Philippine Stock Exchange 71b1u

 is the national stock exchange of the Philippines.  Its main function is to facilitate the buying and selling of

stocks and other securities through its accredited participants.  The PSE has two trading floors:  PSE Center in Ortigas, Pasig City  PSE Plaza in Ayala, Makati City

 Trading Participants trade daily – from 9:30 a.m to 12:10

p.m. except Saturdays, Sunday, legal holidays and days when the Central Bank Clearing Office is closed.

 Choose a stockbroker.  The PSE has a complete list of information about all its

trading participants who are authorized and qualified to trade securities for you. This list is also available on the PSE's website and the telephone directory's Government and Business listings yellow pages under the category of stock and bond brokers. Aside from representing you in the stock market, a stockbroker can also offer you services such as access to market reports/studies, ontime delivery of important documents, and advise on your investments. It is then important that you trust your stockbroker and that you are satisfied with its services.

 You shall be required to open an and fill

out a Customer Information Form and to submit identification papers for verification.  The stockbroker will then assign a trader or agent to

assist you in either buying or selling any listed security. There are also stockbrokers who have an online trading facility that allows you to post orders by yourself, but sufficient understanding of how the stock market works is key. If you choose to be assisted by a trader or agent, you can discuss with him/her what stocks you want to buy or sell.

 Give the order to your trader, and then ask for the

confirmation receipt.  Your buy or sell orders are relayed to the stockbroker's

dealer for execution. In an automated system as in PSE, the order is keyed in through a trading terminal and automatically matched. Confirmation of done trades via phone, email or online - is made as soon as possible and subsequently, an official confirmation or invoice should be delivered to you.

 Pay before settlement date.  The delivery or payment should be made before the

settlement date of T+3. For traditional stockbrokers, settlement of transactions is usually done after three (3) working days from the transaction date. This means that for transactions done on Monday, as an illustration, payment should be received by Thursday. Meanwhile for online stockbrokers, settlement of all transactions is done on the transaction date. Settlement of s is performed by the clearing house.

 You shall receive from your broker either the

proceeds of sale of your stocks (after 3 business days) or proofs of ownership of stocks you bought (confirmation receipt and invoice).  If you wish to have a physical certificate of the stocks you

bought, you can give instructions to your broker and pay the required upliftment fee.

 PSE Composite Index (PSEi)

 The PSE Composite Index, commonly known

previously as the PHISIX and presently as the PSEi, is the main stock market index of the PSE.  The PSEi is the most watched index on the PSE and is also home to most major Philippine companies listed on the PSE. The PSEi is also the PSE's only broad-base index. It is also one of the indicators on the general state of the Philippine economy.

 PSE All Shares Index (ALL)  The PSE All Shares Index is the stock index in the Philippine Stock Exchange in which all of the stocks traded are included in computations for the level of the index.

 The remaining six indices are sector indices based on a company's main

source of revenue. Although listed in an index, companies are listed on the PSE under the First Board, Second Board or the Small and Medium Enterprises Board based on market.



PSE Financials Index (FIN)  The PSE Financials Index, is the main stock market index of the

PSE for banks and financial entities.  This index is one of the PSE indices also home to companies listed on the PSE composite index, namely Banco de Oro Universal Bank, Bank of the Philippine Islands and Metrobank.  PSE Mining and Oil Index (M-O)  The PSE Mining and Oil Index is the main stock market index of the

PSE for mining and oil companies.

   

PSE Holding Firms Index (HDG) PSE Industrial Index (IND) PSE Property Index (PRO) PSE Services Index (SVC)

 Market Order  The simplest type of order.  An order to be executed at the best price available in the market.

DANGER: Adverse price movement may take place between the time the investor places the order and the time the order is executed.

 Limit Order  Designates a price threshold for execution of the trade.  Buy Limit Order

 Stock may be purchased only at the designated price or lower.  Designated price < current market price of the stock.  Sell Limit Order

 Stock may be sold at the designated price or higher.  Designated price > current market price of the stock.

DISADVANTAGE: It offers no guarantee it will be executed at all; the designated price may simply not be obtainable.

 A limit order that is not executable at the time it

reaches the market is recorded in a limit order book.  The limit order is a conditional order: It is executed

only if the limit price or a better price can be obtained.

