SECURITIES MARKETS

Mechanics of investing in securities

BROKER MARKET MAKER

(SECURITIES DEALER)

Buy and sell securities for their Buy and sell securities for their own
customer’s account account

Do not bear the risk associated with price Bear the risk associated with price
fluctuations fluctuations

Market order - an order to execute a stock transaction (either to buy or to sell) at the
best price available.

Day order - an order to execute a stock transaction only in one particular day.

Example:
Mr. X made a day order, to sell his Jollibee Food Corp shares, if the price
of it reaches Php160 or better per share on September 10, 2020. If the price of
such share never rises Php160 on that date, the order to sell expires. The stock
broker cannot sell those stocks anymore on the succeeding days unless there’s a
new order from Mr. X.

Good-til-cancelled order - an order to execute a stock transaction until it is completed

or cancelled by the investor.

Commission – amount paid to broker for executing stock transaction on behalf of the
investors.
Spread – the difference between the amount paid by the underwriters in buying the
stocks, and the amount received in selling the same.

Settlement date - the agreed date to pay the purchased securities, which is the same
day which the said securities will be delivered.

Security prices
No one can really predict with 100% accuracy how the security prices will
behave. Due to its erratic daily fluctuation, investors can only guess, or make
assumptions base on its price movement, what will be the value of securities on the
very next day or the days to come.
The following are some of the various factors that affect the price of securities:
1. Supply and demand
2. Financial performance (earnings) of the company
3. Stock’s apparent risk
4. Interest rate
5. Trend
6. Market sentiment
7. Government stability

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