CAPITAL MARKET OPERATIONS, PLAYERS, PRODUCTS, EFFICIENCY, INDEX ETC A PAPER PRESENTED BY MR. AZU ODITA GENERAL MANAGER/CEO, NETWORTH SECURITIES & FINANCE LIMITED (A MEMBER OF THE NIGERIAN STOCK EXCHANGE)
What is Capital Market Types of Market (Primary & Secondary) Products Offered Products offered and product development in the Capital Market Shares, bonds, debentures; etc Participants and roles in the Capital market SEC, Stock Exchange, Stock brokers, Issuing Houses, Jobbers, Registrars, Institute of stockbrokers; etc. Methods of Accessing the Capital Market Offer by Introduction, Offer for subscription, Right issue, Bonuses, Offer for sale, Private Placement, Share split, construction, reconstruction and consolidation Determining Appropriate Market Price for a Security
1.0 THE CAPITAL MARKET
1.1 It is nice to begin the topic by reviewing our understanding of the capital market. The capital market is a sub-set of the financial system that serves as engine of growth in modern economies. It is that section of the financial system that is involved in providing long-term funds for productive use. The capital market therefore provides an option for governments and companies to raise investment capital for the construction of waterworks, bridges, schools and factories and purchase of vehicles, facilities and equipment using such financial instruments such as equities and bonds. The capital market can also be used as a vehicle to acquire other companies. This compares with the money market, which represents the short-end of the financial system that provides facilities for claims and obligations whose maturity vary from one day to one year. 1.2 We can also look at the capital market as the network of institutions and individuals made up of regulators, ad operators who, together, facilitate the smooth operation of the market. In this regard, the capital market constituencies can be broadly divided into four categories, namely:
1.2.1 1.2.2 1.2.3 1.2.4
Provider of funds (investors individuals, Unit Trusts/mutual funds, pension funds and other institutional investors) Users of funds (companies and governments and their agencies. Intermediaries (facilitators stockbroking houses, issuing houses, registrars, etc. Regulators (Government Regulatory Agencies, such as SEC, and the Central Bank and self Regulatory Organization such as The Nigerian Stock Exchange)
1.3 As can be seen in the foregoing review of the capital market, while the providers of funds comprise individuals and corporate bodies, the users of funds (issuer of securities) are expected to be companies and governments. In other words, individuals may not be able to raise money from the capital market as they can do in the money market.
The capital market is a network of institutions and mechanisms through which medium and long-term funds are made available to businesses and governments and instruments outstanding are transferred among investors. It establishes rules for fair trading practices and regulates the trading activities of its members according to those rules. Stock Exchanges provide a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities. Globally, stock exchanges were established for the purpose of facilitating, regulating and controlling the business of buying and selling securities. Also it provide facility for buying and selling securities that have been listed for trading on that exchange.
Types of Market
Globally, two markets are distinct: Primary Secondary
In the primary market, new instruments are sold for cash through investment agents The funds are then used for capital investment in form of retiring outstanding securities of the company, financing new plant or equipment, secure additional working capital, install modern IT infrastructure, branch expansion etc. Cash generated...
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