Securities Market and

Transactions

3-1
The Role of Financial Markets

 Help firms and governments raise cash

by selling claims against themselves
 Provide a place where investors can act
on their beliefs
 Help allocate cash to where it is most
productive
 Help lower the cost of exchange

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Markets in New Securities

 New securities are issued in a primary

market
 Initial public offerings
 Issue facilitated by investment banker
 Specialists in advice, design, and sales
 Intermediaries between issuer and investor

4-3
Investment Banking

 Client advice includes type and features

of security, offer price, and timing of
sale
 Underwriting services: Risk of selling to
investors assumed from issuer
 Coordinates marketing by helping
issuer register securities, issue
prospectus, and sell securities

4-4
Secondary Markets

 Markets where investors trade

previously issued securities

4-5
Stock Exchanges

 NYSE is a secondary market in equity

shares
 Not-for-profit organization of members
 Listing requirements for traded firms

 AMEX and regional exchanges list

smaller firms, have less volume than
NYSE

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NASDAQ
 An American stock exchange
 The world's first electronic stock market and
the first stock market in the world to start
trading online.
 It has more firms listed than NYSE
 The most popular electronic exchange in the
world. More trading volume than any other
electronic stock exchange in the world
 Famous companies listed on Nasdaq includes
Apple, eBay, Dell, Microsoft, Yahoo, Facebook

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Stock Exchanges in Malaysia
 Bursa Malaysia is the only stock exchange in
Malaysia.
 Bursa Malaysia has over 1,000 listed
companies
 Companies are either listed on Main Market or
ACE Market.
 Main Market for larger capitalized companies
 ACE Market for high growth and technology
companies.

4-8
Equity Market Indicators

 Provide a composite report of market

behavior on a given day
 Dow Jones Industrial Average
 Composed of 30 “blue-chip” stocks
 Price-weighted index: Essentially adds the
prices of 30 stocks, divides by 30
 Adjusted for stock splits, stock dividends
 Oldest, most well-known measure

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Equity Market Indicators

 Standard & Poor’s Composite Index

 Composed of 500 “large” firm stocks
 Expressed as index number relative to a
base index value of 10 (1941-43)
 Value-weighted index: Prices and shares
outstanding considered
 Indicates how much the average equity value of
the 500 firms in the index has increased relative
to the base period

4-10
Equity Market Indicators
 NYSE and NASDAQ Composite Indices
 Value-weighted indices of broad markets
 Nikkei 225 Average
 Price-weighted index of 225 actively-traded stocks
on the Tokyo Stock Exchange
 FBM KLCI
 Consist of 30 largest eligible companies by market
capitalisation
 Computed based on free float adjusted market
capitalisation.
 This means a stock with higher free float will gain
greater weightage in the index.

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Operating Hour – Bursa Malaysia
Pre-Opening 8:30 am
Opening and Continuous Trading 9:00 am
Close 12:30 pm

Lunch

Pre-Opening 2:00 pm
Opening and Continuous Trading 2:30 pm
Pre-Closing 4:45 pm
Trading at Last 4:50 pm
Close 5:00 pm
Pre-Opening
 Morning Session: 8:30am to 9:00am
 Afternoon Session: 2:00pm to 2:30pm

 During the Pre-opening:

 Can enter, modify and delete orders
 No order matching is done
 Theoretical Opening Price (TOP) based on
order entered is calculated and displayed
Opening and Continuous Trading
 Morning Session: 9:00am to 12:30pm
 Afternoon Session: 2:30pm to 4:45pm

 During the continuous trading phase:

 Can enter, modify and delete orders
 Orders are matched real time based on
price-time priority during continuous
trading
 Pre-Closing
 Time: 4:45pm to 4:50pm
 Can enter, modify and delete orders

 During Pre-Closing:
 Orders accepted will be displayed however
matching will not be done:
 Matching will be done at 4:50 during Trading At
Last based
 Theoretical closing price (TCP) based on
orders entered will be calculated and
displayed
 Trading at Last
 Time: 4:50pm to 5:00pm

 During Trading at Last:

 Orders can be entered and matched at last
done price (TCP) only
 It is the last opportunity to buy or sell for the
day
Open an Account

 Open a trading account and a Central

Depository Account (CDS) with a stock
broking company
 You will then be engaged with a licensed
dealer (or a remisier)
 Your trading will be done thru your
Trading Account.
CDS Account

 CDS account is similar to a safe deposit

box except that CDS will only hold your
shares.
 In actual fact, there is no physical shares
under the CDS. Instead, the CDS uses a
simple book entry system to keep track of
the movement of shares which arise from
trades affected on Bursa Malaysia.
Minimum Bids

Market Price of Share Minimum

Bids
Below RM1.00 1/2 sen
RM1.00 up to RM99.99 1 sen
RM100.00 and above 2 sen
Board Lot

 Shares are normally traded in specific

amounts called Board Lots of 100 units.

 Any amount less than board lots are

called odd lots.
Upper Limit Price
 For securities price below RM1.00:
 The highest price such securities can be
traded shall be thirty (30) sen above the
reference price

 For securities price equal to or above

RM1.00:
 The highest price such securities can be
traded shall be 30% above the reference
price.
Lower Limit Price
 For securities price below RM1.00:
 The lowest price such securities can be
traded shall be thirty (30) sen below the
reference price

 For securities price equal to or above

RM1.00:
 The lowest price such securities can be
traded shall be 30% below the reference
price.
Trade Confirmation
 Once the order is confirmed, a contract note will be sent
to the client by the stockbroking house.

 The contract will give the following detail on the Share

purchased (or sold):
 Name of the share

 Number of Share

 Amount

 Commission

 Clearing Fees

 Stamp Duty

 Total Amount Due

 Due Date
The End

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