What are STOCKS?
Stocks are shares of ownership in a company. When you buy stocks of a publicly listed company, you become a stockholder or shareholder of a company. In other words, you become a part-owner of that company.
As a part-owner, you participate in the company’s growth and future profits. Conversely, you may also lose if the company suffers a loss or performs below market expectations.
The number of stocks you acquire will determine how big or small your ownership is. As you acquire more stocks, your ownership stake in the company becomes greater.
Other terms for stocks are “shares” or “equities”.
In Filipino, stocks are called “sapi”, which means to “join” or to “partake”.
As a part-owner, you participate in the company’s growth and future profits. Conversely, you may also lose if the company suffers a loss or performs below market expectations.
The number of stocks you acquire will determine how big or small your ownership is. As you acquire more stocks, your ownership stake in the company becomes greater.
Other terms for stocks are “shares” or “equities”.
In Filipino, stocks are called “sapi”, which means to “join” or to “partake”.
Types of STOCKS
Stocks are classified according to types and classes, depending on the characteristics and earnings potential.
According to RIGHTS
a. Common stock – It is a security usually purchased for participation in the profits and control of ownership and management of the company. A common stockholder exercises control through voting rights during annual or special stockholders’ meetings, but can only claim rights to the company’s assets and earnings when preferred shareholders are already paid in full.
Most of the issues traded in the local stock market are common stocks.
Common stocks are also known as “ordinary shares.”
b. Preferred stock – It is a security whereby the holder has a higher claim on the assets and earnings of the company.
a. Common stock – It is a security usually purchased for participation in the profits and control of ownership and management of the company. A common stockholder exercises control through voting rights during annual or special stockholders’ meetings, but can only claim rights to the company’s assets and earnings when preferred shareholders are already paid in full.
Most of the issues traded in the local stock market are common stocks.
Common stocks are also known as “ordinary shares.”
b. Preferred stock – It is a security whereby the holder has a higher claim on the assets and earnings of the company.
In terms of dividend payment and liquidation, preferred shareholders have priority over common shareholders. Though preferred stockholders do not have voting rights, they are entitled toreceive dividends before any dividends are paid to the common stockholders.
Preferred stocks usually have a specified limited rate of return or dividend and a specified limited redemption and liquidation price.
Preferred stocks are also known as “preference shares.”
Preferred stocks are also known as “preference shares.”
According to OWNERSHIP
Common shares may further be classified into:
a. Class A – These are stocks that can be exclusively traded by Filipino investors.
b. Class B – These are stocks that can be bought and sold by both Filipino and foreign investors.
Both classes have the same privilege and receive the same amount of dividends. Such classification of common shares is done to monitor the equity ownership of both local and foreign investors.
According to SECTORS
Stocks listed and traded on the PSE are classified into six (6) sectors:
1. Financials Sector – includes companies engaged in banking, investments, and finance.
2. Industrial Sector – includes companies involved in the following:
a. Electricity, Energy, Power, and Water
b. Food, Beverage, and Tobacco
c. Construction, Infrastructure, and Allied Services
d. Chemicals
e. Diversified Industrials
3. Holding Firms Sector – includes companies or firms that control or manage partial or complete interest in another company or other companies. Usually, these companies do not produce goods or services itself; rather, its purpose is to own shares of other companies.
4. Property Sector – includes companies involved in land and property development
5. Services Sector – includes companies involved in the following:
a. Media
b. Telecommunications
c. Information Technology
d. Transportation Services
e. Hotel and Leisure
f. Education
g. Diversified Services
6. Mining and Oil Sector – includes companies engaged in mineral extraction, oil exploration, extraction and production
According to CHARACTERISTICS
Though there is no formal definition or criteria to classify a stock according to its characteristics, analysts generally describe stocks as:
a. Blue Chip stocks – are shares of well-established and financially sound companies that have demonstrated their ability to pay dividends in both good and bad times. They also exhibit more modest but dependable returns and are relatively of lower risk.
b. Income stocks – are shares of those companies with good dividend payment history due to steady profits. Since they are stable, income stocks generally have a lower level of volatility.
c. Growth stocks – also called “glamour stocks”, are shares of corporations whose earnings are expected to grow at an above-average rate relative to the market. A growth stock does not usually issue dividends as earnings are reinvested in capital projects.
d. Defensive stocks – are shares that provide regular dividends and stable earnings, regardless of the overall condition of the stock market. Defensive stocks remain stable under difficult economic conditions. Generally, these are stocks of food, oil, and utilities companies, which are characterized by steady demand amidst hard times.
e. Cyclical stocks – are those sensitive to business conditions or cycles strongly tied with the economy’s performance. These companies produce or offer services that are low in demand during slowdown and increase when business peaks.
f. Speculative stocks – are those that rise quickly when economic growth is strong and falls rapidly when growth is slowing down. A speculative stock is considered very risky because of its volatility. It increases or decreases rapidly depending on the economic conditions.
