Although ownership of 50% of shares does result in 50% ownership of a company, it does not give the shareholder the right to use a company's building, equipment, materials, or other property. This is because the company is considered a legal person, thus it owns all its assets itself. This is important in areas such as insurance, which must be in the name of the company and not the main shareholder.
In most countries, including the United States, boards of directors and company managers have a fiduciary responsibility to run the company in the interests of its stockholders. Nonetheless, as Martin Whitman writes:
...it can safely be stated that there does not exist any publicly traded company where management works exclusively in the best interests of OPMI [Outside Passive Minority Investor] stockholders. Instead, there are both "communities of interest" and "conflicts of interest" between stockholders (principal) and management (agent). This conflict is referred to as the principal/agent problem. It would be naive to think that any management would forgo management compensation, and management entrenchment, just because some of these management privileges might be perceived as giving rise to a conflict of interest with OPMIs.[8]
Even though the board of directors runs the company, the shareholder has some impact on the company's policy, as the shareholders elect the board of directors. Each shareholder typically has a percentage of votes equal to the percentage of shares he or she owns. So as long as the shareholders agree that the management (agent) are performing poorly they can elect a new board of directors which can then hire a new management team. In practice, however, genuinely contested board elections are rare. Board candidates are usually nominated by insiders or by the board of the directors themselves, and a considerable amount of stock is held and voted by insiders.
Owning shares does not mean responsibility for liabilities. If a company goes broke and has to default on loans, the shareholders are not liable in any way. However, all money obtained by converting assets into cash will be used to repay loans and other debts first, so that shareholders cannot receive any money unless and until creditors have been paid (most often the shareholders end up with nothing).
Monday, March 16, 2009
Shareholder
A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value.
Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors.
Shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders.
Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.
However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in California, USA, majority shareholders of closely held corporations have a duty to not destroy the value of the shares held by minority shareholders.
The largest shareholders (in terms of percentages of companies owned) are often mutual funds, and especially passively managed exchange-traded funds.
Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors.
Shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders.
Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.
However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in California, USA, majority shareholders of closely held corporations have a duty to not destroy the value of the shares held by minority shareholders.
The largest shareholders (in terms of percentages of companies owned) are often mutual funds, and especially passively managed exchange-traded funds.
Stock
In business and finance, a share (also referred to as equity share) of stock means a share of ownership in a corporation (company). In the plural, stocks is often used as a synonym for shares especially in the United States, but it is less commonly used that way outside of North America.
In the United Kingdom, South Africa, and Australia, stock can also refer to completely different financial instruments such as government bonds or, less commonly, to all kinds of marketable securities.
Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK)
Although there is a great deal of commonality between the stocks of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights being included, for instance, or some shares may have special rights unique to them and issued only to certain parties. Note that not all equity shares are the same.
A stock derivative is any financial instrument which has a value that is dependent on the price of the underlying stock. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm's stock, e.g. single-stock futures.
Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally not delivered in the usual manner, but by cash settlement.
A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black Scholes model. Apart from call options granted to employees, most stock options are transferable.
In the United Kingdom, South Africa, and Australia, stock can also refer to completely different financial instruments such as government bonds or, less commonly, to all kinds of marketable securities.
Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK)
Although there is a great deal of commonality between the stocks of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights being included, for instance, or some shares may have special rights unique to them and issued only to certain parties. Note that not all equity shares are the same.
A stock derivative is any financial instrument which has a value that is dependent on the price of the underlying stock. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm's stock, e.g. single-stock futures.
Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally not delivered in the usual manner, but by cash settlement.
A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black Scholes model. Apart from call options granted to employees, most stock options are transferable.
Floor trader
A floor trader is a member of a stock or commodities exchange who trades on the floor of that exchange for his or her own account. The floor trader must abide by trading rules similar to those of the exchange specialists who trade on behalf of others. The term should not be confused with Floor broker. Floor Traders are occasionally referred to as Registered Competitive Traders, Individual Liquidity Providers or locals.
Rogue trader
A rogue trader is an authorised employee making unauthorised trades on behalf of their employer. It is most often applicable to financial trading, and as such is a term used to describe persons - professional traders - making unapproved financial transactions.
