Stocks and Bonds

STOCKS AND BONDS
Stock Market or Equity Market
-is a private or public market for the

trading company stock and
derivatives of company stock at an
agreed price; these are the securities
listed on a stock exchange as well as
those traded privately.
Philippine Stock Exchange,Inc
"PSE" or the "EXCHANGE"
-is a private organization that provides
and ensures a fair, efficient,
transparent and orderly market for
the buying and selling of securities.
Two former bourses;
Root of Philippine Stock
Exchange
 Manila Stock Exchange (MSE)
-founded in March 1927, the first stock
exchange in the Philippines and one of
the oldest in Asia.
 Makati Stock Exchange (MkSE)

-established in May 1963 and became the
second bourse to operate in the country
December 23,1992
-when MSE and MkSE were unified to
become the PSE (Philippine Stock
Exchange).
Two Trading Floors (one-price, one market)

1. Makati City
2. Pasig City
Trading Floor
-the area in a bank or stock exchange where
securities are traded .
MakTrade System
 this is a single-order-book system that
tallies all orders into one computer and
ensures that these orders match with the
best bid/best offer regardless of which
floor the orders were placed.
 allows PSE to facilitate the trading of

securities in a broker-to-broker market
through automatic order and trade
routing and confirmation.
Cont.
 keeps an eye on any irregularity in the
transactions with its market regulation
and surveillance databases.
June 1998
- the Securities and Exchange Commission
conferred to the PSE the status of a Self-
Regulatory Organization.
Self- Regulatory Organization

- allows the PSE to implement its own rules
and impose penalties on erring trading
participants and listed companies.
Self- Regulatory Organization
-is an organization that exercises some
degree of regulatory authority over an
industry or profession.
2001 or a year after the Securities

Regulation Code of 2000 was enacted.
 the PSE was recognized and transformed

from a non-stock ,member-governed
organization into a share holder based,
revenue generating corporation.
 separation of the Exchange’s ownership and
trading rights, opening the doors for new
market participants.
Philippine Central Depository PCDI(1995)

- a central securities depository company
organized to implement a book-entry
system that will greatly improve the
efficiency of securities settlement.
- provides securities settlement system for

both debt and equity instrument of the
exchange.
Securities Clearing Corporation of the
Philippines ("SCCP")
-established to provide a centralized
clearance, settlement and risk management
services in the book entry environment of
the PCDI system.
PSE Composite and Sectoral Indices

Financial Services
Industrial Mining
Holding Firms Oil
Property
Services
MISSION
The PSE is committed to:
 Offer products and services responsive to

the needs of investors and other
stakeholders.
 Provide a facility for fair, accurate, complete

and timely information about listed
companies, while extending market
education and awareness programs to
investors.
MISSION
 Be a preferred venue for raising capital.
 Practice and promote good governance

within the Exchange and among listed
companies and trading participants.
 Operate efficiently to optimize shareholder

value.
MISSION:
 Adopt world-class systems and global best

practices for an efficient, fair and orderly
market.
 Develop a highly motivated and professional

workforce, committed to serve and excel.
VISION:
A premier exchange with world-class standards for
trading securities and raising capital that serves as a
strong engine for a robust economy.
CORPORATE VALUES :
 Professionalism in delivering quality service
and in meeting the highest standards of
excellence.
 Integrity, transparency and accountability in

implementing business programs and
enforcing decisions.
CORPORATE VALUES :
 Teamwork in working towards a common and
favorable goal for the market.
 Mutual respect in relating with fellow

employees.
 Inner strength in prioritizing the common
good of the market instead of individual
interest.
 Corporate responsibility in promoting market

growth hand in hand with community
welfare.
What are Stocks? Securities?
Stocks are shares of ownership in a

corporation.
Securities are proof of one's ownership or

indebtedness in a company .
Examples:
treasury bill short-term ; money
commercial papers market
stocks long-term ; capital bonds
market
Stockbroker – someone who deals in stocks
and shares.
Stock certificate - document showing

stockholders ownership in the company.
Stock Dividend – pro rate distribution of
additional shares of a corporation’s own
stock to its stockholder.
Stock holder – and individual or business that

owns shares in a corporation.
Stockholders equity – ownership interest of

stockholders in the corporation
Stock market – a stock exchange; the buying

and selling of stocks and shares.
What are the types of Securities that I can buy
in the stock market?
1. Common Stocks - units of ownership of a

public corporation.
2. Preferred Stocks - stocks issued by a firm

which shareholders are given preference
over common stockholders.