How Do You Make Your Money Grow in Stocks
There are two ways to make your money grow in the stock market:
1. Through an increase in stock price or capital appreciation
Capital appreciation is an increase in the market price of your stock. It is the difference between the amount you paid when buying shares and the current market price of the stock. However, if the company does not perform as expected, the stock price may go down below your purchase price.
You cannot really earn from stock price appreciation unless you sell your shares. Otherwise it is only a book value gain, which means it is not yet converted to cash, and current price may change depending on market forces.
For example, if you buy a share of stock at Php100.00, and it rises to Php110.00, your capital appreciation or gain is Php10.00. Keep in mind that you only realize your gain of Php10.00 minus applicable charges, if you sell at Php110.00. If you choose to hold it and it further increases to Php150.00, your capital gain would be Php50.00. However, if your stock decreases to Php100.00, and you decide to sell it at that price, then your capital gain is zero.
2. Through dividends declared by the company
Dividends are paid out to shareholders, representing earnings of the company that are not going to be reinvested in their business. There are two types of dividends: cash and stock dividends.
A cash dividend represents earnings declared by the company for every share of stock. So, if the company declares a dividend of 25 centavos per share, a stockholder with 10,000 shares will receive a cash dividend of (Php2,500.00 minus tax of 10% for individual Filipino investors)(Php0.25 x 10,000) in cash.
Stock dividends are additional shares given to shareholders at no cost. If the company declares a 25 percent stock dividend, a stockholder with 10,000 shares will be entitled to an additional 2,500 shares of stock. These shares can be sold anytime after the shares have been issued.
1. Through an increase in stock price or capital appreciation
Capital appreciation is an increase in the market price of your stock. It is the difference between the amount you paid when buying shares and the current market price of the stock. However, if the company does not perform as expected, the stock price may go down below your purchase price.
You cannot really earn from stock price appreciation unless you sell your shares. Otherwise it is only a book value gain, which means it is not yet converted to cash, and current price may change depending on market forces.
For example, if you buy a share of stock at Php100.00, and it rises to Php110.00, your capital appreciation or gain is Php10.00. Keep in mind that you only realize your gain of Php10.00 minus applicable charges, if you sell at Php110.00. If you choose to hold it and it further increases to Php150.00, your capital gain would be Php50.00. However, if your stock decreases to Php100.00, and you decide to sell it at that price, then your capital gain is zero.
2. Through dividends declared by the company
Dividends are paid out to shareholders, representing earnings of the company that are not going to be reinvested in their business. There are two types of dividends: cash and stock dividends.
A cash dividend represents earnings declared by the company for every share of stock. So, if the company declares a dividend of 25 centavos per share, a stockholder with 10,000 shares will receive a cash dividend of (Php2,500.00 minus tax of 10% for individual Filipino investors)(Php0.25 x 10,000) in cash.
Stock dividends are additional shares given to shareholders at no cost. If the company declares a 25 percent stock dividend, a stockholder with 10,000 shares will be entitled to an additional 2,500 shares of stock. These shares can be sold anytime after the shares have been issued.
Investment Procedure
How to start investing in STOCKS?
Getting started in the stock market is a simple process.
1. Choose your STOCKBROKER.
At present, there are more than a hundred stockbrokerage companies to choose from.
When you choose a stockbroker, you need to consider the type of service you will require and who will best suit your needs. You should remember that your stockbroker is your financial agent that will help you make your invested money grow. Stockbrokers are also classified as traditional or online based on the services that they offer.
Traditional brokers are those who assign a licensed salesman to handle your account and take your orders via written instruction or through a phone call. Online brokers, on the other hand, are those whose main interface with their customer is through the Internet.
