B COM 3RD YEAR

UNIT 3RD – NOTES

SECONDARY MARKET

STOCK BROKER

A Stock Broker is a registered member of a stock exchange performing as a

functionary of the exchange to deal with securities on behalf of his clients. He
charges brokerage fee from his clients. Stock Brokers are regulated by the Securities
and Exchange Board of India (SEBI) and are required to abide by the SEBI (Stock
Brokers and Sub- Brokers) Regulations, 1992, Rules and bye- laws of the stock
exchange. He acts as a linkman between the stock exchange and the investors or
traders.
A registered broker has to pay the registration fees to the SEBI on the basis of
annual turnover ( sum of total purchase price and sale price of securities).

ROLE OF STOCK BROKERS

Acting as a liaison
Execution of orders
Issue of contract notes
Maintain secrecy
Provide advice
Provide good infrastructure
Safeguard the interest of the clients
Deal with various types of securities
Integrity
Diligence.

STOCK BROKER QUALIFICATION

 To become a stockbroker, you must have a bachelor's degree and at least two
years of experience working in a stock brokerage firm.
 To be eligible for his employment, a sub-broker (the prior stage of being a
broker) must have completed the 12th grade. The minimum age is 21 years
old. This is a fully integrated company.
  Stockbroking jobs aren't the only ones available in this area. The stock
market necessitates the expertise and abilities of specialists from numerous
sectors, ranging from economists who understand the ins and outs of the
market to financial planners who can provide you with sound stock
guidance. You can also work as a financial manager, an analyst, or a market
specialist.

SUB BROKER –

A sub-broker operates as an agent for a broker, bringing in new clients for the
broker to work with. In exchange for the introduction of new customers, a sub-
broker is entitled to a cut of the profits made by the broker
A sub-broker is a person works on behalf of a trading member of a recognized
stock exchange. A person appointed by a stock Brocker and as an agent gets access
to the trading platform of a stock exchange. Just needs to fill an agreement form
with the stockbroker.
for more info
https://www.bajajfinservsecurities.in/blog/roles-and-functions-sub-brokers-india/

JOBBER

"Jobber" is a slang term for a market maker on the London Stock Exchange prior
to the mid-1980s. Jobbers, also called "stockjobbers," acted as market
makers (MMs). They held shares on their own books and created market liquidity
by buying and selling securities, and matching investors' buy and sell orders
through their brokers, who were not allowed to make markets.

The term "jobber" is also used to describe a small-scale wholesaler or middleman

in the retail goods trade.

 A jobber, also known as a stockjobber, was a term used for a market maker
on the London Stock Exchange.
 Jobbers held shares on their own accounts and help boost market liquidity
by matching investors' buy and sell orders through their brokers.
  The term jobber was used prior to October 1986, but little is known of their
actual activities as they kept few records.
 Jobbers left few records of their affairs and neither journalists nor other
observers retained much in the way of detailed accountings of their work.
 The jobber system evolved into a recognizably modern form during the
course of the 19th century, as the range of securities types broadened.

PORTFOLIO CONSULTANT

The Portfolio Consultant in the Portfolio Analysis and Consulting Group within
Firm's Solutions provides investment consulting services to current and prospective
clients across the spectrum of sales channels. The consultant performs in-depth
portfolio analysis using quantitative & qualitative methods.

A portfolio manager is a person or group of people responsible for investing a

mutual, exchange traded or closed-end fund's assets, implementing its investment
strategy, and managing day-to-day portfolio trading. A portfolio manager is one of
the most important factors to consider when looking at fund investing. Portfolio
management can be active or passive, and historical performance records indicate
that only a minority of active fund managers consistently beat the market.

 A portfolio manager is a person or group of people responsible for investing

a fund's assets, implementing the fund's investment strategies, and
managing day-to-day portfolio management.
 Portfolio managers can take an active or passive management role.
 The ability to originate ideas and to employ excellent research skills are just
two factors that influence a portfolio manager's success.
INSTITUTIONAL INVESTOR

It can be any organization or company that pools funds from several sources –
individual investors or other entities – and invests them in different market
securities on their behalf. In other words, institutional investors are those market
players that collect others’ corpora to buy and sell securities, like stocks, bonds,
forex, foreign contracts, etc.
They usually trade in large blocks of securities. Therefore, institutional investors
carry significant weight in this domain and are often touted as the whales of stock
markets. An institutional investor example would be mutual funds.
The market perceives this category of investors as more knowledgeable and well-
conversant in the ways of financial markets. And the perception holds since they
possess not only specialized knowledge but also analytical resources at their
disposal that a regular investor is not privy to. Due to that reason, institutional
investors are also subject to less protective regulations.
Types of Institutional Investors
As mentioned earlier, any entity that collects funds from a number of sources to
buy and sell securities is an institutional investor. By that understanding, there are
five types of institutional investors in the market. These are:
 Mutual Funds
It’s the most popular among this category. Mutual funds are vehicles facilitating
investment in a variety of securities with capital commitment from several
investors, both individual and otherwise.
In other words, numerous entities invest their capital, which is pooled and in turn,
invested in a bag of securities called mutual funds. Qualified fund managers handle
each MF.
Thus, individuals with a limited understanding of stock market dynamics can rely
on this instrument to mobilize their disposable income. Nearly every mutual fund
includes an array of liquid securities. Therefore, members can retract their
investment anytime.
Moreover, the securities invested via MFs usually span across several industries or
types. It’s designed to minimize the risk of capital loss, wherein the gains from one
dilute loss in another security kind.
 Hedge Funds
Another popular instrument in line with institutional investor meaning is a hedge
fund. It can be best described as an investment partnership where the money
collected from members is pooled to invest in securities. Here, there’s a fund
manager, who’s called the general partner, and a bevy of investors called limited
partners.
Its characteristics are somewhat consistent with mutual funds’, in that they are
designed to reduce risk and enhance returns via a diverse portfolio.
However, hedge funds distinguish themselves with more aggressive investment
policies and are also more exclusive compared to MFs. Therefore, they are also
perceived as riskier. Naturally, returns are even more substantial here.
 Insurance Companies
Insurance companies are heavyweight institutional investors. These institutions
employ the premium they receive from policyholders into securities. Since the
aggregate of premiums is considerable, their investments are also sizable. The
returns insurance companies receive from trading are deployed to pay for claims.
 Endowment Funds
Endowment funds are set up by foundations, where the administrative/executive
entity utilizes the funds for its cause. Typically, schools, universities, hospitals,
charitable organizations, etc. establish these funds.
Here, the investment usually acts as a deductible for the investor. These funds are
so designed that the principal remains intact, and the controlling organization uses
the investment income to finance its activities.
 Pension Funds
Pension funds are also a popular form of institutional investors. Both an employer
and an employee can invest in pension funds. The accumulated capital goes toward
the purchase of different kinds of securities.
There are two kinds of pension funds –
 Where the pensioner receives a fixed sum irrespective of how the fund
fares.
 Where the pensioner receives returns based on the performance of the fund.
Apart from these five types, commercial banks are also considered as institutional
investors.