This activity is in the grey area between civil and criminal illegality for the reason that the perpetrator is a legitimate employee of a company or institution, yet enters into transactions on behalf of their employer without permission.
One famous rogue trader is Nick Leeson, whose losses were sufficient to bankrupt Barings Bank in 1995 following his ill-advised and unauthorized investments in index futures. Through a combination of poor judgement on his part, lack of oversight by management, a naive regulatory environment and unfortunate outside events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old financial institution.
This activity is in the grey area between civil and criminal illegality for the reason that the perpetrator is a legitimate employee of a company or institution, yet enters into transactions on behalf of their employer without permission.
One famous rogue trader is Nick Leeson, whose losses were sufficient to bankrupt Barings Bank in 1995 following his ill-advised and unauthorized investments in index futures. Through a combination of poor judgement on his part, lack of oversight by management, a naive regulatory environment and unfortunate outside events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old financial institution.
Swing trading
Swing trading sits in the middle of the continuum between day trading and trend following. Swing traders hold a particular stock for a period of time, generally between a few days and two or three weeks, and trade the stock on the basis of its intra-week or intra-month oscillations between optimism and pessimism.
It should be noted that in either of the two market extremes, the bear-market environment or bull market, swing trading proves to be a rather different challenge than in a market that is between these two extremes. In these extremes, even the most active stocks will not exhibit the same up-and-down oscillations that they would when indices are relatively stable for a few weeks or months. In a bear market or a bull market, momentum will generally carry stocks for a long period of time in one direction only, thereby ensuring that the best strategy will be to trade on the basis of the longer-term directional trend.
The swing trader, therefore, is best positioned when markets are going nowhere—when indices rise for a couple of days and then decline for the next few days, only to repeat the same general pattern again and again. A couple of months might pass with major stocks and indices roughly the same as their original levels, but the swing trader has had many opportunities to catch the short terms movements up and down (sometimes within a channel).
Of course, the problem with both swing trading and long-term trend following is that success is based on correctly identifying what type of market is currently being experienced. Looking back over the past few years, trend following would have been the ideal strategy for the raging bull market of the last half of the 1990s, while swing trading probably would have been best for 2000 and 2001. With the 2002 bear market, the best strategy would have been to follow the trend and short everything in sight. As economists and traders would agree, the most accurate insight into trends is viewed in retrospect.
Much research on historical data has proven that in a market conducive to swing trading, liquid stocks tend to trade above and below a baseline value, which is portrayed on a chart with an exponential moving average (EMA). In his book Come Into My Trading Room: A Complete Guide to Trading, Alexander Elder uses his understanding of a stock's behavior above and below the baseline to describe the swing trader's strategy of “buying normalcy and selling mania” or “shorting normalcy and covering depression.” Once the swing trader has used the EMA to identify the typical baseline on the stock chart, he or she goes long at the baseline when the stock is heading up and short at the baseline when the stock is on its way down.
So, swing traders are not looking to hit the home run with a single trade—they are not concerned about perfect timing to buy a stock exactly at its bottom and sell exactly at its top (or vice versa). In a perfect trading environment, they wait for the stock to hit its baseline and confirm its direction before they make their moves. The story gets more complicated when a stronger up-trend or down-trend is at play: the trader may paradoxically go long when the stock jumps below its EMA and wait for the stock to go back up in an uptrend, or he or she may short a stock that has stabbed above the EMA and wait for it to drop if the longer trend is down.
When it comes time to take profits, the swing trader will want to exit the trade as close as possible to the upper or lower channel line without being overly precise, which may cause the risk of missing the best opportunity. In a strong market, when a stock is exhibiting a strong directional trend, traders can wait for the channel line to be reached before taking their profit, but in a weaker market they may take their profits before the line is hit (in the event that the direction changes and the line does not get hit on that particular swing).
Swing trading, while a good trading style for beginning traders, still offers significant profit potential for intermediate and advanced traders. Swing traders can realize sufficient rewards on their trades after a couple of days, which keep them motivated, but their long and short positions of several days are of ideal duration so as to not lead to distraction. By contrast, trend following offers greater profit potential if a trader is able to catch a major market trend of weeks or months, but there are few traders with sufficient discipline to hold a position for that period of time without getting distracted. On the other hand, trading dozens of stocks per day (day trading) may just prove too great a white-knuckle ride for some, making swing trading the perfect medium between the extremes.