The full listing of stockbrokers is available in the PSE website www.pse.com.ph.
2. Open a TRADING ACCOUNT with your chosen stockbroker.
The next step is to formally open a trading account. Similar to the process in opening a bank account, representatives of the chosen stockbrokerage company will require you to fill out a Customer Account Information Form or CAIF. Accomplish this along with the other requirements such as:
o Two (2) valid IDs;
o Specimen signature cards, and;
o Proof of billing.
3. Discuss with your stockbroker the stocks you wish to BUY or SELL.
After opening a trading account, you can now start discussing with your stockbroker the stocks you wish to buy (or sell).
4. Give ORDERS to the stockbrokers.
Placing an order to buy or sell a stock can be done by making a telephone call or sending an SMS to your stockbroker. Orders can also be placed directly online via the Internet.
5. Get the CONFIRMATION RECEIPT.
Once your order has been carried out, your stockbroker will give you a confirmation invoice showing the details of your transaction.
6. Deliver/Pay before SETTLEMENT DATE.
The delivery or payment should be before the settlement date. For traditional stockbrokers, settlement of transactions is usually done after three (3) working days from the transaction or T+3. For online stockbrokers, settlement of all transactions is done on the transaction date.
7. Receive PAYMENT.
At present, there are more than a hundred stockbrokerage companies to choose from.
When you choose a stockbroker, you need to consider the type of service you will require and who will best suit your needs. You should remember that your stockbroker is your financial agent that will help you make your invested money grow. Stockbrokers are also classified as traditional or online based on the services that they offer.
Traditional brokers are those who assign a licensed salesman to handle your account and take your orders via written instruction or through a phone call. Online brokers, on the other hand, are those whose main interface with their customer is through the Internet.
The full listing of stockbrokers is available in the PSE website www.pse.com.ph.
2. Open a TRADING ACCOUNT with your chosen stockbroker.
The next step is to formally open a trading account. Similar to the process in opening a bank account, representatives of the chosen stockbrokerage company will require you to fill out a Customer Account Information Form or CAIF. Accomplish this along with the other requirements such as:
o Two (2) valid IDs;
o Specimen signature cards, and;
o Proof of billing.
3. Discuss with your stockbroker the stocks you wish to BUY or SELL.
After opening a trading account, you can now start discussing with your stockbroker the stocks you wish to buy (or sell).
4. Give ORDERS to the stockbrokers.
Placing an order to buy or sell a stock can be done by making a telephone call or sending an SMS to your stockbroker. Orders can also be placed directly online via the Internet.
5. Get the CONFIRMATION RECEIPT.
Once your order has been carried out, your stockbroker will give you a confirmation invoice showing the details of your transaction.
6. Deliver/Pay before SETTLEMENT DATE.
The delivery or payment should be before the settlement date. For traditional stockbrokers, settlement of transactions is usually done after three (3) working days from the transaction or T+3. For online stockbrokers, settlement of all transactions is done on the transaction date.
7. Receive PAYMENT.
Ways to Post an Order
How can I post a buy or sell order?
Placing an order to buy or sell stocks to your stockbroker can be done in three ways: over the phone (call or text message), online, and face-to-face (walk-in).
• Over the phone (call or text message)
The most traditional way to post a buy or sell order is by making a telephone call to your stockbroker and get firsthand advice from him.
You may also post orders through text messaging, which may be arranged with a trader of a full service stockbrokerage house. Note that there are certain risks involved including the possibility of your order not being received on time and accurately, or not being received at all by the trader.
• Online
Investors with online trading accounts post their buy or sell order via the Internet using the online trading platform of an online stockbroker. With a few simple clicks, you may buy or sell stocks without the need to speak to your stockbroker. Online trading allows faster posting of orders and settlement at a lower commission rate.
• Face-to-face (walk-in)
Some stockbrokers have their own investors’ trading lounges where you can monitor stock price fluctuations through viewing facilities and at the same time, personally post a buy or sell order through a trader.
Placing an order to buy or sell stocks to your stockbroker can be done in three ways: over the phone (call or text message), online, and face-to-face (walk-in).
• Over the phone (call or text message)
The most traditional way to post a buy or sell order is by making a telephone call to your stockbroker and get firsthand advice from him.
You may also post orders through text messaging, which may be arranged with a trader of a full service stockbrokerage house. Note that there are certain risks involved including the possibility of your order not being received on time and accurately, or not being received at all by the trader.
