Stock Market: Over-The-Counter (OTC) or Off-Exchange Trading Is Done Directly Between Two
Stock Market: Over-The-Counter (OTC) or Off-Exchange Trading Is Done Directly Between Two
Stock Market: Over-The-Counter (OTC) or Off-Exchange Trading Is Done Directly Between Two
The market in which shares of publicly held companies are issued and traded either
through exchanges or over-the-counter markets. Also known as the equity market
A stock exchange is often the most important component of a stock market
Over-the-counter (OTC) or off-exchange trading is done directly between two
parties, without any supervision of an exchange
Stock market consists of primary market and secondary market
The primary market is the part of the capital market that deals with issuing of
new securities. This is typically done through an investment bank. Also known as
"new issue market" (NIM)
The secondary market, also called aftermarket, is the financial market in which
previously issued financial instruments are bought and sold. The Karachi Stock
exchanges is a secondary market.
Stock Exchange
A stock exchange is a form of exchange which provides services for stock
brokers and traders to trade stocks, bonds, and other securities.
A stockbroker is a regulated professional individual, usually associated with
a brokerage firm or broker-dealer, who buys and sells stocks and other securities for
both retail and institutional clients, through a stock exchange or over the counter, in
return for a fee or commission.
A stock trader refers to a person or entity engaging in the trading of equity
securities, in the capacity of agent, hedger, arbitrageur, speculator, or investor.
Stock exchanges also provide facilities for issue and redemption of securities and
other financial instruments, and capital events including the payment of income
and dividends. Securities traded on a stock exchange include stock issued
by companies, unit trusts, derivatives, pooled investment products
and bonds. It is one of the most vital areas of a market economy because it gives
companies access to capital and investors a slice of ownership in a company with
the potential to realize gains based on its future performance
Going public
Capital intensive companies, particularly high tech companies, always need to raise high volumes of
capital in their early stages. For this reason, the public market provided by the stock exchanges has
been one of the most important funding sources for many capital intensive startups.
Venture capital
A third usual source of capital for startup companies has been venture capital. An investor who either
provides capital to startup ventures or supports small companies that wish to expand but do not have
access to public funding. Venture capitalists are willing to invest in such companies because they can
earn a massive return on their investments if these companies are a success.
Venture capitalists also experience major losses when their picks fail, but these investors are typically
wealthy enough that they can afford to take the risks associated with funding young, unproven
companies that appear to have a great idea and a great management team.
Corporate partners
A fourth alternative source of cash for a private company is a corporate partner, usually an
established multinational company, which provides capital for the smaller company in return for
marketing rights, patent rights, or equity. Corporate partnerships have been used successfully in a
large number of cases.
help companies' management boards finance their organizations. This may promote business activity with
benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger
economic growth and higher productivity levels of firms. Sometimes it is very difficult for the stock investor
to determine whether or not the allocation of those funds is in good faith and will be able to generate longterm company growth, without examination of a company's internal auditing.
5) Profit sharing
Both casual and professional stock investors, as large as institutional investors or as small as an ordinary
middle-class family, through dividends and stock price increases that may result in-capital gains, share in
the wealth of profitable businesses. Unprofitable and troubled businesses may result in capital losses for
shareholders.
6) Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve management
standards and efficiency to satisfy the demands of these shareholders, and the more stringent rules for
public corporations imposed by public stock exchanges and the government. Consequently, it is alleged
that public companies (companies that are owned by shareholders who are members of the general
public and trade shares on public exchanges) tend to have better management records than privately
held companies (those companies where shares are not publicly traded, often owned by the company
founders and/or their families and heirs, or otherwise by a small group of investors).
However, when poor financial, ethical or managerial records are known by the stock investors, the stock
and the company tend to lose value. In the stock exchanges, shareholders of underperforming firms are
often penalized by significant share price decline, and they tend as well to dismiss incompetent
management teams.
or otherwise raise additional funds to make any regular coupon payments and refund the principal when
the bonds mature.
Listing requirements
Listing requirements are the set of conditions imposed by a given stock exchange upon companies that
want to be listed on that exchange. Such conditions sometimes include minimum number of shares
outstanding, minimum market capitalization, and minimum annual income. For example in Karachi stock
exchange
(1) No company will be listed unless it is registered under the Ordinance as a public limited
company or has been setup under a statute and its minimum paid-up capital is Rs.200 million.
(3) Despite receiving the application for listing and any preliminary actions thereon, no company
shall be listed unless it has made a public issue which is subscribed by not less than 500
applications.