MODULE 3

Lesson 1: Security Market and The Philippine Stock

Exchange
Lesson 2: Participants in Security Markets, Mechanics in
Investing & Ways to Grow Your Money in Stock Market
Lesson 3: Board Lot Table, Electronic Board & How to Read
Stock Quotes
Lesson 4: Investor’s Rights, Investment Guidelines & Bear
vs. Bull Market
Lesson 5: Virtual Stock Trading (An Introduction to
Investagram)

“Price is what you pay, value is what you get.”

==Warren Buffet==

1
INTRODUCTION

Investment is the employment of funds with the aim of achieving additional income or
growth in value. The essential quality of an investment is that, it involves ‘waiting’ for a reward. It
involves the commitment of resources which have been saved or put away from current
consumption in the hope that some benefits will accrue in future. The term ‘Investment’ does not
appear to be as simple as it has been defined.
 Investment has been categorized by financial experts and economists. It has also often been
confused with the term speculation. The following discussion will give an explanation of the various
ways in which investment is related or differentiated from the financial and economic sense and how
speculation differs from investment. It must be clearly established that investment involves long-
term commitment.

“Never depend on single income, invest to create a second

source.”
==Warren Buffet==

ENJOY YOUR MODULE...

2
ABOUT THE MODULE

This module includes five (5) lessons. The first lesson is the Philippine stock market, second is
the role of security market; third are mechanics in investing and board lot table and electronic board;
fourth are how to read stock quotes and bear vs. bull market and the last lesson are investor’s right
and virtual stock trading. This module contains task like pre-test and post-test that you need to
accomplish. Likewise, activities like self-test should also be accomplished to measure your knowledge
you gained in the module.

BUT BEFORE YOU GO WITH THE MODULE here are some of the things to
remember: ICONS TO REMEMBER:

Means WHAT TO DO (PRETEST). You need to answer it before reading the

lessons. This will measure your understanding/knowledge on the topic before
you take the lesson.

KEY TO ANSWERS. This will lead you to the answers on the different task or
activities on the module.

LESSON. You will encounter this icon whcih leads you to the lesson
proper/topic for this module.

OBJECTIVES. This icon means the Learning objectives of the course. You will
encounter this icon every module.

SELF TEST. You will encounter this icon every end of the module. Answer it and
this will measure the knowledge that you gained in the module.

3
ABOUT THE AUTHORS

KATHERINE ALON - RABBON, MBA

Faculty Member, CBAA

Prof. Katherine A. Rabbon is a Bachelor of Science in Business Administration

 major in Financial Management graduate. She had finished 21 units in Doctor
in Business Administration and a graduate of Master in Business
Administration in 2018.

Prof. Alon is an active member of the Junior Confederation of Finance

Association Philippines (JCFAP), Asian Qualitative Research Association,
Entrepreneurship Educator’s Association of the Philippines, Inc.; State
Universities and Colleges Teachers Educators, Asia Pacific Network for
International Educational Education and Values Education (APNIEVE), she is
also a member of the UNP Faculty Union and UNP-FULAP from 2018 to
present. She was also the adviser of Junior Bankers Association - the
Accredited Organization of Financial Management from 2018 to present.

Prof. Alon is inclined to running, mountain biking, badminton, hiking,

waterfalls chasing and travelling. Her recent achievements were when she
conquered the traverse trails of Mt. Apo at Davao City last November 2017
and Mt. Fuji at Japan last July 2019.

ENGELBERT E. CASIMIRO, BSBA FM

Faculty Member, CBAA (PT)

Mr. Casimiro is a graduate of bachelor of Science in Business Administration

major in Financial Management. He is a civil service 2 nd level eligibility or
professional level passer.

Mr. Casimiro is now a part-time faculty under the Financial Management

Program and is teaching both major and minor subjects.

He Is very much interested in financial updates of the Philippines and loves

reading books.

4
OVERVIEW

For most of the investors throughout their life, they will be earning and spending money.
Investor’s current money income exactly balances with their consumption desires. Sometimes,
investors may have more money than they want to spend at other times, they may want to purchase
more than they can afford. These imbalances will lead investors either to borrow or to save to
maximize the long
run benefits from their income. When current income exceeds current consumption desires, people
tend to save the excess. They can do any of several things with these savings. One possibility is to put
the money under a mattress or bury it in the backyard until some future time when consumption
desires exceed current income. When they retrieve their savings from the mattress or backyard, they
have the same amount they saved. Another possibility is that they can give up the immediate
possession of these savings for a future larger amount of money that will be available for future
consumption. This tradeoff of present consumption for a higher level of future consumption is the
reason for saving. What investor does with the savings to make them increase over time is
investment. In contrast, when current income is less than current consumption desires, people
borrow to make up the difference.

Those who give up immediate possession of savings (that is, defer consumption) expect to
receive in the future a greater amount than they gave up. Conversely, those who consume more than
their current income (that is, borrowed) must be willing to pay back in the future more than they
borrowed. The rate of exchange between future consumption (future rupee) and current consumption
(current rupee) is the pure rate of interest. Both people’s willingness to pay this difference for
borrowed
funds and their desire to receive a surplus on their savings give rise to an interest rate referred to as
the pure time value of money. This interest rate is established in the capital market by a comparison
of the supply of excess income available (savings) to be invested and the demand for excess
consumption (borrowing) at a given time.

