Syndicate
Capital Suppliers
Capital suppliers: companies or private people that are interested in allocating the remaining liquidity in order to get a profit. Investors allocate their funds trying to get the maximum profitability with a minimum risk. At the same time, try to ensure a good liquidity in investments, so they can recover quickly in case needed.
Brokers: these play a very important role since they contact the demands of buyers with the supply of sellers of securities. In some countries, this function is developed by securities societies and agencies that have replaced the exchange agencies in stock markets brokers monopoly. The securities societies can represent a third party in exchange of a commission (broker), and on their own to get benefits (dealer). Therefore, they can invest in securities, ensure the subscription of issues, as well as give credit to buys and sales of securities. Securities agencies, on the other hand, can only act as brokers and are not empowered to give credit for this kind of transactions or to ensure issuance of securities.
Commissions that brokers receive are variable, but range around 1% of the sales price.
In order to work with a determined (specific) stock market, every bond society as agencies has to be a member of such market. In this case, they have to add the phrase “and stock market” (bond and stock market society or agency).
Bond societies and agencies mainly have , as stockholders credit entities (basically banks, savings institutions, and old exchange and stock market agencies). Securities societies as well as agencies must count with a minimum capital, according to the current legislation. Similarly, they have to be approved by the Stock Market?s National Commission and authorized by the Treasury and Revenue Ministry.
Portfolio managing societies are the ones who can give –exclusively- the individual management service of investment portfolios, according to the orders given by investors.
Other entities that participate in the stock market are the investment societies.
In trading certain securities, as debentures, or those from the secondary stock market, “counterpart societies” must take part as requested by the issuing entities. These societies provide liquidity to these securities when compromising to buy a specified percentage of the same when demand does not match the supply. On the contrary, that is to say, when supply of securities do not match the demand, counterpart societies have to sell a specific percentage – if they have the securities- of the existing difference between them. These operations are done at a fixed price by themselves.
The main objectives of the stock market are:
- To facilitate the exchange of funds among entities in need of funding and investors. For that, issuing entities of securities – these have to be admitted in the stock market. This exchange takes place in the primary market.
- To provide liquidity to stock market investors. In this way, the investor can recover its investment when needed if he goes to the stock market to sell the securities previously bought. This can be achieved through the secondary market.
Price fixing of the securities through the demand and supply law.
Facilitate information to investors, since buying and selling securities is legally guaranteed.
Publish prices and traded amounts to inform investors and interested entities.
Besides, the stock market plays an important role as barometer of the economy. That’s right, the stock market, with its fluctuations is usually used as an indicator of the evolution of the economy. Throughout history, the stock market cracks have many times been the alert that an economic recession would come soon.