1. 4.3 The functions of Stock Exchanges
IGCSE Economics
4.3 The functions of Stock Exchanges

2. Learning Outcome
Describe the functions of Stock Exchanges

3. The basics….. Discuss 2 mins
What is stock ?
Who sells stock?
Why do these organisations sell stock?
What are the owners of stock called?
Why do investors buy shares in companies?
Who might ‘investors’ be?
What is a stock exchange?
Can any business sell shares on a stock exchange?

4. (Government Stock/Securities)
Types of Stock
Preference Shares
(Preferred Stock)
Ordinary Shares
(Common Stock)
Government Bonds
(Government Stock/Securities)
What is the difference?

5. Stock Exchanges – what are they?
A market where buyers and sellers meet to trade stock
There are different stock exchanges in different countries all over the world
Companies (PLC) must be registered with a stock exchange in order to sell their shares there
Do you know the names of any stock Exchanges?

7. Click on the picture to go to the webpage of the London Stock exchange
Click on the picture to go to the webpage of the London Stock exchange. We used the plenary time to look up some companies that they will have heard of and find out the value of their shares.

8. Simple Stock Market Simulation

9. The Key Players Businesses Investors Brokers What they want…
To raise money
Investors
What they want…
To make money by receiving dividends/interest and selling shares at a higher price than they bought for
Brokers
What they want…
To earn commission by advising clients and trading shares for them

10. The Stock Exchange operates two different markets
Primary Markets
Secondary Markets

11. Primary Markets When businesses first issue shares
This is known as an IPO (Initial Public Offering)
Lets see how it works……..
The Key Players……
Businesses
Investors
Brokers

12. Primary Market On the day of issue….. Initial Share Price: $1.00
Click on the picture to go to the webpage of the London Stock exchange. We used the plenary time to look up some companies that they will have heard of and find out the value of their shares.

13. One year later…… The business had a brilliant year
They made huge profits and have announced that they will be paying dividends to their shareholders.
Dividends: $0.50 per share

14. Questions… Primary Markets
How have the key players benefited?
The Business?
The Investors?
The Brokers?
How could this help the economy?

15. Secondary Markets The ‘Second Hand’ market for shares
Investors often think in the short term and will want to re-sell their shares
Let’s see how it works…..

16. Some time in the future……
Secondary Market
Some time in the future……
Current Share Price: $1.20
Click on the picture to go to the webpage of the London Stock exchange. We used the plenary time to look up some companies that they will have heard of and find out the value of their shares.

17. Questions… Secondary Markets
How have the key players benefited?
The Business?
The Investors?
The Brokers?
Who would have suffered if share prices had gone down instead of up?
Who will benefit from any future share price increases?
What determines whether the price of shares will change?

18. Questions… 2 mins
Who would have suffered if share prices had gone down instead of up?
Who will benefit from any future share price increases?
What determines whether the price of shares will change?
What might make the market price of shares go up?
What might make the market price go down?

19. Stock Exchanges – Why use them?
Why not cut out the ‘middleman’?
They make it easier and quicker to find buyers for shares
They reduce the risk
The collect price information

20. Key Question…. What role do stock markets play in the economy?
How do stock exchanges help investors and businesses
In turn….. How can this help the economy?

21. Task – 2 mins
Fill in the gaps sheet

22. What have you learnt today?
1 thing you’d like to find out more about…
2 things you learned about stocks
3 things you learned about stock exchanges

23. What have you learnt today?