Participants in the Securities Markets
Participants in the Securities Markets. People of different categories do engage in share trading on DSE. Share ownership in DSE has increased significantly during the last couple of years. The motivation of all the participants is presumed to be the same: to earn a return at least commensurate with the level of risk assumed.Participants in the Securities Markets.
In the securities markets, there are many different groups of potential buyers viz., people who buy stocks because they want to have capital gain; people who buy stocks because of some interesting news captured their interest; people who buy stocks to take advantage of arbitrage plays; and people who buy stocks to obtain dividends. Each group can be lured into the marketing of stocks at different entry points in the cycle. These people with diverse interest can be further broken down into two categories: capital gain players and return on investment players.
However, the participants in the securities markets are named as follows:
Securities and Exchange Commission: The Securities and Exchange Commission is the federal regulatory agency that oversees the issuance and trading of securities. Its mission is to administer laws in the securities field and to protect investors and the public in the securities transactions.
Stock Exchange: It provides a market place or facilities for bringing together buyers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange and includes such market place and facilities. Regulations for the admission of securities for trading on the stock exchanges are very stringent.
Issuer: It’s an either existing or a newly established firm offering or already offered bonds, notes or securities for public sale or private placement.
Underwriter: The individual or firm finding the investors for the initial public offerings of securities are called underwriters. It is also called investment banker. It purchases new issues from the issuers and arranges for their resale to the investors. The investment-banking firm that first reaches an agreement with the issuer is called the originator. The originator ultimately manages the flotation and coordinate two temporary groups called underwriting syndicate and the selling group.
Commercial Bank: Commercial banks participate in the securities markets by making portfolio management with the equity shares for their own and for the customers also. In recent days commercial banks have been found to be entering the securities markets in the form of being underwriters of public issue of shares, and then managing portfolio with small amount of shares for their own profit. In addition to the commercial operations, commercial banks keep a serious thought to participatory role in the securities markets.
Investment Company: It’s a company engaged in buying and selling securities of other companies and includes a company, the investment of which in share capital of other companies at any one time is of enlargement equivalent to eighty per cent of the aggregate of its own paid up capital and free reserves.
Broker: It means any person engaged in the business of effecting transactions in securities for the accounts of others. Brokers are commission sales people who need not invest their own funds in the securities they sell. Dealers employ many brokers.
Dealer: A dealer is an individual or a firm that puts its own capital at risk by investing in a security in order to carry an inventory of the security and makes a market in it. Typically a dealer buys for his or her own account and sells to the customers from the dealer’s inventory. Dealer’s profit or loss is the difference between the prices he pays and the price he receives for the same security. The same individual or firm may function at different times, as broker and dealer.
Speculator: It’s an individual who is willing to assume a relatively large risk in the hope of a large gain in shorter period of time. Its principal concern is to increase capital rather than dividend income. Speculator may buy and sell the same day or may invest in enterprises they do not expect to be profitable for years.
Broker-dealer (B/D): It’s a firm that retails mutual fund shares and other securities to the public.
Jobber: He is the person engaged in the business of effecting transactions in securities for his own account but does not include any person trading securities either individually or in some fiduciary capacity otherwise than as a part of a regular business.
Investor: It’s an individual whose principal concerns in the purchase of a security are regular dividend income, safety of the original investment and if possible, capital appreciation.
Bear: It’s a person who thinks security prices will fall. It denotes the description given to the stock market when share prices are falling and when the economic outlook is pessimistic.
Bull: It’s a person who believes security prices will rise. It denotes the description given to the stock market when share prices are rising and when the economic outlook is optimistic.
Stag: This is the description given to the share market when an investor buys shares offered in a new issue and sells them shortly afterward. These investors have no intention to hold the shares as a medium or long-term investment.
Commission Broker: An agent who executes the public’s orders for the purchase or sale of securities. He is the employee of a member firm who buys or sells for the customers of the firms.
Floor Broker: A member of a stock exchange who executes orders on the floor of the exchange to buy or sell listed securities. Sometimes he acts on floor for the other members.
Registered Trader: An exchange member who utilizes his floor trading privileges primarily to purchase and sell for his own account and others that he has an interest. He is allowed to use his membership to buy or sell for his own account.
Specialist: It refers to as the center of the auction market. He has two functions; viz., to serve as broker who handles the limit order or special orders placed with member brokers and to act as dealer in the stocks assigned to him in order to maintain a ‘fair and orderly market’. He is expected to buy or sell for his own account when there is insufficient public supply or demand to provide a continuous, liquid market.
Short seller: A short sale occurs when one person sells a second person security borrowed from a third person. A short seller is the speculator who expects the price of that security to fall, enabling him to purchase the security at a lower price later and then delivers it at the higher price at which he had previously arranged to sell it.
Participants in the Securities Markets