ensuring wider share ownership.

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* Open Price- the stock price for the first transaction
at the start of the trading day.
* Low- the lowest stock price for transactions during
the day.
* High- the highest stock price for transactions during
the day.
* Close- the stock price for the last transaction of the
day.
* Volume- the number of shares or contracts traded in
a security during a given period of time