Stop order – the order is not to be executed until the market moves to a designated price, at which at which time it becomes a market order.  Buy stop order – the order is not to be executed until the market rises to a designated price, that is, until it trades at or above, or is bid at or above the designated price.  designated price > current market price of the stock

  Sell stop order - the order is not to be executed until the

market falls below a designated price, that is, until it trades at or below, or is bid at or below the designated price.  designated price < current market price of the stock

 DANGERS:  Stock prices sometime exhibit abrupt price changes, so the

direction of a change in a stock price may be quite temporary, resulting in the premature trading of a stock.

CONDITIONAL ORDERS AND THE DIRECTION OF TRIGGERING SECURITY PRICE MOVEMENTS Price of Security Higher price

Current price Lower price

Comment

Limit Order

Market-ifTouched Order

Stop-Limit Order

Stop Order

Price specified for a sell limit order

Price specified Price specified for a sell market- for a limit buy if-touched order stop order

Price specified for a buy stop order

Price specified for a buy limit order

Price specified for a buy market-iftouched order

Price specified for a sell stop order

Can be filled Becomes market only at price or order when price better; does not is reached become a market order until price is reached

Price specified for a sell stoplimit order

Does not become Becomes market a market order order when price until price is is reached. reached; can be executed only at price or better

 Stop Order – an order designed to get out of an

existing position at an acceptable price (without specifying the exact price)  Market-if-touched Order – an order designed to get

into a position at an acceptable price (also without specifying the exact price)

 Opening Order – indicates a trade to be executed

only in the opening range for the day.  Closing Order – indicates a trade is to be executed

only within the closing range for the day.  Fill-or-kill Order – orders that contain order

cancellation provision. It must be executed as soon as it reaches the trading floor or it is immediately canceled.  Open Order or Good until canceled order - good

until the investor specifically terminates the order.

 Round lot – is typically 100 shares of a stock.  Odd lot – defined as less than a round lot.  Block Trade – an order of 10,000 shares of a given

stock or a total market value of $200,000   Super Designated Order Turnaround System

(SuperDot) – NYSE’s system for routing orders of a specified size (submitted by brokers) through a computer directly to the specialists’ posts where the orders can be executed.

 Buying on margin – A transaction in which an

investor borrows to buy shares using the shares themselves as collateral.  Call money rate - or broker loan rate is the interest

rate that banks charge brokers for funds for this purpose.  Securities of Exchange Act of 1934 – prohibits

brokers from lending more than a specified percentage of the market value of the securities.

 Algorithmic Trading – the use of computer programs

to enter trading orders to minimize the costs associated with trading.  TRADING COSTS: 1.

Explicit Trading Costs – are direct costs of trading, such as broker commissions, fees, and taxes.

2.

Implicit Trading Costs – represent such indirect costs as the price impact of the trade, timing costs, and opportunity costs.

 Custodial fees – charged by an institution that

holds securities in safekeeping for an investor.  Transfer fees – fees associated with transferring an asset from one owner to another.  Soft Dollars – arrangements under which products or service

other than execution of securities transactions are obtained by an adviser from or through a broker-dealer in exchange for the direction by the adviser of client brokerage transactions to the broker-dealer  -refer to money paid by an investor to a broker/dealer or a third party through commission revenue rather than by direct payments.

Impact Costs – is the change in market price due to

supply/demand imbalances caused by the presence of the trade. Timing Costs – is measured as the price change between

the time the parties to the implementation process assume responsibility for the trade and the time they complete the responsibility. Opportunity Costs – is the “cost” of securities not

traded. This cost results from missed or only partially completed trades.

 Institutions typically transact much larger orders than

individuals or retail investors.  Institutions typically pay lower commissions than

individuals.  An individual trading through a broker/dealer typically

goes through a stockbroker. These orders go to a retail exchange execution desk and from there to the NYSE or to the OTC execution desk. Institutional investors typically give their orders directly to the institutional broker/dealer execution desk, for both exchange and OTC orders.

 Block Trades – defined as either trades of at least

10,000 shares of a given stock, or trades of shares with a market value of at least $200,000, whichever is less.   Program Trades – involve the buying and/or selling

of a large number of names simultaneously. Such trade are also called basket trades because effectively a “basket” of stock is being traded.