Functions of the Stock Exchange

1. Fund Mobilization: Through the stock exchange market, which is a part of the capital market, fund or capital can be raised or mobilized by companies or investors. 2. Sales of Securities: Investors can buy and sell old securities like stock, shares, etc. 3. Financial Market for Investment: It is a market where people can invest their money in shares of companies. 4. It facilitates the transfer of shares: Stock exchange facilitates the transfer of ownership of shares between investors. Investors who want to withdraw from one company to another can do so without any hindrance. 5. Provides avenue for government to raise funds: Government can raise fund by selling bond or gilt-edge in the stock market. 6. Valuation of price of securities: The market, through the forces of demand and supply can fix price for securities. 7. Provision of professional advice: The stock market provides professional advice to investors on sales and management of securities.

Members of the stock exchange market

In a specialized market like the stock exchange, only members are permitted to conduct business. All transactions in the market must follow laid down rules and regulations. Only companies that have received approval from the council of the exchange can quoted. The two major members are: The brokers and jobbers. Others are unauthorized clerks and authorized clerks. a. Brokers: This is the agent who is professionally engaged in the purchase and sales of securities in the stock exchange on behalf of a client in exchange for commission called, brokerage. They act as a link or go-between the members of the public who want to buy and sell securities and other members of the exchange. Formally, they go through the jobbers to find out what the prices of the securities are. b. Jobbers: A jobber is a member of the exchange who is the actual dealer in securities. He transacts business with the broker who is acting on the behalf of the investors. Jobbers specialize in a particular type of business, they buy and sell securities on their own for profits called, jobbers turn. They quote two prices: Buying price and selling price. Jobbers cannot deal with members of the public and their work requires high degree of experience.

Other members of the exchange are: a. Unauthorized clerk: An unauthorized clerk is an employee of the broker who is not allowed to deal on the floor of the exchange. They neither have access to the floor of the market, nor can they sell or buy securities. The unauthorized clerks are only given permission to assist members of the exchange. b. Authorized clerk: This is a clerk of the broker who under the regulations of the exchange, is entitled to buy and sell on the behalf of their employers. They can enter the exchange and act on behalf of their employers. They are employed to transact business on behalf of their employers when they are absent from the exchange.

Speculation is the purchase of security by speculators in the hope that its price will rise and that profitable resale will thereby be possible. Speculators pay little attention to income to be obtained from securities at the moment but are interested in the fluctuations in their market prices. They purchase security with the hope that the price will rise and that selling it will bring profit. Speculation makes selling it bring profit. Speculation makes security to be more liquid. There are three speculators in the stock exchange, namely:

1. Bull: This is the speculator on the floor of the exchange who buys securities with the hope that the price will rise and that he will sell at a higher price for a gain. The bull will wait for a time of general rise in prices of securities. A market is said to be bullish if it is keen to buy. 2. Bear: This is the speculator who expects prices of securities to fall before delivery dates and thus sells out to make good profit. Bear is a name given to a speculator who sells stock in anticipation of a fall in prices of securities. 3. Stag: A stag is a speculator who applies for new issues and stock in large quantity with the feeling or anticipation that the prices of the shares will rise above the offer prices. The stag hopes to make profit after selling. On the other hand, securities are known as investments which are traded in the stock exchange market to provide income. They may carry fixed interest rate, e.g. debenture. It is a general term for investments traded in the stock exchange. Examples of securities are shares, stocks gilt-edged, bond and debenture. Types of Securities

1. Shares: Shares can be defined as the individual portion of the companys capital owned by shareholders. It is the interest which a shareholder has in a company. In other words, a share is a unit of capital measured by a sum of money. A share also represents the mechanism by which the shareholders of a company can have limited liability. They have single indivisible units, e.g. N250, N50 etc. 2. Stock: Stock can be defined as the bundle of share or mass of capital which can be transferred in fractional amounts. They are always fully paid, e.g. it can be quoted per N100 nominal value. 3. Debentures: A debenture is a document which acknowledges a loan generally under the companys seal, bearing a fixed rate of interest. It usually gives security for repayment of loan as well as the interest. It can be described as a document setting out the terms of loan of a company, i.e., certificate of indebtedness. Holders of debenture certificates have no voting rights. 4. Bond: A bond is a security issued by a government or its agency or private institution as a means of raising fund. Bonds are usually due to be redeemed at some future date, and they carry a fixed rate of interest. 5. Gilt-edged: Gilt-edged is a security issued by the government; it has a fixed rate of interest. This type of

security is considered to be very safe as government cannot fail to pay its debts. Gilt-edged carries a minimum issued risk in terms of repayment. Factors affecting prices of securities 1. The forces of demand and supply. 2. Activities of speculators. 3. Instability in prices of shares. 4. Rate of interest in securities. 5. Political situation of a country.