• Online
Investors with online trading accounts post their buy or sell order via the Internet using the online trading platform of an online stockbroker. With a few simple clicks, you may buy or sell stocks without the need to speak to your stockbroker. Online trading allows faster posting of orders and settlement at a lower commission rate.
• Face-to-face (walk-in)
Some stockbrokers have their own investors’ trading lounges where you can monitor stock price fluctuations through viewing facilities and at the same time, personally post a buy or sell order through a trader.
Posting an Order
What basic information do I need to provide my stockbroker
when posting an order?
when posting an order?
When posting an order, you must tell your stockbroker the name of the listed company or the symbol of the stock to be bought or sold, the price you are willing to buy or sell a specific stock and lastly, the number of shares to be traded.
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• Buy or Sell
Choose BUY to purchase shares or SELL to dispose shares.
• Number of Shares
Indicate the number of shares to trade—must be a whole number bigger than zero. All buying and selling orders are subject to a minimum number of shares as prescribed by the board lot table instituted by the PSE. Prices in the market may fluctuate according to the set intervals based on the price level of the shares. See the NEW PSE Board Lot Table.
• Stock Symbol
State the name of the listed company or the symbol of the stock to be bought or sold. Go to Stock Symbol Lookup.
• Price
Indicate the highest price you are willing to buy or lowest price you are willing to sell the stock to be bought or sold. Price may be specified or based on the market depending on the type of order you want to post.
• Order Type based on Price
The most common order types based on price are market (prevailing market price) and limit (specified price) orders. See Order Types.
• Order Type based on Expiration/Validity
Traders have access to many different types of orders classified according to validity such as Day, Good Till Cancelled (GTC), Good Till Date (GTD) and Good Till Week (GTW). See Order Validity Types.
Types of Stock Trading Orders
What are the different types of stock trading orders?
All stock trades consist of at least two orders—one buy and one sell order—usually with one order to enter the trade, and one or more orders to exit the trade.
A single order is either a buy order or a sell order. An order can be used either to enter a trade or to exit a trade. If a trade is entered with a buy order, then it will be exited with a sell order, and vice versa. For example, if a trader expected the market's price to go up, the simplest trade would consist of one buy order to enter the trade, and one sell order to exit the trade. Conversely, if a trader expected the market's price to go down, the simplest trade would consist of one sell order to enter the trade, and one buy order to exit the trade.
Traders have access to many different types of orders according to price and validity, which they can use in various combinations to execute their clients’ trades. With this, a stockbroker’s commission may depend on which type of order an investor prefers to take.
The following explanations will explain each of the order types, and how these orders are used in stock trading.
ORDER TYPES (according to price)
1. Market Order
Market Order is the buying or selling of stocks without a specified price, or immediately at the prevailing market price when the order is executed, whatever the price may be.
Market order is the simplest and quickest way to get your order completed. It is often subject to the lowest commission since this is the easiest to execute.
For example, if stock ABC’s current market price is Php2,500.00 per share, the investor should be willing to buy or sell at this price level. Although being practiced in some other markets, this type of order is rarely used in the local equities market.
2. Limit Order
Limit Order is entered with a specified price known as the limit price. This allows investors to buy or sell at their desired buying or selling price levels.
The primary difference between a market order and a limit order is that the stockbroker cannot guarantee that the former will be executed at a specific price.
For example, stock ABC’s current market price is Php2,500.00 per share. If the investor thinks that this price level is too expensive, he may post a lower bid or buying price of Php2,450.00 per share. This means that his order will only be matched if stock ABC’s market price reaches Php2,450.00 per share or if when there are available sellers at Php2,450.00 per share.
3. Market on Opening/Closing Order
Market on Opening/Closing Order is accepted only during pre-open and pre-close periods and executed at the opening/closing price of the instrument.
4. Market-to-Limit Order
Market-to-Limit Order is an order entered for immediate execution at the best price with whatever volume available and remaining quantity will be queued as a limit order.
5. Stop Order (Stop Loss/Stop Limit)
Stop Orders are triggered when a specified price limit is reached. It becomes a market order as soon as its trigger price limit is reached. There are two (2) kinds of stop orders:
All stock trades consist of at least two orders—one buy and one sell order—usually with one order to enter the trade, and one or more orders to exit the trade.