5
GENERAL GUIDELINES:

It is important that you must read all documents (e.g. syllabus, assignments) to be familiar
with course expectations. On-line attendance is expected, however, late logging into the Learning
Management System of students is considered. You are expected to observe internet etiquette at all
times they access the net. The promotion of a safe online community is expected both from the
students and faculty. Online academic integrity should be observed at all times through honest and
transparent assessment. Mechanics of assessment tasks such as graded question and answer,
formative test and essay will be provided during the lecture. Any form of assessment will be given
during and after the online discussion. You are not required to post photographs and other personal
information on the course site. Student(s) with special needs and concerns with technology/software
application will be given consideration. Moreover, the student may be assisted by his/her
parents/relatives who have the capacity to do such. Likewise, you should take the examinations given
within the period it will be given via on-line or face to face. If you fail to take the examination, he/she
should notify the faculty concern the reason(s) for failure to take the examination.

All assignments are expected to be done individually. you are given 7 working days to submit
their outputs after the announcement of the assigned tasks/activities. Assignments may be submitted
through the facebook messenger, yahoo and google accounts using their last name/first name/ middle
name/assignment code as the filename. Assignment code will be provided by their own
instructor/professor.

You are expected to visit the sites of the Securities and Exchange Commission and the
Philippine Stock Exchange Inc. to supplement the existing notes or topics given in order for them to
familiarize themselves with the application of the theories and concepts in the field of investment and
portfolio management. You should participate to online class savings mobilization once in a week.
They are required to have a Gcash account or any other Electronic Payment Application (financial
technology tool). Your participation to the Financial Management Program Lending Operation
however is optional. You should submit all the necessary requirements via on-line or other modes
(courier). You should acquire or obtain the needed materials like books, manuals and links from
various sources. Likewise, you have the responsibility of maintaining the security of their usernames,
passwords, and personally identifiable information.

The instructor/professor shall have the following responsibilities:

Orient you regarding the use of software applications to enable you to clearly understand
what to do. The monitoring of your attendance and participation will also be done in order to track
objectively their individual performance. Prepare the power point presentations, modules/manuals,
activities before the delivery should be done before hand so as to deliver the lessons very well.
Report untoward incident in the cyberspace to higher authorities will be for disciplinary actions. Grade
and record all student performance objectively via on-line or any other modes in order for the
students to track their individual performance, lacking and the like. Ensure students receive accurate,
sufficient and up to date class performance via on-line or other modes. Likewise, the teacher must
develop or adopt appropriate materials, assessments, exercises, and any other helpful resources that
will assist in developing a supportive learning community.

LESSON 1: SECURITY MARKET AND PHILIPPINE STOCK EXCHANGE

INTRODUCTION

Business firms need tremendous amounts of capital to finance their operations. To grow &
expand, they must invest capital in amounts beyond their capacity to save in any reasonable period of
time. Here, the financial markets permit both business and government to raise the needed funds by
selling securities. Simultaneously, investors with excess funds are able to invest and earn a return,
enhancing their welfare.

OBJECTIVES:
At the end of the lesson, the students should be able to:

• Describe and compare the differences of a security market and a stock market. •
Characterize the importance of a primary market and a secondary market. •
Discuss the functions and responsibilities of PSE departments.

A. SECURITY MARKET vs STOCK MARKET:

Security Market = is the means by which products and services are bought and sold directly
or through an agent. (Levy, Haim)

= it serve two (2) functions. (1) they help companies to raise funds by
making the initial sale of their stock to the public. (2) They provide a place
where investors can trade already issued stock.

= is a component of the wider financial market where securities can be

bought and sold between subjects of the economy, on the basis of demand
and supply. It encompasses equity markets, bond markets and derivatives
markets where prices can be determined and participants both professional
and non
professionals can meet.

= is used in an economy to attract new capital, transfer real assets in

financial assets, determine price which will balance demand and supply and
provide a means to invest money both short and long term.

= provides a meeting ground for buyers and sellers who participate in either
the primary market or secondary market. They provide facilities and
procedures for handling transactions in new and old securities. It is where
security buyers and sellers transact business.

Stock Market = is the aggregation of buyers and sellers (a loose network of economic
transactions, not a physical facility or discrete entity) of stocks (also called shares), which
represent ownership claims on businesses; these may include securities listed on a public
stock exchange, as well as stock that is only traded privately.

= are where individual and institutional investors come together to buy and
sell shares in a public venue. Nowadays these exchanges exist as electronic
marketplaces.

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B. KINDS OF SECURITY MARKET

1. Primary Market. = is a mechanism through which a firm can raise additional capital by
selling stocks, bonds, and other securities.

= is one in which a borrower issues new security in exchange for cash from
an investor (buyer). It is the market that deals with newly issued securities.
It is where new shares are issued and sold to the investing public for the first
 time.

= is a system of distributing new securities that originate in a company that

needs funds to operate and expand. Since the new issue of the security
involves a large amount of funds and issuance of a large number of
certificates, an investment banker is usually employed to organize the
purchase and distribution of the company’s securities.

= Is an organized activity involving the buying and/or selling of securities

done within a stock exchange

= In the primary market, new issues of securities are negotiated through: (a)
Investment banking and (b) direct or private placement.

a) Investment Banking = refers to the negotiation of the sale of new securities to

the public by underwriting the issue, which is done by Investment Banking
House or in short Investment Bankers.

b) Direct or Private Placements = Is an offering of a security directly to one

investor or group of investors. This is one whereby new securities issues are
sold directly to financial institutions, bypassing the open market. Here, he
issues

2. Secondary Market = it provides a forum for the trading of securities after their initial
sales. Once new securities have been sold in the primary market, an efficient mechanism
must exist for their resale if investors are to view securities as attractive opportunities.

= it provides the means for investors to trade securities among themselves.

