Features of the Stock Market:
The main features of the stock market and share market are as follows.
|Features of Stock Market or Stock Exchange Market|
|3.||The element of capital market|
|6.||Listing of Securities|
|8.||Controlled by the Securities and Exchange Commission (SEC)|
|9.||Central Government Recognition|
|10.||Sensitive to Events|
|11.||The Nerve Center of the Economy|
|12.||Raising Funds by Business Enterprises|
1. Organized market
Stock Exchange is a systematic market for buying, selling and dealing with securities. It provides ready marketability to securities. This is an organized market.
2. Organized body
A stock exchange is an organized body associated with or corporate body. It may be a Public Limited Company, Company Limited by Guarantee and Voluntary Non-Profit Organization. It is owned by the Private Sector and supervised by the Government.
3. The element of capital market
Stock Exchanges are important elements of the capital market. It helps companies to get medium and long-term funds by selling shares and debentures.
4. Registered brokers
Stockbrokers do trading on the Stock Exchange. If trading in the stock market done by any other party, then it can not be considered a valid buy.
Stock Exchanges are mostly located in the capital cities of the main states in the United States. At present, there are 22 major stock exchanges in the US. For example, NASDAQ, NYBT, NMS, etc.
6. Listing of securities
Stock Exchange facilitates the listing of shares. Companies can get their shares listed on one or more stock exchanges in the country. Listing is done by a listing agreement. Only listed companies can trade in the stock exchange.
7. Governing body
Stock Exchanges are administered and managed by the Governing Body. It comprises:
b. Vice President,
c. Chief Executive
e. Public Representatives
f. Government Nominees.
8. Controlled by the Securities and Exchange Commission (SEC)
All activities of the US Stock Exchange are controlled by the Securities and Exchange Commission (SEC). The SEC makes rules and regulations. If they are not followed by the stock exchange, SEC can cancel their registration.
9. Central Government Recognition
The Central Government must recognize stock exchanges. Recognition may be temporary or permanent.
10. Sensitive to events
Stock exchanges are extremely sensitive to economic and political events taking place within and outside the country.
11. The nerve center of the economy
They regard the stock exchange as a nerve center of the economy. Any event has its reflection on share prices.
12. Raising funds by business enterprises
Business enterprises can grow their initial capital and additional capital. For their growth and expansion through stock exchanges. These are the features of the stock market and share market features explained below.
Features of Share Market
The main features of the share market are as follows.
|Features of Share Market or share Exchange Market.|
|2.||Decision-making and voting rights.|
|4.||Limited liability for shareholders|
|6.||Loss absorption for other (debt) investors and other creditors.|
|7.||Source of income.|
1. Ownership rights
If you buy a share, you can become the part-owner of that company. This provides you with voting rights on important matters of the company and can take part in the profits of the company.
2. Decision-making and voting rights
Holding shares grants voting rights and the shareholders can elect the members of the board of directors.
3. High-profit potential
When you purchase a stock, you become the owner to that extent. Once the corporate makes a lot of profits and expands, the demand for its shares will rise. As a result, the share of costs additionally moves up. As an owner, you already have rights in its profits. Now, as the demand for the shares goes up, a second benefit in the form of appreciation in capital invested opens up.
4. Limited liability for shareholders
For each shareholder, the maximum value at risk is the total value of their investment in the shares of the company. This means that, unlike in a partnership, ordinary shareholders are not personally liable for the debt of a company if bankruptcy or liquidations.
However, once the corporate did not create expected profits, there’ll be a low demand for its share price of the shares. thus there’s an opportunity for high-profit gain and high-profit loss. These two go hand in hand. If you’re not careful in selecting a corporation, you’ll lose cash by investing in stocks. Once you purchase associate accounts for inflation and taxes, you’ll realize all risk-fewer investments aren’t so safe.
6. Loss absorption for other investors and other creditors
It is important to understand that shares come last in the ranking of a company’s capital structure. Shareholders only hold a residual claim. This means that in a liquidation, shareholders only get back their money if there is anything left over after they have settled creditors. In most cases, the shares are usually worthless if of a liquidation.
7. Source of Income
We have already explained that shareholders are part owners of the company and can earn a part of the annual profits of that company. Shareholders get income by dividends and bonus shares.
8. Uncertain returns
While many companies pay out dividends to shareholders, there is no obligation on companies to do so. There is no guarantee of returns in any form to shareholders. However, in return for this uncertainty and risk, shares carry higher expected returns over the long-term than most investments. This forms the basis of the relationship between risk and returns for investors in stocks and shares. It is very easy to understand about features of the stock market and share market.
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