What is a stock exchange?
Investing in equities is an important investment we make to generate inflationary returns. This was a conclusion drawn from the previous chapter. But how do you invest in stocks? Of course, before jumping into this topic, it's important to understand the ecosystem in which stocks work.
Go to PSEthe stock market and shop (read as a transaction) to invest in stocks, much like going to a nearby Kirana store or supermarket. Anyone who wants to trade stock will be open to the public. Simply put, Transact means buying or selling. Stocks of public companies like PSE cannot be bought or sold without trading on the stock market for convenience.
The main purpose of the exchange is to support the transaction. Therefore, if you are a stock buyer, the stock market will help you meet the seller and vice versa. Unlike supermarkets, stock exchanges do not exist in the form of bricks or mortar. It is in electronic form. You can access the market electronically from your computer and trade (buy and sell stocks). It is also important to note that you can access the stock market through a registered agency called a stock broker. Later, we will explain in detail about the stock broker. Philippines has one major stock exchange that make up the stock market, The Philippine Stock Exchange.
Who Are The Market Participants?
The stock market attracts individuals and businesses of all backgrounds. Everyone operating on the stock exchange is known as a market participant.
Exchange
An exchange is an organized market or facility that connects buyers and sellers and facilitates the buying and selling of stocks. The only exchange operating in the country is the Philippine Stock Exchange (PSE). This ensures that trade transactions are conducted in an efficient, orderly, fair and transparent manner. Enforce rules and regulations that listed companies and trading participants must adhere to. Therefore, PSE acts as a "guardian" of the Filipino stock market.
Investor
An investor, also known as a shareholder or shareholder, is the person who owns the shares of a listed company. You are granted certain privileges such as the right to fair and equal treatment, the right to exercise voting and related rights, and the right to receive dividends and other benefits to shareholders. They are classified as retail or institutional, and either local or foreign.
Stock Broker
The stock broker or trading participant is licensed by the Securities and Exchange Commission (SEC) and is permitted to trade on the exchange. They act as an intermediary between buyers and sellers of stocks in the market. For services as a stock broker, you will receive a purchase or sales commission from the customer.
PSE initially issued 184 trading rights. To date, PSE has 133 active stock brokers.
Representatives of these approved stock brokers (approved sellers) meet daily at specific times on the 'trading floor' of the stock exchange, where they buy and sell stock for the customer's account. They place orders in the market to get the maximum profit possible for their customers by buying at the lowest possible price or selling at the highest possible price.
There are two types of stock brokers:
- Traditional-Hire a licensed seller to manage your account and accept written instructions or orders over the phone
- Online-The main interface is the Internet, where customers place orders and access market information online
Listed Company
A listed company, also known as an "issuer", is a company on which stock is traded on the stock exchange. These companies meet the strict approval and reporting requirements of PSE and have undergone an initial public offering (IPO) or initial public offering. As of August 2011, PSE has 249 listed companies. They are grouped into six different sectors: finance, industry, holdings, real estate, services, mining and oil.
Clearinghouse
Philippine Securities Settlement Corporation (SCCP) SCCP is a wholly owned subsidiary of the stock exchange. It was established to ensure the orderly settlement of stock transactions taking place at PSE. SCCP uses the Central Clearing and Central Settlement (CCCS) system obtained from Belgian Capital Markets Co. (CAPCO).
SCCP is responsible for determining the liabilities and claims of Clearing Members' cash and securities and synchronizing the settlement of funds with the transfer of securities under the delivery-to-payment or multilateral net settlement model. It guarantees the settlement of transactions in the event of a trading participant failure and ensures the finality and irrevocability of all exchange transactions through a failed management process. Implement appropriate risk management measures to mitigate the risks inherent in the clearing and settlement of exchange transactions, as well as maintain and manage the Clearing and Transaction Guarantee Fund (CTGF).
Depository
Philippines Depository and Trust Corp. (PDTC) PDTC acts as a securities account or "custodian bank" for listed stocks traded on PSE. Established Central Custodian Bank in the Philippines and organized to conduct paperless transactions. PDTC performs an accounting transfer of securities.
- From the seller's account to the buyer during the settlement of a stock exchange transaction.
- From one PDTC subscriber to another for each customer instruction.
- A lender-to-borrower account for a loan transaction.
Billing Banks
PSE has three authorized banking institutions where trading participants pay and receive stock transactions. Settlement Bank receives cash deposits for payment of purchased securities, confirms payment of legitimate clearing obligations to SCCP, debits from buyer's cash account and seller's cash account during settlement, by Receive and / or return the cash security sent. Clearing members were provided to cover the daily negative trading risk.
Transfer Institution
Share Transfer Agent is the "official custodian" of the shareholder's company file. The stock exchange agent provides the issuer or listed company with a list of securities holders. Performs a transfer of substantive owners and handles corporate actions such as stock or cash dividends, stock rights, stock splits, and the creation of a power of attorney.1
Who Regulates The Exchange?
A joint mission of the World Bank and the International Monetary Fund visited the Republic of the Philippines from October 8th to November 6th, 2001 as part of the Financial Sector Assessment Program (FSAP). The objective was to assess the effectiveness of securities regulation, the soundness of market intermediaries, and the prospects for capital market development, including the objectives of the International Organization of Securities Commissions (IOSCO) and compliance with securities regulation principles.
The Securities and Exchange Commission (SEC) is the primary regulator of capital markets and their participants. Bangko Sentral ng Pilipinas (BSP) is a non-bank financial institution as long as it has an ownership relationship with a bank, performs quasi-bank functions and trustee business, and is permitted to provide foreign exchange products and services. (NBFI) also supervises. The Securities Regulation Code (SRC) is the most important legal basis for regulating the market. The SRC has narrowed and redefined the SEC's authority to help regulators focus on regulating the securities market, especially on implementing it.
However, further rationalization of the scope seems to be necessary and is expected. The SRC has also stipulated the non-mutualization of the Philippine Stock Exchange (PSE). This addressed, among other things, the conflict of interest of PSE as a self-regulatory body (SRO). The Philippine regulatory and supervisory framework is broad but complex. This is because regulatory agencies remain fragmented, while the financial industry and services are becoming more complex and generalized by functional regulation. The SEC is the most important regulatory authority for capital markets and their participants. NBFI is regulated and regulated by the SEC.2
Highlights of this Article
- If you want to trade stocks, the stock exchange is the best choice
- The exchange exists electronically and is accessible through stock brokers
- There are different types of market participants working in the stock market
- All companies doing business in the market are regulated and need to do business only within the framework set by the regulatory agency
- PSE is the regulator of the Philippine securities market. They set up a legal framework and regulate all companies interested in the market