This is where original holders sell their shares to other investors. An investor
can only make profit when he can sell his shares at a price higher than the
purchase price. The secondary market consists of: (1) stock exchanges;
and (2) over-the-counter markets.

a) Stock Exchange – on exchanges, such as the Philippine Stock Exchange,

securities are bought and sold in central location. When one investor sells, the
securities are sold on the exchange floor by a broker to another investor. The
proceeds go to the seller, not to the company that issued the security. (e.g.
PSE, Philippine Dealing & Exchange (PDEX) Corporation). A stock
exchange is an organized marketplace or facility that brings buyers and sellers
together and facilitates the sale and purchase of stocks.

b) Over-the-Counter Markets – is one where trading is performed over the

telephone by securities dealers who buy from and sell to investors. Here,
stocks of corporations not listed and therefore not traded in the stock
exchange but registered with and licensed by the SEC for sale to the public
are only available in the so-called Over-the-Counter market.

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C. PHILIPPINE STOCK EXCHANGE (PSE)
= is the only stock exchange in the Philippines. It is one of the oldest stock
exchanges in Asia, having been in continuous operation since the
establishment of the Manila Stock Exchange in 1927. It currently maintains a
trading floor at the PSE Tower in Bonifacio Global City, Taguig City. The PSE is
composed of a 15-man Board of Directors with Jose T. Pardo as Chairman.

= The main index for PSE is the PSEi, which is composed of a fixed basket of
 thirty (30) listed companies. The PSEi measures the relative changes in the
free float-adjusted market capitalization of the 30 largest and most active
common stocks listed at the PSE. The selection of companies in the PSEi is
based on a specific set of public float, liquidity and market capitalization
criteria. There are also six sector-based indices as well as a broader all shares
index.

= Trading in the PSE is a continuous session from 9:30AM to 3:30PM daily

with a recess from 12:00PM to 1:30PM.

History:

The Philippine Stock Exchange was formed from the country’s two former stock
exchanges, the Manila Stock Exchange (MSE), established on August 8, 1927, and the
Makati Stock Exchange (MkSE), which was established on May 27, 1963.

Although both the MSE and the MkSE traded the same stocks of the same companies,
the bourses were separate stock exchanges for nearly 30 years until December 23,
1992, when both exchanges were unified to become the present-day Philippine Stock
Exchange.

In June 1998, the Securities and Exchange Commission (SEC) granted the PSE a
""Self Regulatory Organization"" (SRO) status, which meant that the bourse can
implement its own rules and establish penalties on erring trading participants (TPs)
and listed companies.

In 2001, one year after the enactment of the Securities Regulation Code, the PSE was
transformed from a non-profit, non-stock, member-governed organization into a
shareholder-based, revenue-earning corporation headed by a president and a board of
directors. The PSE eventually listed its own shares on the exchange (traded under the
ticker symbol PSE) by way of introduction on December 15, 2003.

The PSE Structure:

The PSE”S organizational structure holds five (5) groups, namely: 1) Listings &
Disclosure Group, 2) Compliance & Surveillance Group, 3) Operations/Automated
Trading Group, 4) Finance and Investment Group and Business Development & 5)
Information Group which reports directly to the Office of the President.

The Functional Responsibilities of each Departments:

1. Listings and Disclosure Group - This group is composed of the following

departments: Listing Processing, Legal Advisory and Corporate Disclosure. It
processes and evaluates listing applications, conducts legal due diligence, and
monitors compliance to continuing listing requirements including disclosure of
listed companies. It also coordinates IPO (initial public offering) distribution.

2. Compliance and Surveillance Group - This group acts as the police of the
Exchange. It is composed of the Compliance Audit Department, Special
Investigation Department, Market Surveillance Department and Legal Section.
The group conducts legal audit and review aside from auditing of member-

9
brokers books and operations. It also monitors the member’s compliance to
set rules and regulations and enforces appropriate sanctions to violators or
erring member-brokers. It takes responsibility in the operation of the
surveillance activity, to ascertain that there are no illegal postings and
dealings made in any of the issues listed in the Exchange.

3. Operations/Automated Trading Group - examines and controls the

monitoring, logging and analysis of computer system resource utilization; the
maintenance of network connections of all workstations at the trading floor
 and remote offices; managing of database of off-floor installed sites; and the
implementation and integration of the different components of the trading
and office systems.

4. Finance and Investment Group - Is responsible for the management of the

company’s financial resources. It is composed of the Accounting Department,
Treasury Department, Payroll and Budget Section and Investments Monitoring
Section which handles the maintenance of book of accounts, preparation of
financial statements and budget, management and placement of PSE funds,
monitoring of accounts receivables and billing of accounts.

5. Business Development and Information Group - Is in charge of the

expansion, development and packaging of domestic and foreign financial
products, equity-related securities, debt-related securities and other forms of
securities and derivatives. It coordinates with private businesses, government
agencies and associations in the overall development and packaging of the
securities, derivatives and trading facilities.

FAQs:

1. Where is the current trading floors of PSE? - The unified trading floor is now
located in the Philippine Stock Exchange Tower (PSE Tower), the new
headquarters of The PSEi, located in One Bonifacio High Street, in Bonifacio
Global City.

2. What is the trading schedule of PSE? - The trading schedule has morning and
afternoon sessions. The morning session is from 9:30a.m. to noon, while the
afternoon session starts from 1:30p.m. until 3:30p.m including a 10-minute run
off period. The actual placing of orders can start 30 minutes before the market
opens or at 9:00a.m.
Market Phases

9:00 a.m. Pre-Open

9:30 a.m. Market Open

12:00 n.n. Market Recess

1:30 p.m. Market Resume

3:15 p.m. Pre-Close

3:20 p.m. Run-off / Trading At Last

3:30 p.m. Market Close

3. How many are active trading participants of PSE? – PSE have removed inactive
participants, from 184 in 2003 down to 132 as of March 2018.