It should be noted that in either of the two market extremes, the bear-market environment or bull market, swing trading proves to be a rather different challenge than in a market that is between these two extremes. In these extremes, even the most active stocks will not exhibit the same up-and-down oscillations that they would when indices are relatively stable for a few weeks or months. In a bear market or a bull market, momentum will generally carry stocks for a long period of time in one direction only, thereby ensuring that the best strategy will be to trade on the basis of the longer-term directional trend.
The swing trader, therefore, is best positioned when markets are going nowhere—when indices rise for a couple of days and then decline for the next few days, only to repeat the same general pattern again and again. A couple of months might pass with major stocks and indices roughly the same as their original levels, but the swing trader has had many opportunities to catch the short terms movements up and down (sometimes within a channel).
Of course, the problem with both swing trading and long-term trend following is that success is based on correctly identifying what type of market is currently being experienced. Looking back over the past few years, trend following would have been the ideal strategy for the raging bull market of the last half of the 1990s, while swing trading probably would have been best for 2000 and 2001. With the 2002 bear market, the best strategy would have been to follow the trend and short everything in sight. As economists and traders would agree, the most accurate insight into trends is viewed in retrospect.
Much research on historical data has proven that in a market conducive to swing trading, liquid stocks tend to trade above and below a baseline value, which is portrayed on a chart with an exponential moving average (EMA). In his book Come Into My Trading Room: A Complete Guide to Trading, Alexander Elder uses his understanding of a stock's behavior above and below the baseline to describe the swing trader's strategy of “buying normalcy and selling mania” or “shorting normalcy and covering depression.” Once the swing trader has used the EMA to identify the typical baseline on the stock chart, he or she goes long at the baseline when the stock is heading up and short at the baseline when the stock is on its way down.
So, swing traders are not looking to hit the home run with a single trade—they are not concerned about perfect timing to buy a stock exactly at its bottom and sell exactly at its top (or vice versa). In a perfect trading environment, they wait for the stock to hit its baseline and confirm its direction before they make their moves. The story gets more complicated when a stronger up-trend or down-trend is at play: the trader may paradoxically go long when the stock jumps below its EMA and wait for the stock to go back up in an uptrend, or he or she may short a stock that has stabbed above the EMA and wait for it to drop if the longer trend is down.
When it comes time to take profits, the swing trader will want to exit the trade as close as possible to the upper or lower channel line without being overly precise, which may cause the risk of missing the best opportunity. In a strong market, when a stock is exhibiting a strong directional trend, traders can wait for the channel line to be reached before taking their profit, but in a weaker market they may take their profits before the line is hit (in the event that the direction changes and the line does not get hit on that particular swing).
Swing trading, while a good trading style for beginning traders, still offers significant profit potential for intermediate and advanced traders. Swing traders can realize sufficient rewards on their trades after a couple of days, which keep them motivated, but their long and short positions of several days are of ideal duration so as to not lead to distraction. By contrast, trend following offers greater profit potential if a trader is able to catch a major market trend of weeks or months, but there are few traders with sufficient discipline to hold a position for that period of time without getting distracted. On the other hand, trading dozens of stocks per day (day trading) may just prove too great a white-knuckle ride for some, making swing trading the perfect medium between the extremes.
Day Traders
One who trades financial instruments such as stocks, options, futures, derivatives, and currencies very rapidly, closing all positions within the same trading day.
There are two major types of day traders: institutional and retail.
An institutional day trader is a trader who works for financial institution. This type of trader has certain advantages over retail traders as he/she generally has access to more resources, tools, equipment, large amounts of capital and leverage, large availability of fresh fund inflows to trade continuously on the markets, dedicated and direct lines to data centers and exchanges, expensive and high-end trading and analytical software, support teams to help, and more. All these advantages give them certain edges over retail day traders.