A single order is either a buy order or a sell order. An order can be used either to enter a trade or to exit a trade. If a trade is entered with a buy order, then it will be exited with a sell order, and vice versa. For example, if a trader expected the market's price to go up, the simplest trade would consist of one buy order to enter the trade, and one sell order to exit the trade. Conversely, if a trader expected the market's price to go down, the simplest trade would consist of one sell order to enter the trade, and one buy order to exit the trade.
Traders have access to many different types of orders according to price and validity, which they can use in various combinations to execute their clients’ trades. With this, a stockbroker’s commission may depend on which type of order an investor prefers to take.
The following explanations will explain each of the order types, and how these orders are used in stock trading.
ORDER TYPES (according to price)
1. Market Order
Market Order is the buying or selling of stocks without a specified price, or immediately at the prevailing market price when the order is executed, whatever the price may be.
Market order is the simplest and quickest way to get your order completed. It is often subject to the lowest commission since this is the easiest to execute.
For example, if stock ABC’s current market price is Php2,500.00 per share, the investor should be willing to buy or sell at this price level. Although being practiced in some other markets, this type of order is rarely used in the local equities market.
2. Limit Order
Limit Order is entered with a specified price known as the limit price. This allows investors to buy or sell at their desired buying or selling price levels.
The primary difference between a market order and a limit order is that the stockbroker cannot guarantee that the former will be executed at a specific price.
For example, stock ABC’s current market price is Php2,500.00 per share. If the investor thinks that this price level is too expensive, he may post a lower bid or buying price of Php2,450.00 per share. This means that his order will only be matched if stock ABC’s market price reaches Php2,450.00 per share or if when there are available sellers at Php2,450.00 per share.
3. Market on Opening/Closing Order
Market on Opening/Closing Order is accepted only during pre-open and pre-close periods and executed at the opening/closing price of the instrument.
4. Market-to-Limit Order
Market-to-Limit Order is an order entered for immediate execution at the best price with whatever volume available and remaining quantity will be queued as a limit order.
5. Stop Order (Stop Loss/Stop Limit)
Stop Orders are triggered when a specified price limit is reached. It becomes a market order as soon as its trigger price limit is reached. There are two (2) kinds of stop orders:
a. Stop Loss Order
A Stop Loss Order stays inactive and is not displayed in the market until a trade occurs at the order’s trigger price. It is immediately treated as a Market Order when the order is triggered. It specifies only the trigger price.
b. Stop Limit Order
A Stop Limit Order is the same as the stop loss order wherein it also stays inactive and is not displayed to the market until a trade occurs at the order’s trigger price. Instead of specifying only one price, a stop limit order specifies two prices: the trigger price and the limit price, which must exceed the limit price.
ORDER VALIDITY TYPES (according to time/validity)
a. Day Order (DAY)
Day Order is valid until the end of the trading day only. If the investor’s buying or selling order is not matched during the day, this will automatically be cancelled and will have to be reposted by/for the investor on the next trading day.
b. Good Till Cancelled (GTC)
Good Till Cancelled is valid until cancelled by the investor or trader or until it has reached the set expiration date of the security.
c. Good Till Date (GTD)
Another most frequently used limit order is the Good Till Date which is valid until the date specified by the investor.
d. Good Till Week (GTW)
Good Till Week is a type of limit order which is valid for seven (7) calendar days. If unmatched within seven (7) calendar days, the buy or sell order will automatically be cancelled and will have to be reposted by the investor though his trader or through his online trading account.
e. Sliding Validity (SLIDING)
Sliding Validity Order is valid for 360 calendar days from the time it is posted.
f. Fill-and-Kill (FAK)
The Fill-and-Kill (FAK) Order, also referred to as ‘Execute-and-Eliminate Order’, is valid upon execution. Fill-and-Kill orders require the stockbroker to instantly execute a trade at the quoted market price. If the stockbroker is not capable of doing so, the order is immediately discarded.
VOLUME QUALIFIERS
The following volume qualifiers to the Order types are accepted by the Trading System:
a. Minimum-Quantity Order
Minimum-Quantity Orders must be executed immediately to the extent of the specified minimum quantity, with any remaining unexecuted portion being added to the Order book, and shall only apply to Limit or Market-to-Limit Order.
b. Iceberg Order
Iceberg Orders, also referred to as “disclosed quantity orders”, are orders which are successively entered in the Central Order Book, and disclosed to the market at specified tranches. Disclosed quantity shall not be less than the specified percentage set by the Exchange.
