Problems and Prospects of Capital Market
What is Capital Market?
A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as Securities and Exchange Commission (SEC) for Bangladesh or for the UK Financial Services Authority (FSA) oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. What is stock?
Stock is a security issued in the form of shares that represent ownership interests in a company. There is both common stock (often simply called "stock," "shares," or "equity") and preferred stock. Common stock holders elect the company's board of directors and actively participate in the company's success (or failure) through a rising (or falling) stock price. Common stock holders may also receive dividends, provided the company is profitable, obligations to commercial creditors and bondholders have been met, and the board sees fit to declare them.
How can it be traded?
For example if you want to transfer your part of ownership of the firm to other then you should sell the deed of ownership to someone else. In that case, you have to maintain some papers. For example, a sale deed will be signed and the deed will be registered in government registry office. In case of stock when you buy stock/share of a certain company you will be given a share certificate. This certificate certifies that you own that much part of the company. In addition, you have to register your ownership certificate with company's register. However, due to some problems with paper certificate - (such as copied certificate, maintenance of huge paper certificates) a new system of electronic stock (dematerialized share) is made. In this system, your stock is preserved in an electronic system rather delivering you the paper shares. Moreover, you do not need to register your ownership. The ownership is automatically transferred to you and preserved in an automatic system. This system is called Central Depository Bangladesh Limited (CDBL).
What is stock exchange?
A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which give them advantages of speed and cost of transactions. For example Dhaka Stock Exchange has a electronic trading system called TESA and Chittagong Stock Exchange has an electronic trading system called VECTOR. These two systems work as an arrangement to help buy/sell of listed securities.
Capital Market Participants:
The participants of capital market are mainly those who have a surplus of funds and those who have a deficit of funds. The persons having surplus...
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