4. How many are the listed companies? – Currently there are 273 plus 4 recently
listed companies, total of 277.

5. How about the online brokers? – There are 31 online brokers on the list.

10

LESSON 2: PARTICIPANTS IN THE SECURITY MARKETS, MECHANICS OF

 INVESTING, BASIC SETTLEMENT PROCESS & WAYS TO GROW MONEY
IN STOCK MARKET

INTRODUCTION

The reality is that investing in the stock market carries risk, but when approached in a
disciplined manner, it is one of the most efficient ways to build up one's net worth. Therefore it is
necessary that one should understand who are the market participants, mechanics of investing and
ways to grow money in stock market.

OBJECTIVES:
At the end of the lesson, the students should be able to:

• Recall who are the participants of the market, the process of settling payments and
how to start investing.
• Analyze the contribution of each participants in the market.
• Assess the benefits and ways of earning in investment.

A. EIGHT (8) MARKET PARTICIPANTS OF SECURITY MARKETS IN THE PHILIPPINES:

Figure 1

1. Stock Exchange - Is an organized marketplace or facility that brings buyers and sellers
together and facilitates the sale and purchase of stocks. The only stock exchange
operating in the country is the Philippine Stock Exchange, Inc. (PSE). It makes sure that
trading transactions are done in an efficient, orderly, fair, and transparent manner. It
enforces rules and regulations that its publicly listed companies and trading participants
must strictly

11
abide by. In this way, the PSE fulfills its function as the “guardian” of the Philippine stock
market.

2. Investors - also referred to as stockholders or shareholders, are those who own shares of
stock of a publicly listed company. They are accorded certain privileges like the right to
fair and equal treatment, the right to vote and exercise related rights, and the right to
receive dividends and other benefits due to stockholders. They are classified as either
 retail or institutional, and local or foreign.

3. Stockbrokers - A stockbroker or trading participant is licensed by the Securities and

Exchange Commission (SEC) and is entitled to trade at the Exchange. They act as an
agent between a buyer and seller of stocks in the market. For their services as
stockbrokers, they receive from their clients either a buying or a selling commission. The
PSE originally issued 184 trading rights. To date, the PSE has 133 active stockbrokerage
houses.

The representatives (licensed salesmen) of these accredited stockbrokers convene daily,

at certain specified hours, on the “trading floor” of the exchange, where they sell and buy
shares of stocks for the account of their clients. They execute orders in the market to the
greatest possible advantage of their customers, by buying at the lowest possible price or
by selling at the highest possible price.

There are two (2) types of stockbrokers:

• Traditional – those who assign a licensed salesman to handle your account and to
take your orders via a written instruction or a phone call
• Online – those whose main interface is the internet where clients execute their orders
and access market information online.

4. Listed Companies - also called “issuers”, are those whose shares of stock are traded on
the Exchange. These companies qualified with the stringent listing and reportorial
requirements of the PSE, and have gone through initial public offering (IPO) or listing by
way of introduction. As of year, 2020 the PSE have a total of 277 listed companies. These
are classified into six different sectors: Financials, Industrial, Holding Firms,
Property, Services, and Mining and Oil.

5. Clearing House - Securities Clearing Corporation of the Philippines (SCCP), is a

wholly owned subsidiary of the Exchange. It was established to ensure the orderly
settlement of equity trades executed at the PSE. The SCCP uses the Central Clearing and
Central Settlement (CCCS) system purchased from the Capital Markets Co. (CAPCO) of
Belgium.

SCCP is responsible for establishing the cash and securities liabilities and entitlements of
its clearing members, synchronizing the settlement of funds and the transfer of securities
based on the delivery-versus-payment model or multilateral net settlement; guaranteeing
the settlement of trades in the event of a trading participant’s trade default in order to
ensure the finality and irrevocability of all Exchange trades through its fails management
procedures; implementing appropriate risk management measures in order to mitigate
risks inherent in the clearing and settlement of Exchange trades and the maintenance
and administration of the Clearing and Trade Guarantee Fund (CTGF).

6. Depository - Philippine Depository and Trust Corp. (PDTC) acts as securities

depository or “custodian” of listed shares of stock that are traded at the PSE. It was
organized to establish a central depository in the Philippines and to implement scripless
trading. The PDTC performs book-entry transfer of securities:

• From seller’s to buyer’s accounts during settlement of Exchange trades; •

From one PDTC participant to another per client instruction, and;
• From lender’s to borrower’s account for loan transactions.
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7. Settlement Banks - the PSE has three (3) accredited banking institutions where
trading participants make and receive payments for stock transactions. The settlement
banks accept deposits of funds for payment of securities bought, confirm payments of due
clearing obligations to SCCP, debit buyer’s cash account and credit seller’s cash account
during settlement, and receive and/or return cash collateral put up by clearing members
to cover their daily trade negative exposures.
 8. Transfer Agents – They are considered the “official keeper” of the corporate shareholder
records. The stock transfer agents provide the issuer or the listed company with a list of
holders of its securities. They effect transfer of beneficial ownership and process corporate
actions like stock or cash dividends, stock rights, stock splits, and collation of proxy forms.

B. HOW TO START INVESTING IN STOCKS. Getting started in the stock market is a simple
process if you know the basics and technicalities.

1. Choose your stockbroker or trading participants. There are over 100 licensed
traditional and online stockbrokers accredited by the PSE. Your choice of stockbroker
should depend on the type of service you will require and who will best suit your needs.
Stockbrokers vary in the range of services that they offer and the types of customers they
serve such as:
• Handling institutional or corporate accounts versus individual retail customers •
Providing advisory services
• Providing research and analysis
• Providing investor education seminars and market briefings

2. Open a stock brokerage account.

The next step is to formally open a trading account. Similar to the process in opening a
bank account, representatives of the chosen stockbrokerage company will require you to
fill out a Customer Account Information Form or CAIF. Accomplish this along with the
other requirements such as:

• Two (2) valid IDs;

• Specimen signature cards, and;
• Proof of billing.

