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TOPIC: STOCK EXCHANGE cont’d
CONTENT:
- Speculation: meaning and speculators
- Bodies can assess capital market (public and government).
- Second tier security market i. meaning
- Advantages to the company and public investing
- Operating regulations
- Primary and secondary markets/ first tier and second tier
SUB-TOPIC 1: Speculation
Speculation is the purchase of securities by speculators in the hope that its price will rise and that profitable resale will thereby be possible. Speculators take advantage of price fluctuation of prices, buy shares with the intention of reselling them when the prices rise.
Types of speculators
- Bull: a bull is a speculator who buys securities with the intention of reselling them at a higher price before the payment on the securities is due. He buys securities and waits for a time of general rise in price of securities.
- Bear: A speculator who expects prices to of securities to fall before delivery dates and thus sells out to make good profit. He sells to people the securities he does not yet possess with the speculation that the price of the securities will fall before the delivery date so that he can acquire the securities and sell at a profit margin.
- Stag: A stag is a speculator who applies for new issues of shares and stock in large quantity with the hope that prices of the shares will rise above the offer prices. He hopes to make profit after selling.
SUB-TOPIC 2: BODIES THAT CAN ASSESS CAPITAL MARKET
The Securities and Exchange Commission (SEC) is the apex regulatory body for Nigeria’s capital market which operates the supervision of the Federal Ministry of Finance. Securities and Exchange commission was established in 1979 and has the following functions:
- Valuation of shares
- Registration of Market operators
- Approval of shares allotment
- Registration of Securities
- Enforcement of sanctions against erring operators
- Approval and registration on merger and acquisition.
- Acting as Regulatory Apex Organization of Nigeria Capital Market.
Nigeria Security Clearing System (CSCS): This is an independent organization which performs the clearing and settlement of transaction for the stock exchange. They perform the following roles:
- Acting as a central depository of certificate.
- It acts as sub-registrar to all companies
- It reduces the settlement cycle
- Ensures clearing and settlement of transactions.
- Keeps financial instrument.
- Eliminates cases of missiong identification.
- Issues central securities identification numbers to stock brokers and investors.
EVALUATION:
- Describe the following: bull ii. Stock broker iii. Stage iv. Securities.
- List 2 bodies that assess capital market and their functions.
SUB-TOPIC 3: SECOND TIER SECURITY MARKET
MEANING OF SECOND TIER SECURITY MARKET
Second Tier Security Market (SSM) is a market is a market in which buying and selling of existing securities of companies take place. It was set up in order to complement the efforts of the stock exchange market towards fund mobilization for investment. The major participants in this market are the stock brokers and banks such as acceptance houses, investment banks and issuing houses.
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