The Stock Exchange

When a company needs to raise money in order to grow, it can choose between two different options. It can issue shares (or part of its capital) which can be bought by the general public. These shares are known as equities or ordinary shares, and are the most common form of shares. When you buy shares in a company, you become a shareholder and own a part of that company (or have a stake in the company). As part owner of a company, you can therefore make or lose money depending on company's profits. If the company does make profits, it pays a certain sum of money per share to its shareholders usually twice a year, this sum of money is called dividend. Companies can also borrow money from a bank or from general public by issuing bonds which are loans with a fixed amount of interest to be paid each year.

Each year, billions of pounds of shares are bought and sold (or in one word traded) on the London Stock Exchange as well as on ones in New York, Paris, Moscow, Tokyo and in the other financial centres of the world. In addition to the above-mentioned shares, so-called government stocks or gilt-edged securities are also traded on the Stock Exchange. These are loans issued by the government to gather enough money in order to get on with its expenditures, for example, in the case there is budget deficit to be met. In Russia we still remember quite well bad experience gained due to state short-term borrowings in eightieths.The Stock Exchange can be defined as a market place where securities are traded. Many companies are authorised to use the Stock Exchange to trade their shares. Every day the press gives valuable information about the shares of these listed companies. You can obtain such information from financial sections of newspapers; it is also placed in Internet and TV News along with specialized financial journals. This information enables you to follow the progress of any shares that you own or you may be intending to acquire. In the financial section listed companies are grouped according to sector, for instance. Insurance, Banks, Transport, Oil and Gas, Food Manufacturing and others. There are several columns in a financial section. It is obviously indicated the name of the share and its price as it stood at the close of the Stock Exchange yesterday. It is said, for example, British Airways closed at two hundred pence per share. Then there may be two columns showing the highest and the lowest prices for the shares during the current year. The next column displays the change, which means how much the price of the share has changed in comparison with the previous day's closing price. For shareholders and securities analysts the following figures are the most important, and they are price/earning ratio and yield. The first one refers to the relationship between the current market price for a share and the profit earned by the company over the most recent year. And the second one, yield, implies the sum of money that shareholders can expect to receive for every pound or dollar invested.

In developed capitalist countries most adults save or invest in one form or another and much of these savings are made through the Stock Exchange. This investment might be direct - buying shares in companies or gilt-edged securities, and the investments might be indirect as well, such investments are performed in the following way: anyone who pays in a pension scheme and insurance or places money on deposit in clearing bank, in fact gives the corresponding pension fund or insurance company or bank the right to act on his or her behalf, trading on the Stock Exchange. As much as two thirds of all Stock Exchange members are the aforesaid institutions and organizations. Not long ago the Stock Exchange represented crowded trading floor with throng of dark suited men milling around the hexagonal stands. That indeed was the picture until 27th October, 1986 - the day commonly known as "Big Bang", which resulted in the greatest changes in the history of the Stock Exchange. Before Big Bang Stock Exchange members were either brokers or jobbers. Brokers acted on behalf to their clients to trade shares, but jobbers acted as wholesalerson their own behalf trading shares with brokers but not with general public. Formerly if you had wanted to trade some shares you would have gone to your stockbroker or to your bank. Then the bank or the stockbroker would have telephoned their broker on the floor of the Stock Exchange and he would then have gone from jobber to jobber asking them to quote their prices at which they were prepared to buy and to sell the shares. In that way the broker tried to find the acceptable price at which he would have done the transaction with the jobber who offered such a price. Nowadays instead of brokers and jobbers all members are free to trade without dealing through jobbers. Before Big Bang the Stock Exchange was only open to individuals. But now it doesn't matter whether you are an individual or you represent a firm. Former Stock Exchanges were largely internal, but since financial institutions and insurance companies, have been able to become members, they actively compete internationally because of their capitals unlike the individuals in the past whose capitals were too small to do it.

At present stockbrokers are able to fix their own charges for trading shares according to the service they provide. To cope with the increasingly growing business new electronic system has been introduced to help stockbrokers manage with their clients. It is called Stock Exchange Automatic Quotation. This system displays all current stock information, which is constantly updated. It looks like television screen and it really makes the brokers' works much easier keeping them up with all changes taking place in the market.

Дата добавления: 2015-08-03