3. Discuss with your stock broker the stock you wish to BUY or SELL. After opening
a trading account, you can now start discussing with your stockbroker the stocks you wish
to buy (or sell).

4. Give orders to stock broker. Placing an order to buy or sell a stock can be done by
making a telephone call or sending an SMS to your stockbroker. Orders can also be placed
directly online via the Internet.

5. Get the CONFIRMATION RECEIPT. Once your order has been carried out, your
stockbroker will give you a confirmation invoice showing the details of your transaction.

6. Deliver or Pay before the Settlement Date. The delivery or payment should be before
the settlement date. For traditional stockbrokers, settlement of transactions is usually
done after three (3) working days from the transaction or T+3. For online stockbrokers,
settlement of all transactions is done on the transaction date.

7. Receive Payment.

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C. BASIC SETTLEMENT PORCESS: The settlement process refers to the completion of a PSE
trade effected by the delivery and payment of the securities on settlement date.

For traditional stockbrokers, settlement of all transactions, either buying or selling is usually
done after three (3) trading days from the transaction date or T+3. This means that the buyer
must pay for the costs of the transaction to his stockbroker within three (3) trading days after
the trade was done. Similarly, the seller will receive the proceeds of the sale from the
 stockbroker after the third day from the transaction date.

As such, cleared funds must be deposited in the clearing member’s cash settlement account in
the settlement bank and securities must be made available in the clearing member’s securities
accounts in the central depository’s system not later than 12:00 noon of settlement date. If
securities are not delivered by the selling clearing member, the clearing house will not release
the corresponding cash entitlement to him, and vice versa. Late deliveries are imposed a
monetary fine/penalty by the clearing house.

Figure 2

For online stockbrokers, settlement of all transactions is done on the transaction date. To buy
shares of stock, you will need to fund your account prior to any purchase. In the same
manner, the proceeds of your sale will be credited to your account not later than three (3)
working days from the transaction date.

D. WAYS TO GROW MONEY IN STOCK MARKET: There are two ways to make your money
grow in the stock market:

1. Through an increase in stock price or capital appreciation

Capital appreciation is an increase in the market price of your stock. It is the difference
between the amount you paid when buying shares and the current market price of the
stock. However, if the company does not perform as expected, the stock price may go
down below your purchase price.

You cannot really earn from stock price appreciation unless you sell your shares.
Otherwise it is only a book value gain, which means it is not yet converted to cash, and
current price may change depending on market forces.

For example, if you buy a share of stock at Php100.00, and it rises to Php110.00, your
capital appreciation or gain is Php10.00. Keep in mind that you only realize your gain of
Php10.00 minus applicable charges, if you sell at Php110.00. If you choose to hold it and
it further increases to Php150.00, your capital gain would be Php50.00. However, if your
stock decreases to Php100.00, and you decide to sell it at that price, then your capital
gain is zero.

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2. Through dividends declared by the company

Dividends are paid out to shareholders, representing earnings of the company that are
not going to be reinvested in their business. There are two types of dividends: cash and
stock dividends.

2.2 A cash dividend – represents earnings declared by the company for every share of
stock. So, if the company declares a dividend of 25 centavos per share, a
stockholder with 10,000 shares will receive a cash dividend of (Php2,500.00 minus
 tax of 10% for individual Filipino investors) (Php0.25 x 10,000) in cash.

2.3 Stock dividends – are additional shares given to shareholders at no cost. If the
company declares a 25 percent stock dividend, a stockholder with 10,000 shares
will be entitled to an additional 2,500 shares of stock. These shares can be sold
anytime after the shares have been issued.

15

LESSON 3: BOARD LOT TABLE, ELECTRONIC BOARD & STOCK QOUTES

INTRODUCTION

The idea behind board lots is to facilitate easier trading by defining blocks of shares for
trading, instead of having a random assortment of numbers being traded and electronic boards are
monitors which displays all stocks currently traded. Both are needed to understand so as to better
interpret stock quotes.
 OBJECTIVES:
At the end of the lesson, the students should be able to:

• Outline and employ the minimum number of shares when buying or selling stocks. •
Express the trading symbols and codes of an electronic board.
• Interpret stock quotes in order to monitor and keep track of one’s ivestments.

A. THE BOARD LOT TABLE:

Trading of stocks is done by board lot or round lot system. The Board Lot Table
determines the minimum number of shares one can purchase or sell at a specific
price range. Therefore, the minimum amount needed to invest in stocks varies and
will depend on the market price of the security as well as its corresponding board lot.
Below is the accepted minimum amount of investment.

PRICE From To
TICK SIZE LOT SIZE

A 0.0001 0.0099 0.0001 1,000,000 B 0.01 0.049 0.001 100,000 C 0.05 0.249
0.001 10,000 D 0.25 0.495 0.005 10,000 E 0.5 4.99 0.01 1,000 F 5 9.99 0.01
100 G 10 19.98 0.02 100 H 20 49.95 0.05 100 I 50 99.95 0.05 10 J 100 199.9
0.1 10 K 200 499.8 0.2 10 L 500 999.5 0.5 10 M 1000 1999 1 5 N 2000 4998 2
5 O 5000 UP 5 5

Figure 3

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How to Use the Board Lot Table:

1. Determine the minimum number of shares to that can be traded for each stock. 2.
Determine the minimum price fluctuation or increment which is applicable to each stock.
3. Determine the minimum amount of money needed to buy any PSE traded stock.

Examples:

1. PLDT (TEL) is traded at Php 2,890. TEL’s stock price corresponds to Row N. Lot size is
5. Therefore, the minimum number of share you can buy/sell from PLDT at ay given
time is 5.

