SECURITIES AND CAPITAL MARKET

TERMINOLOGIES:
• SECURITIES
– refer to - INCOME YIELDING - PAPER TRADED - on the stock exchange
or secondary markets.
– are Evidences of ownership in an enterprise or Evidences of
indebtedness of a person or enterprise.
o Example: T-bills, bonds, commercial papers

• SECURITIES MARKET
– is a general term that Refers to a number of markets in which -
Financial assets are traded.
– refers to the Market dealing with the resale and purchase of
securities or other titles to property.

• FINANCIAL INTERMEDIARIES
– the Major supplier of long term-funds.
• UNDERWRITING – is act of process of Guaranteed the distribution and
sale of security of any kind issued by another corporation.

• YIELD – Rate of return

• RISK-RETURN TRADE OFF – investors Expect a higher return on his

investment, but is Also willing to assume additional risks.

• STOCK MARKET sometimes called as STOCK EXCHANGE – its main activity

is that of a secondary market where outstanding shares are bought and
sold in a continuous manner.

• DIVERSIFICATION – Process of investing wherein investors try to spread

their funds to buy different stocks, or combine these stocks with interest-
bearing securities.

• PORTFOLIO MANAGEMENT – is placing funds in the different kinds of

investment vehicles.
Underwriting syndicate – when groups of investment bankers
pool together their resources to underrate an issue.

Spread – is the difference between the bank’s lending rate to

bank borrowers and the deposit rate the bank pays its
depositors.

Financial intermediaries – refers to those institutions that

bring investors and borrowers together in an impersonal
market setting.

Listing - involves an application process essentially in

compliance with exchange rules. Such rules mainly ensure
that a listed company is financially healthy and provides
regular disclosure of material information to the exchange
and the investing public.
CLASSIFICATIONS OF FINANCIAL
MARKETS
a) New Securities
b) Existing Securities
c) Public Offering
d) Private Placement
e) Long-term maturities
f) Short-term maturities
Types of Securities Market

MONEY MARKET – is the market for debt securities with maturities of less
than one year.
Examples: T-bills, commercial papers

CAPITAL MARKET – is the market for long-term securities.

Examples: Stocks, Bonds

Participants in the Securities Market

1. Issuer
2. Investment banker/investment houses/universal banks
3. Stockbrokers
4. Dealers
5. Individual/institutional investors
Classification of Capital Market

a) PRIMARY MARKET – new shares are issued and

sold to the investing public for the first time.

Example: New issue of SMC common stocks

refers to the issuance of new securities, which in turn
represent an actual transfer of funds from the investors to
the issue of the new security.

Example: IPO (Initial Public Offering)

b) SECONDARY MARKET – is where original holders sell their shares to other
investors. Refers to the issuance of new securities which in turn represent an
actual transfer of funds from the investors to the issue of the new security.
Example: Philippine National Oil Co. sold to the investing public a portion of its
shares to Petron Corp.

1) ORGANIZED SECURITY EXCHANGES – is an organized venue for trading

registered and listed stocks. It facilitates communication between buyers and
sellers of stocks.
Examples: Makita Stock Exchange
Manila Stock Exchange
Philippine Stock Exchange

2) OVER-THE-COUNTER MARKET – is an intangible organization dealing

with stocks that are registered under the Revised Securities Act but are
“unlisted”. It is “a large collection of brokers and dealers, connected by
telephones and computers that provides for trading of unlisted stocks”.
Participants in the capital market:

Suppliers of funds
Users of funds
Financial intermediaries
Regulators
CAPITAL MARKETS
PRIMARY MARKET
Regulatory Agencies

Securities Securities
ISSUER Investment Banker INVESTOR

Funds Funds
SECONDARY MARKET

Regulatory Agencies

Securities Securities
ISSUER Stock Exchange / INVESTOR
(Buying) Over-the-Counter Market (Selling)
Funds Funds