1. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
What are ‘Markets’?
Efficient markets?
Well functioning
Information availability
Volumes, prices
Sharenet, JSE.co.za
Liquidity and price continuity
Numerous participants. Flow
Transaction costs
Friction
External efficiency
Numerous participants
Information arrives randomly
Competition to adjust

2. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Primary and secondary markets
Primary
IPO
Prospectus
Underwriting
Private placements
Secondary
Financial market
Liquidity
Information – yields and prices

3. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Primary and secondary markets
Secondary
OTC
Purely brokers
Direct trading/Fourth market

4. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Market structures and organisation
Five types of transactions
Market orders
Transact at prevailing prices
Limit orders
Specific prices
Short sales
Sale of shares not owned with intention of buying them back later at a lower price (risky)
Shares are lent to the seller

5. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Five types of transactions
Special orders
Stop order loss or buys
The stop buy is to minimise losses on short sales
Margin transactions
Borrows shortfall to buy shares with the share itself as collateral
Higher interest rate

6. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Trading system
STRATE
Dematerialisation
Continuous order driven system
Odd lots
SA Securities Markets
BESA – Bond Exchange of South Africa
SAFEX – South African Futures Exchange
Indices, bonds, currency (FMD), Agriculture (SADD)

7. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
JSE – JSE Securities Exchange Ltd
Main Board
AltX
Different listing requirements
Table 2.1
Market Indices
Aggregate market movement
Use thereof

8. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Use of Indices
Benchmark performance
To create and monitor an index fund
Market rates or return
Prediction for the market itself
Systematic risk relationship as a proxy
Variables in the index
Sample size
Weighting
Arithmetic or geometric average or one that reflects all changes

9. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Weighting
Value
Market capitalisation of all shares included
Price weighted
Index value = Total market index/Index divisor
Total market index = market capitalisation
Index divisor – ‘k factor’
Share splits, bonuses etc go through the k factor
Equal weighting for all

10. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Bond market indices
More difficult
Bonds mature, new ones appear, different types of bonds
Sinking or calls for example
Duration affects volatility
Difficult to price some compared to shares
Indices
All Bond Index (ALBI)
Government Bond Index (GOVI)
Other Bond Index (OTHI)

11. ORGANISING AND FUNCTIONING OF SECURITIES MARKETS
Global view
Must use a proper index for the proper decision
Changes
Negotiated commissions
Meant to deal with ‘soft dollars’ and promote good broker advice
Block trades
Significant blocks of shares
Volatility
New exchanges and consolidations
Increased automisation