2. Sell shares of Eastwest Bank (EW). Check PSE Website for its current price - Php 11.60.
Check the row on PSE Board Lot table which corresponds to its stock price. EW is at
Row G, threfore EW’s tick size is Php 0.02 which means prices to be used must be
increment or divisible by 0.02. EW can therefore be sold at a price of Php12.00,
however it still depends on the buyer’s willingness to purchase the stock

3. Buy shares of MegaWorld Corp (MEG). Check current price – Php 3.88. Know the
minimum shares of MEG at the Board Lot Table – Row E, 1000 shares. Then multiply
the current price with the minimum lot size (Php 3.88 x 1000 share = Php 3,880).

Note:
 ☞ Brokers charge certain prices and commissions so the amount of investment needed to
buy stocks will surely increase.
☞ Also, stock brokers require investors to fund their trading account with minimum
amount of money before they can start trading.

B. ELECTRONIC BOARD:

The Electronic Board, is the center of attraction inside the trading floor of an Exchange, it
displays all current stock prices, volume, and other relevant information. All prices shown on
the electronic board are intraday values.

At present, the PSE has two trading floors— one at Tower One along Ayala Avenue in Makati
and another at Tektite Tower in Ortigas Center, Pasig. But recently, the two trading floors
unified as one at Bonifacio Global City.

Under the "one-price, one-market" system, the electronic boards in these two trading
floors display identical trading transactions. So, what do the numbers and columns on the
board mean? Though most are easily understandable, some may be confusing for a stock
market newbie.

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How to read Electronic Board: Here is a review of the common numbers in the stock
quotes and what they mean.

Figure 4
1. NAME – displays the stock symbol of the listed company
2. OPEN – displays the opening price of the stock for the day\
 3. BID – displays the highest buying price in the market
4. ASK – displays the lowest selling price in the market
5. HIGH – displays the highest price traded for the period
6. LOW – displays the lowest price traded for the period
7. CLOSE – displays the closing price of the trading day
8. L/T – or last traded price refers to the price at which the stock was last traded; also
referred to as the current market value of the stock.
9. VOL – or volume refers to the total number of stocks transacted in the stock market
during a given period of time

Note:

☞ EB have 7 columns, these are composed of trading symbols of the member company
and they are coded alphabetically.
☞ There are four (4) common colors that can be seen in an EB. These are yellow/yellow
orange – means price of a stock remained unchanged since the other day. Green –
for gain and Red – for loss.

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C. HOW TO READ STOCK QOUTES:

The stock market is very volatile, which can be very intimidating to a novice investor. That is
why investors must always monitor or keep track of their investments, which means being
able to read or interpret the daily stock quotes. — A list of prices of stocks at one point
within the trading day.

In the past, stocks were quoted in fractions, but now, most exchanges use decimals. Stock
quotes are updated regularly during the trading day. Based on these numbers, investors can
make decisions on whether to buy or sell, or hold the stocks.

Stock quotes and charts are often found in the financial section of a newspaper, financial
magazine or online. These charts provide details on the trends and stock prices of
companies that trade stocks in the public trading markets, and the chart is organized in a
standardized format of ten (10) columns for easy reading. Here is how to read the basic stock
quotes.

1. NAME - The name of the listed company.

2. SYMBOL - A unique alphabetic name which identifies the stocks of a listed company.
Go to Stock Symbol Lookup.
3. BID - The highest price that a buyer is willing and able to purchase for a share of stock
at a particular time, also called the “buyer’s price”.
4. ASK - The lowest price that a seller is willing and able to offer for sale for a share of
 stock, also called the “seller’s price".
5. OPEN - The opening price of the stock for the day.
6. HIGH - The highest traded price of a stock during a specific trading period.
7. LOW - The lowest traded price of a stock during a specific trading period. 8.
CLOSE - The closing price of the trading day
9. CHANGE OF DIRECTION - Comes in the form of a triangle or arrow head pointing
either up or down, which indicates whether the stock is trading higher or lower than
the previous day’s closing price. The colors of the stock ticker symbols indicate the
trading trends. Sometimes, the change of direction is indicated by plus or minus
symbols. In this case, plus equates to up and minus equates to down.
10. VOLUME - The total number of shares traded during a given period of time. 11.
VALUE - The amount of transactions in peso terms traded on a particular period. This
indicates how much money is turned over from the trading of stocks.

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LESSON 4: INVESTOR’S RIGHT, INVESTMENT GUIDELINES & BEAR vs

BULL MARKET

INTRODUCTION

As an investor, it shall be mandatory to know your rights, how are you protected. What are
the parameters in investing and you must mentally grasp the difference between bear and bull
markets.

OBJECTIVES:
At the end of the lesson, the students should be able to:

• Restate basic legal rights of each investors.

• Illustrate the rules and strategies in investing.
• Identify which is a bull market and a bear market.

A. INVESTOR’S RIGHTS:

All investors must be fully aware of their basic legal rights as articulated in existing laws, rules,
and regulations issued by the government entities and the Exchange.

The PSE has been promoting shareholder activism to encourage shareholders to exercise their
rights connected with their investment transactions. Outline below is a summary of such
rights. It covers the different phases of investment and includes pre-investment phase up to
termination of the investment.

It is important to note that the rights presented in this section are simply a collation from
relevant legal issuances. The basis for any liability in connection with investment transactions
 shall still be the specific law, rule, and regulation

1. Right to fair and equal treatment - Every inventor should be given fair and equal
treatment in terms of opportunities in terms of opportunities offers and access to
information.

2. Right to full, accurate and timely information - Every investor should be given
complete, accurate and timely information to allow them to make informed decisions
about their investments.

3. Right to vote and exercise related rights - Every investor should be given the
right to participate in the management of the business by voting on important
decisions such as who should be the directors and what major activities the business
should undertake.

4. Right to have full access to funds in the account - Every investor should be
allowed to exercise rights of absolute ownership over his account and may be
subjected to limitations only with express consent.