A retail day trader (or private day trader) is a trader who works for himself, or in partnership with a few other traders. A retail trader generally trades with his own capital, though he may also trade with other people's money. Law has restricted the amount of other people's money a retail trader can manage. In the United States, day traders may not advertise as advisors or financial managers. Although not required, nearly all retail day traders use direct access brokers as they offer the fastest order entry and to the exchanges, as well as superior software trading platforms.
In the past, most day traders were institutional traders due to the huge advantages they had over retail traders. However, since the technology boom in the second half of the 1990s, advances in personal computing and communications technology, realized in the accessibility of powerful personal computers and the Internet, have brought fast online trading and powerful market analytical tools to the mainstream. Low, affordable commissions from discount brokers as well as regulation improvements in favor of retail traders have also helped level the trading playing field, making success as a retail trader a possibility for many and a reality for some.
There are two major types of day traders: institutional and retail.
An institutional day trader is a trader who works for financial institution. This type of trader has certain advantages over retail traders as he/she generally has access to more resources, tools, equipment, large amounts of capital and leverage, large availability of fresh fund inflows to trade continuously on the markets, dedicated and direct lines to data centers and exchanges, expensive and high-end trading and analytical software, support teams to help, and more. All these advantages give them certain edges over retail day traders.
A retail day trader (or private day trader) is a trader who works for himself, or in partnership with a few other traders. A retail trader generally trades with his own capital, though he may also trade with other people's money. Law has restricted the amount of other people's money a retail trader can manage. In the United States, day traders may not advertise as advisors or financial managers. Although not required, nearly all retail day traders use direct access brokers as they offer the fastest order entry and to the exchanges, as well as superior software trading platforms.
In the past, most day traders were institutional traders due to the huge advantages they had over retail traders. However, since the technology boom in the second half of the 1990s, advances in personal computing and communications technology, realized in the accessibility of powerful personal computers and the Internet, have brought fast online trading and powerful market analytical tools to the mainstream. Low, affordable commissions from discount brokers as well as regulation improvements in favor of retail traders have also helped level the trading playing field, making success as a retail trader a possibility for many and a reality for some.
Stock trader
Individuals or firms trading equity (stock) on the stock markets as their principal capacity are called stock traders. Stock traders usually try to profit from short-term price volatility with trades lasting anywhere from several seconds to several weeks. The stock trader is usually a professional. A person can call themself a full or part-time stock trader/investor while maintaining other professions. When a stock trader/investor has clients, and acts as a money manager or adviser with the intention of adding value to their clients finances, they are also called a financial advisor or manager. In this case, the financial manager could be an independent professional or a large bank corporation employee. This may include managers dealing with investment funds, hedge funds, mutual funds, and pension funds, or other professionals in equity investment, fund management, and wealth management. Several different types of stock trading exist including day trading, swing trading, market making, scalping (trading), momentum trading, trading the news, and arbitrage.
Stock traders in the trading floor of the New York Stock Exchange.
On the other hand, stock investors purchase stocks with the intention of holding for an extended period of time, usually several months to years. They rely primarily on fundamental analysis for their investment decisions and fully recognize stock shares as part-ownership in the company. Many investors believe in the buy and hold strategy, which as the name suggests, implies that investors will hold stocks for the very long term, generally measured in years. This strategy was made popular in the equity bull market of the 1980s and 90s where buy-and-hold investors rode out short-term market declines and continued to hold as the market returned to its previous highs and beyond. However, during the 2001-2003 equity bear market, the buy-and-hold strategy lost some followers as broader market indexes like the NASDAQ saw their values decline by over 60%.
Stock traders/investors usually need a stock broker such as a bank or a brokerage firm to access the stock market. Since the advent of Internet banking, an Internet connection is commonly used to manage positions. Using the Internet, specialized software, and a personal computer, stock traders/investors make use of technical analysis and fundamental analysis to help them in the decision-making process. They may use several information resources. Some of these resources are strictly technical. Using the pivot points calculated from a previous day trading, traders are able to predict the buy and sell points of the current day trading session. This pivot points give a cue to traders as to where price will head for the day; signalling the trader where to enter his trade, and where to exit. There are criticism on the validity of these technical indicators used in technical analysis, and many professional stock traders do not use them. Many full-time stock traders and stock investors have a formal education of some sort in fields like economics, mathematics and computer science, which are, in general, particularly relevant for this occupation.