3. Warrants - refers to a derivative instrument
which grants the holders the right but not
the obligation to buy (in the case of a call
warrant) or sell (in the case of put warrant)
a stated number or shares of stock at a
specified price and at a specific time in the
future.
4. Philippine Deposit Receipts (PDRs) - a

security which grants the holder the right to
the delivery of sale of the underlying share.
5. Small-Demominated Treasury Bonds
(SDT-Bonds)
-are long-term and relatively risk-free debt
securities issued by the Bureau of Treasury
(BTr) of the Republic of the Philippines.
How are shares and SDT bonds bought
or sold?
Stockbroker is a person or a corporation
authorized and licensed by the Securities and
Exchange Commission (SEC) and PSE to trade
securities.
Investing Procedures:
1. Choose a stockbroker.
2. You shall be required to open an account
and fill-out a Reference Card and to submit
identification papers for verification.
3. Give the order to your broker/trader, and
then get the acknowledgement receipt.
4. For equity transactions: Deliver the Stock
Certificate if you are selling or pay within
the settlement date (3 days from date of
transaction) if you are buying.
For SDT-Bonds transactions: Selling

investors must open a RoSS account under
his broker's sub-account and instruct his
bank-underwriter to transfer the share to
this account.
5. You shall receive from your broker either

the proceeds of sale your stocks (after 3
days for equities and on the date of trade
for SDT-Bonds) or proof of ownership of
stocks you bought (confirmation receipt and
invoice).
Note:
You can purchase shares of stock either through IPO (Initial Public
Offering) or through the open market.
The Trading Cycle
How can I profit in the stock market?
 Capital Gains
-these are profits made due to an increase in
the market price of a stock from the buying
price.
 Cash Dividend
-a dividend given to shareholders in the form
of cash. It is computed by multiplying the
number of shares held by the cash dividend
rate declared.
 Stock Dividend
-a dividend given to shareholders in the form
of additional stocks. It is computed by
multiplying the number of shares held by the
percentage of the stock dividend declared.
 Stock Rights
-stock rights offering is the option given to
the present shareholders to buy additional
shares of stock at a price lower than its
market price.
What is a bond ?
Bond – is written promise by a company,
government or other institution to pay the
face amount at the maturity date.
- represents borrowing lending agreements.
Bond discount – the amount below face value

at which a bond is issued.
Bond premium -the amount in excess of face

value(maturity value) at which a bond is
issued.
Bond dividend – a dividend paid in the issuing
company’s own bonds.
Bond indenture - agreement between a bond

issue and holder covering the terms of issue.
Bond rating – quality ratings of corporate and

municipal bond issues.
Bond redemption – a transaction in which

bonds are repurchased or retired by the
issues.
Bond valuation – the process followed by an
investor in determining what to pay for a
bond.
Par value ( or Face value) – the amount which

will be paid by the debtor or issuer upon
maturity.
Maturity – the length of time that has to expire

for the face value of the bond to be paid by
the issuer.
Bearer – bonds may be paid to the bearer or
holder of the bond.
Mortgage bonds or debentures – bonds which

have as security for its repayment some
assets ( usually real state).
Government Securities
are unconditional obligations of the Republic of

the Philippines. It is back by the full taxing
power of the national government.
Two kinds of government securities:

1. Treasury bills (T-bills)
2. Treasury bonds (T-bonds)
Treasury bills are government securities which
mature in less than a year. T bills can be in:
1. 91- day bills
2. 182 day bills
3. 364 day bills
Treasury bonds - an interest-bearing debt

security issued by the government, with an
initial life of between ten and thirty years

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STOCKS AND BONDS

Stock Market or Equity Market

-is a private or public market for the

 Makati Stock Exchange (MkSE)

Two Trading Floors (one-price, one market)

 allows PSE to facilitate the trading of

Self- Regulatory Organization

2001 or a year after the Securities

 the PSE was recognized and transformed

Philippine Central Depository PCDI(1995)

- provides securities settlement system for

PSE Composite and Sectoral Indices

 Offer products and services responsive to

 Provide a facility for fair, accurate, complete

 Be a preferred venue for raising capital.

 Practice and promote good governance

 Operate efficiently to optimize shareholder

 Adopt world-class systems and global best

 Develop a highly motivated and professional

 Integrity, transparency and accountability in

 Mutual respect in relating with fellow

 Corporate responsibility in promoting market

Stocks are shares of ownership in a

Securities are proof of one's ownership or

Stock certificate - document showing

Stock holder – and individual or business that

Stockholders equity – ownership interest of

Stock market – a stock exchange; the buying

1. Common Stocks - units of ownership of a

2. Preferred Stocks - stocks issued by a firm

4. Philippine Deposit Receipts (PDRs) - a

For SDT-Bonds transactions: Selling

5. You shall receive from your broker either

- represents borrowing lending agreements.

Bond discount – the amount below face value

Bond premium -the amount in excess of face

Bond indenture - agreement between a bond

Bond rating – quality ratings of corporate and

Bond redemption – a transaction in which

Par value ( or Face value) – the amount which

Maturity – the length of time that has to expire

Mortgage bonds or debentures – bonds which

are unconditional obligations of the Republic of

Two kinds of government securities:

Treasury bonds - an interest-bearing debt

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