5. Right to expect the Board, Management, Brokers & Agents to perform their
functions responsibly - Every investor can expect the Board, management, brokers

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and agents to perform their duties and responsibilities in accordance with a corporate
culture of integrity, honesty and compliance with the spirit as well as the letter of the
law.

6. Right to rely on the completeness, accuracy & truthfulness of accounting

and financial statements - Every investor should be able to rely on completeness,
accuracy, reliability, relevance, and timeliness of accounting and financial statements
as certified by independent auditors.

7. Right to recourse in case of disputes concerning the account - Every investor

has the right to know that in case a problem arises concerning his/her account,
he/she has access to officers, managers, and agents of brokerage firms and receive
prompt attention.

8. Right to fair securities markets where trades are executed at the best
possible price - Every investor should be able to rely that stocks traded in the stock
exchange is reflective of how the market values the company.

9. Right to expect that the regulatory bodies are exercising supervision over
the industry - Every investor should be able to rely on these institutions, their
functions and duties under the law in ensuring that the market operates in an orderly,
efficient, and transparent manner and that investors are adequately protected.

10. Right to know dividend policy, to receive dividends and to enjoy other
benefits due to stockholders - Every investor should have a share of the profits of
the company and enjoy other benefits as part-owner of the company.

B. INVESTMENT GUIDELINES:

1. Start to save as much as you can as soon as you can.

 2. Be sure that the money you will invest in the stock market is an amount that you can
set aside for a long-term investment.

3. Know your investments. Understand more about the company you are looking to invest
in.

4. Do not put all your eggs in one basket. Try to maintain a portfolio of at least three (3)
to five (5) good stocks.

5. Plan your trade and trade your plan.

C. BEAR vs. BULL MARKET: In the investing world, the terms "bull" and "bear" are frequently
used to describe market conditions. These terms are used to describe how stock markets are
doing in general—that is, whether they are appreciating or depreciating in value. And as an
investor, the direction of the market is a major force that has a huge impact on your portfolio.
So, it's important to understand how each of these market conditions may impact your
investments.

Bull Markets
- A bull market is a market that is on the rise and where the conditions of the economy
are generally favourable.
- A bull market is typified by a sustained increase in prices. In the case of equity
markets, a bull market denotes a rise in the prices of companies' shares. In such
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times, investors often have faith that the uptrend will continue over the long term. In
this scenario, the country's economy is typically strong and employment levels are
high.

Bear Markets
- A bear market exists in an economy that is receding and where most stocks are
declining in value. Because the financial markets are greatly influenced by investors'
attitudes, these terms also denote how investors feel about the market and the
ensuing economic trends.
- a bear market is one that is in decline. A market is usually not considered a true "bear"
market unless it has fallen 20% or more from recent highs. In a bear market, share
prices are continuously dropping. This results in a downward trend that investors
believe will continue; this belief, in turn, perpetuates the downward spiral. During a
bear market, the economy slows down and unemployment rises as companies begin
laying off workers.
 To have a clearer and additional knowledge and understanding about Bull and
Bear Market, watch a video on YouTube just follow the link:
https://www.youtube.com/watch?v=TSQXHYeCi08

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LESSON 5: VIRTUAL STOCK TRADING (AN INTRODUCTION TO

INVESTAGRAM)

INTRODUCTION

Here they are going to explore the real stock market by investing virtually for free. Learning
by doing and having fun at the same time can make the students appreciate more the idea of
investing.

OBJECTIVES:
At the end of the lesson, the students should be able to:

• Describe virtual stock trading and its benefits.

• Practice one’s skills using a certified educational platform.
 • Appraise virtual stock trading as a way of journey towards financial freedom.

A. VIRTUAL STOCK TRADING:

Is a smart way to learn stock trading without risk in the volatile market. Self-directed investors
who search a platform that incorporates and facilitates technology, performance and
profitability to help achieve their online trading goals, can always take advantage on
dependable trading platform. They can use the platform to practice trading stocks and options
without risking a single penny.

Virtual stock trading provides students the opportunity to try the technical tools and testing
their knowledge on stocks and options trading. Virtual stock trading is made so as to make
future clients comfortable before jumping into actual stock market trading.

B. BENEFITS OF VIRTUAL STOCK MARKET TRADING:

1. Practical training
- Now a days many people are interested in educating themselves about the markets.
We definitely get the theoretical knowledge while studying the contents on
various areas, but we don’t get the practical exposure on the same. The virtual
stock market trading helps the aspirants to learn the actual process involved in
trading without undergoing any real time processes. The new entrant in market
benefits a lot through this feature where he learns everything from basic to
intermediary level.

2. Helps in understanding market

- The virtual stock market trading helps you learn the market dynamics. It helps you
to evaluate the effect of various happenings of the world on stock markets.
Fundamental analysis is possible through better understanding of the markets.

3. Elimination of Risk
- As mentioned in the initial paragraphs, the virtual stock markets helps in eliminating
the real associated risks with trading. You lose nothing while trading virtually.

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4. Use of Virtual Money
- As a human being what pinches most to anybody is money outflow, but in virtual
stock market trading you make use of virtual money for trading, so there is no
actual cash outflow. Spend or Invest as much as you want without any money
outflow.

5. Prevention is better than cure

- The statement holds good even in case of stock market trading. Take prevention
measures to avoid losses rather than covering it afterwards. Virtual stock market
trading assists you in getting a bird’s eye view of the market and you can protect
yourself from taking unreasonable risks and measures.

6. Mistakes don’t cost

- A man learns most from his mistakes. What can be better than this, if your mistake
doesn’t cost you even a single penny. All that costs you is virtual money and so
the investors are assured of safety of their real wealth.

7. Exposure
 - The investor gets exposed to various kinds of knowledge, practical experience,
different types of risks, and so many factors which helps him/her in successful
stock market trading.