Trading activities are not free. They have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking for an easy way to make money quickly. In addition, stock traders/investors face several costs such as commissions, taxes and fees to be paid for the brokerage and other services, like the buying/selling orders placed at the stock exchange. According to each National or State legislation, a large array of fiscal obligations must be respected, and taxes are charged by the jurisdiction over the transactions, dividends and capital gains. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the jurisdiction, or that tax free stock market operations are useful to boost economic growth. Beyond these costs, the opportunity costs of money and time, the currency risk, the financial risk, and all the Internet Service Provider, data and news agency services and electricity consumption expenses must be added.
Stock traders in the trading floor of the New York Stock Exchange.
On the other hand, stock investors purchase stocks with the intention of holding for an extended period of time, usually several months to years. They rely primarily on fundamental analysis for their investment decisions and fully recognize stock shares as part-ownership in the company. Many investors believe in the buy and hold strategy, which as the name suggests, implies that investors will hold stocks for the very long term, generally measured in years. This strategy was made popular in the equity bull market of the 1980s and 90s where buy-and-hold investors rode out short-term market declines and continued to hold as the market returned to its previous highs and beyond. However, during the 2001-2003 equity bear market, the buy-and-hold strategy lost some followers as broader market indexes like the NASDAQ saw their values decline by over 60%.
Stock traders/investors usually need a stock broker such as a bank or a brokerage firm to access the stock market. Since the advent of Internet banking, an Internet connection is commonly used to manage positions. Using the Internet, specialized software, and a personal computer, stock traders/investors make use of technical analysis and fundamental analysis to help them in the decision-making process. They may use several information resources. Some of these resources are strictly technical. Using the pivot points calculated from a previous day trading, traders are able to predict the buy and sell points of the current day trading session. This pivot points give a cue to traders as to where price will head for the day; signalling the trader where to enter his trade, and where to exit. There are criticism on the validity of these technical indicators used in technical analysis, and many professional stock traders do not use them. Many full-time stock traders and stock investors have a formal education of some sort in fields like economics, mathematics and computer science, which are, in general, particularly relevant for this occupation.
Trading activities are not free. They have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking for an easy way to make money quickly. In addition, stock traders/investors face several costs such as commissions, taxes and fees to be paid for the brokerage and other services, like the buying/selling orders placed at the stock exchange. According to each National or State legislation, a large array of fiscal obligations must be respected, and taxes are charged by the jurisdiction over the transactions, dividends and capital gains. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the jurisdiction, or that tax free stock market operations are useful to boost economic growth. Beyond these costs, the opportunity costs of money and time, the currency risk, the financial risk, and all the Internet Service Provider, data and news agency services and electricity consumption expenses must be added.
Stock broker
A stock broker or stockbroker is a regulated professional who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors.
Requirements:
In order to become a stockbroker in the United States, a candidate must pass the General Securities Representative Examination (also known as the "Series 7 exam").
In the UK, brokers are required to pass the SII (Securities and Investment Institute) Certificate in Securities, this qualification is achieved by passing two exams: Either Unit 1: FSA Financial regulations or Unit 6 Principles of Financial Regulation for MiFID compliant retail trading, and either Unit 2: Securities, Unit 3: Derivatives or Unit 4: for both Securities and Derivatives. Passing Unit 1 or Unit 6 identifies individuals as having attained FSA Approved Person Status.
Services provided:
A transaction on a stock exchange must be made between two members of the exchange — an ordinary person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker.
There are three types of stockbroking service.
Execution-only, which means that the broker will only carry out the client's instructions to buy or sell.
Advisory dealing, where the broker advises the client on which shares to buy and sell, but leaves the final decision to the investor.
Discretionary dealing, where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf.
