The Stock Exchange SS2 Commerce Lesson Note

A stock exchange is a specialized market where investors can buy and sell existing securities like shares, stocks, debentures and gill edge securities. It is a part of the capital market.

FUNCTIONS (IMPORTANCE) OF THE STOCK EXCHANGE

1. It is a market for buying and selling of hand securities.
2. It assists companies to raise capital
3. It determines the value (prices) of shares, stock and other securities daily.
4. The prices of shares quoted on the stock exchange serve as economic indicators.
5. It assists the government in raising funds e.g. through development stock.
6. It protects investors from any form of fraud.
7. It helps to raise the administrative standard of companies by improving financial management and accounting information. 
8. It employs brokers, jobbers, clerks etc.
9. It provides information to investors and is also involved in investors’ education.
10. It provides a yardstick for measuring the performance of companies.

OPERATORS AT THE STOCK EXCHANGE

Members operating at the stock exchange are:

1. Brokers (Stockbrokers)
2. Jobbers
3. Authorized clerk

TYPES OF SECURITIES DEALT IN AT THE STOCK EXCHANGE

1. Shares 
2. Stocks
3. Debentures
4. Bonds
5. Gilt-edge securities: These are securities issued by the government. This type of security is very safe as the government cannot default (i.e. fail to pay its debts). They are therefore regarded as being risk-free investments.

SPECULATORS AT THE STOCK EXCHANGE

1. Bull: This is a speculator who buys securities with the hope that the price will rise and that he will sell at a higher price for a gain.
2. Bear: This is a speculator who sells securities hoping that the price will fall so that he can buy them at lower prices later and thereby make a profit.
3. Stag: This is a speculator who buys new issues directly from a public limited company in the hope that the shares or stocks will be in great demand once they are quoted on the stock exchange a few days later. The stag hopes to make a profit after selling.

METHODS OF ACHIEVING QUOTATION OF SHARES AT THE STOCK EXCHANGE

1. Offer for sale
2. Offer for subscription
3. Introduction
4. Placement