C. INVESTAGRAMS

Investagram is a social media platform where like-minded people share their knowledge or
opinion regarding the stock market and investing. This is a community where we support one
another towards reaching financial success. We also have tools readily available for all our
users to help them with their stock market journey. We have a chart where you can see the
price action of the stocks. If you are into more advanced tools that can help you with your
trading, we have InvestaPrime and InvestaPro. We also have our virtual trade where you can
practice your skills and systems in trading without the fear of losing your hard-earned money.

Investagram is a one stop shop to financial freedom. It provides a handy guidance for people
who wants to start their journey in the world of stock market.

Monitor over hundreds of stocks any time at present and get the perfect view of what is
happening in the market. Get to feel on how to invest in real stock market by doing it virtually
with their VIRTUAL TRADING. Get access to the different kinds of investment and trading
tools such as charts, screener, instant analysis, calculators, and many more.

Investagram' mission is to encourage and give free education to every people on how to
invest their money properly in equities. Also, to provide all the information and tools that
would greatly help everyone before making their next trade.

D. HOW TO OPEN AN ACCOUNT (Step by Step Process)

1. Using laptop/desktop, go to their web page: https://www.investagrams.com/Login, usin

mobile phones/smartphones – download “Investa & VTrade App”.
2. Click “Sign Up”
3. Fill out necessary details, then click “Register”.
4. Or you can “Link” your “FB Account”.
5. Once successfully signed up/log in, you will be redirected to Investagrams Homepage.

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6. You will be asked to “Verify your E-mail/ Contact Number”, “Update Notification Settings”
& “Update Investment Profile”.
7. Under Investment profile, 1) choose “mix” at investment strategy.
8. Once everything settled, you can now explore Investagrams.
9. Click “Stock Button” for real-time monitoring, market summary, market status, projected
price, stock jockey, news and terminal.
10. Click “Virtual Trade” to view your portfolio, competition and trading cup 2020. 11. Click
“learn Button” to upgrade knowledge from “Beginner to Advance” and to access your free
classes.

To have a clearer and additional knowledge and understanding on how to open an

Investagram account, watch a video on YouTube just follow the link:
https://www.youtube.com/watch?v=mYufavepgaU

TERMINOLOGIES [Lesson 1 – 5]:

TERM DEFINITION
 Bid Price The highest price that a buyer is willing and able
to purchase for a share of stock.

Ask Price The lowest price that a seller is willing and able to
offer for sale for a share of stock. It is also called the
“offer price”

Board Lot It is the minimum number of shares one can purchase

or sell a stock at a specific price range.

Opening Price It is the first price the stock traded for the trading day.

Closing Price It is the last traded price of the stock at 12:00 NN of

the trading day.

High Price It is the highest price the stock traded for the trading day.

Low Price It is the lowest price the stock traded for the trading day.

Initial Public Offering It is a process whereby a privately held corporation

offers for sale its shares of stock for the first time to
the public in order to raise capital to fund investments
and business expansion.

Are often issued by smaller, younger companies

seeking capital to expand, but it can also be done by
large privately owned companies looking to become
publicly traded.

Market Value The price at which buyers and sellers are willing to
purchase or sell the stock based on information or
perceived value.

Underwriter Is a company or other entity that administers the

public issuance and distribution of securities from a
corporation or other issuing body.

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They generally receives underwriting fees from their
issuing clients but they also can earn profits when
selling the underwritten shares to investors.

IPO Underwriters Are usually investment banks.

They work with a company to ensure that all

regulatory are requirements are satisfied.

Publicly Listed A company becomes publicly listed when its shares are
Companies traded in the PSE. To become a publicly listed
company, a company must meet the stringent listing
and reportorial requirements of the PSE to safeguard
the investors’ interests and ensure transparency.
PSE Composite Index It is the benchmark index measuring the performance
of the Philippine stock market. It is a fixed basket
comprised of 30 listed companies representing the
general movement of stock prices. The selection of
these companies is based on a specific set of criteria.

Securities & It is a government agency whose primary mission is to

Exchange protect investors and maintain the integrity of the
Commission capital markets, among which is the stock market.

Stock Certificate A piece of paper that certifies a person’s share

ownership in a corporation.

Lot Size Represents the minimum number of shares that can be

traded for a stock.

Tick Size Represents the minimum price change or increment for

any given stock.

Stock Price It is the currency value of a listed company per share

in the stock market. It is derived by dividing the
market capitalization by the total number of shares
outstanding.

Ticker A computerized listing of information showing stock

market activity and stock price movements.
Information includes the stock symbol, last traded
price and the volume of shares traded.

Limit Order A type of transaction order placed with your stock

broker to buy or sell shares of stock at a specified
buying or selling price.

Market order A type of transaction order placed with your

stockbroker to buy or sell shares of stock at the
current market price.

Good Till Cancelled A type of transaction order placed with a

Order stockbrokerage firm to buy or sell shares of stock
which remains outstanding for seven calendar days
until cancelled by the investor or trader.

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Day order A type of transaction order placed with a
stockbrokerage firm to buy or sell shares of stock that
is only valid for one trading day.

Value Turnover The amount of transactions in peso terms traded on a

particular period.

Volume It is the number of shares traded in the stock market

during a given period of time.
 CONGRATULATIONS FOR FINISHING THE FIRST MODULE
NOW YOU CAN PROCEED TO THE SECOND MODULE

End of Module 3

REFERENCES

FIN 103 Manual

https://www.pseacademy.com.ph/

https://www.investopedia.com/terms/b/boardlot.asp

https://www.investopedia.com/terms/s/stockquote.asp

https://www.investopedia.com/insights/digging-deeper-bull-and-bear-markets/

https://www.youtube.com/watch?v=mYufavepgaU

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