Stock broker: A stock broker would deal with shares. Shares and stocks have the same definition; a share is a unitized ownership stake in a company's equity. A stock is a piece of money – a share of a company – that a few years ago were represented on a document, and nowadays records are kept electronically. A stockbroker possesses a number of shares; however he or she can choose how many of these he or she wishes to trade, so that perhaps some can be kept for him or her. Keeping an amount is understandable, because stock-broking is a risky business. This is because the prices that shares are worth are constantly increasing and decreasing, depending on how much money the company you are dealing with, is producing. For example, say a stockbroker buys a share from a dealer, for $1, and then sells it to a client for x sum of money. The next day, the price for that same share value, decreases (the company is not producing as much money), so that it's now worth 50p. The stockbroker had spent $1, however, which was 50p too much: he or she has just lost 50p. That's how stockbrokers lose money. They then continue trading at what they think are suitable times – when it is unlikely for the price of a share to alter (to start with he or she could buy that share back for 50p and sell it again, to another client).
Foreign Exchange Members: These city traders deal with currencies. Their clients are usually called "market makers" (literally makers of markets: shopkeepers are a common example) and are the people they use to earn money. Currencies are traded, for example: the stock broker can give his/her client $1, and the client can give him/her £1 in return, as long as such a deal was discussed and agreed to (as mentioned previously, the person who makes the final decision as to what the deal is going to be depends on the position of the stockbroker - in Advisory dealing, for example, the investor makes the concluding decision.) In this case the city trader gains profit (because he/she gains £1, that is worth more than what he/she gave [$1]), but indeed often the market maker does too (that's how they earn their money). For example, it would be perfectly possible for the city trader to hand over £1 and let his/her client give back only $1. N.B: You have to bear in mind that very large sums of money - not the example of $1 and £1 above - are exchanged.
Bond-dealers:A bond-dealer is a city trader who lends a sum of money to a stock (section of a company). If a company owns £1,000,000, and this was due to a million bondholders each lending £1 to the stock, than each bondholder lends a bond of £1.
Traders at hedge funds and on banks' proprietary trading desks trade via market makers (the banks).
You have to bear in mind that these city traders do not have clients at their desk(s) to perform the deal - the Foreign Exchange (for example) keep aware of the various money-exchanges through software on the computer, a particular and more popular one being known as "CREST". Other methods of dealing include using the phone. There are other occupations within the title of being a "city trader", but these are the main three, in which the first is most common.
Requirements:
In order to become a stockbroker in the United States, a candidate must pass the General Securities Representative Examination (also known as the "Series 7 exam").
In the UK, brokers are required to pass the SII (Securities and Investment Institute) Certificate in Securities, this qualification is achieved by passing two exams: Either Unit 1: FSA Financial regulations or Unit 6 Principles of Financial Regulation for MiFID compliant retail trading, and either Unit 2: Securities, Unit 3: Derivatives or Unit 4: for both Securities and Derivatives. Passing Unit 1 or Unit 6 identifies individuals as having attained FSA Approved Person Status.
Services provided:
A transaction on a stock exchange must be made between two members of the exchange — an ordinary person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker.
There are three types of stockbroking service.
Execution-only, which means that the broker will only carry out the client's instructions to buy or sell.
Advisory dealing, where the broker advises the client on which shares to buy and sell, but leaves the final decision to the investor.
Discretionary dealing, where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf.
Stock broker: A stock broker would deal with shares. Shares and stocks have the same definition; a share is a unitized ownership stake in a company's equity. A stock is a piece of money – a share of a company – that a few years ago were represented on a document, and nowadays records are kept electronically. A stockbroker possesses a number of shares; however he or she can choose how many of these he or she wishes to trade, so that perhaps some can be kept for him or her. Keeping an amount is understandable, because stock-broking is a risky business. This is because the prices that shares are worth are constantly increasing and decreasing, depending on how much money the company you are dealing with, is producing. For example, say a stockbroker buys a share from a dealer, for $1, and then sells it to a client for x sum of money. The next day, the price for that same share value, decreases (the company is not producing as much money), so that it's now worth 50p. The stockbroker had spent $1, however, which was 50p too much: he or she has just lost 50p. That's how stockbrokers lose money. They then continue trading at what they think are suitable times – when it is unlikely for the price of a share to alter (to start with he or she could buy that share back for 50p and sell it again, to another client).
Foreign Exchange Members: These city traders deal with currencies. Their clients are usually called "market makers" (literally makers of markets: shopkeepers are a common example) and are the people they use to earn money. Currencies are traded, for example: the stock broker can give his/her client $1, and the client can give him/her £1 in return, as long as such a deal was discussed and agreed to (as mentioned previously, the person who makes the final decision as to what the deal is going to be depends on the position of the stockbroker - in Advisory dealing, for example, the investor makes the concluding decision.) In this case the city trader gains profit (because he/she gains £1, that is worth more than what he/she gave [$1]), but indeed often the market maker does too (that's how they earn their money). For example, it would be perfectly possible for the city trader to hand over £1 and let his/her client give back only $1. N.B: You have to bear in mind that very large sums of money - not the example of $1 and £1 above - are exchanged.
Bond-dealers:A bond-dealer is a city trader who lends a sum of money to a stock (section of a company). If a company owns £1,000,000, and this was due to a million bondholders each lending £1 to the stock, than each bondholder lends a bond of £1.
Traders at hedge funds and on banks' proprietary trading desks trade via market makers (the banks).
You have to bear in mind that these city traders do not have clients at their desk(s) to perform the deal - the Foreign Exchange (for example) keep aware of the various money-exchanges through software on the computer, a particular and more popular one being known as "CREST". Other methods of dealing include using the phone. There are other occupations within the title of being a "city trader", but these are the main three, in which the first is most common.
Karachi Stock Exchange
The Karachi Stock Exchange or KSE is a stock exchange located in Karachi, Sindh, Pakistan. Founded in 1947, it is Pakistan's largest and oldest stock exchange, with many Pakistani as well as overseas listings. Its current premises are situated on Stock Exchange Road, in the heart of Karachi's Business District.
History:
History:
Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan. It was declared the “Best Performing Stock Market of the World for the year 2002”. As on May 30, 2008, 654 companies were listed with a market capitalization of Rs. 3,746.203 billion (US$ 56.334 billion) having listed capital of Rs. 705.873 billion (US$ 10.615 billion). The KSE 100TM Index closed at 12130.51 on May 30, 2008.
Trading:
The exchange has pre-market sessions from 09:15am to 09:30am and normal trading sessions from 09:30am to 03:30pm. It is the second oldest stock exchange in South Asia.[1] The karachi stock exchange has undergone a considerable deal of downturn partly due to global financial crisis and partly on account of domestic troubles. It remained suspended in excess of 4 months and resumed normal trading only on December 15,2008. The KSE 100 Index and KSE 30 Index after hitting the low around mid january has now rebounced and recovered 20-25% till March 12th 2009.
Growth:
The KSE is the biggest and most liquid exchange in Pakistan and in 2002 it was declared as the “Best Performing Stock Market of the World” by “Business Week”. As of December 20, 2007, 671 companies were listed with the market capitalization of Rs. 4364.312 billion (US$ 73 Billion) having listed capital of Rs. 717.3 billion (US$ 12 billion). On December 26, 2007, the KSE 100 Index reached its ever highest value and closed at 14,814.85 points.
Foreign buying interest had been very active on the KSE in 2006 and continued in 2007. According to estimates from the State Bank of Pakistan, foreign investment in capital markets total about US$523 Million. According to a research analyst in Pakistan, around 20pc of the total free float in KSE-30 Index is held by foreign participants.
KSE has seen some fluctuations since the start of 2008. One reason could be that it is the election year in Pakistan, and stocks are expected to remain dull. KSE has set an all time high of 15,000 points, before settling around the 14,000 mark.
Karachi stock exchange Board of Directors has recently (2007) announced plans to construct a 40 story high rise KSE building, as a new direction for future investment.
Disputes between investors and members of the Exchange are resolved through deliberations of the Arbitration Committee of the Exchange.
KSE began with a 50 shares index. As the market grew a representative index was needed. On November 1st, 91 the KSE-100 was introduced and remains to this day the most generally accepted measure of the Exchange. Karachi Stock Exchange 100 Index (KSE-100 Index) is a benchmark used to compare prices overtime, companies with the highest market capitalization are selected. To ensure full market representation, the company with the highest market capitalization from each sector is also included.
In 1995 the need was felt for an all share index to reconfirm the KSE-100 and also to provide the basis of index trading in future. On August the 29th, 1995 the KSE all share index was constructed and introduced on September 18, 1995.
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