The Board Lot Table
How much is the minimum amount of investment?
Trading of stocks is done by board lot or round lot system. The Board Lot Table determines the minimum number of shares one can purchase or sell at a specific price range. Therefore, the minimum amount needed to invest in stocks varies and will depend on the market price of the security as well as its corresponding board lot.
Prices of stocks move through a scale of set price fluctuations. Prices are thus adjusted along these fluctuations at a time. Transactions which are beyond the prescribed number of maximum fluctuations from the last sale price are not allowed.
| PRICE | TICK SIZE | LOT SIZE | |
| From | To | ||
| 0.0001 | 0.0099 | 0.0001 | 1,000,000 |
| 0.0100 | 0.0490 | 0.0010 | 100,000 |
| 0.0500 | 0.2490 | 0.0010 | 10,000 |
| 0.2500 | 0.4950 | 0.0050 | 10,000 |
| 0.5000 | 4.9900 | 0.0100 | 1,000 |
| 5.0000 | 9.9900 | 0.0100 | 100 |
| 10.0000 | 19.9800 | 0.0200 | 100 |
| 20.0000 | 49.9500 | 0.0500 | 100 |
| 50.0000 | 99.9500 | 0.0500 | 10 |
| 100.0000 | 199.9000 | 0.1000 | 10 |
| 200.0000 | 499.8000 | 0.2000 | 10 |
| 500.0000 | 999.5000 | 0.5000 | 10 |
| 1000.0000 | 1999.0000 | 1.0000 | 5 |
| 2000.0000 | 4998.0000 | 2.0000 | 5 |
| 5000.0000 | UP | 5.0000 | 5 |
The Trading Schedule
In the Philippines, the only operating stock exchange is the PSE.
The PSE has two (2) trading floors in Ayala Center, Makati City and Ortigas Center, Pasig City—where trading participants trade daily from 9:30 a.m. to 12:10 p.m. except Saturdays, Sundays, legal holidays and days when the Central Bank Clearing Office is closed.
The PSE has two (2) trading floors in Ayala Center, Makati City and Ortigas Center, Pasig City—where trading participants trade daily from 9:30 a.m. to 12:10 p.m. except Saturdays, Sundays, legal holidays and days when the Central Bank Clearing Office is closed.
The PSE has finalized plans to extend trading hours beginning this October, in a bid to attract more investors and prepare for cross-border trading with neighboring Southeast Asian nations.
On Oct. 1, trading will open at 9:30 a.m. and close at 1 p.m. On Jan. 1, 2012, the morning session will be held from 9:30 a.m. to noon, while the afternoon session will start at 1:30 p.m. until 3:30 p.m.
Investors may post a buy or sell order even after the trading period. However, this order will only be entered and matched through the PSE’s new trading system known as the PSEtrade, the next trading day.
Who are the Market Participants?
STOCK EXCHANGE
A stock exchange is an organized marketplace or facility that brings buyers and sellers together and facilitates the sale and purchase of stocks.
A stock exchange is an organized marketplace or facility that brings buyers and sellers together and facilitates the sale and purchase of stocks.
The only stock exchange operating in the country is the Philippine Stock Exchange, Inc. (PSE). It makes sure that trading transactions are done in an efficient, orderly, fair, and transparent manner. It enforces rules and regulations that its publicly listed companies and trading participants must strictly abide by. In this way, the PSE fulfills its function as the “guardian” of the Philippine stock market.
INVESTORS
Investors, also referred to as stockholders or shareholders, are those who own shares of stock of a publicly listed company. They are accorded certain privileges like the right to fair and equal treatment, the right to vote and exercise related rights, and the right to receive dividends and other benefits due to stockholders. They are classified as either retail or institutional, and local or foreign.
STOCKBROKERS
A stockbroker or trading participant is licensed by the Securities and Exchange Commission (SEC) and is entitled to trade at the Exchange. They act as an agent between a buyer and seller of stocks in the market. For their services as stockbrokers, they receive from their clients either a buying or a selling commission.
The PSE originally issued 184 trading rights. To date, the PSE has 133 active stockbrokerage houses.
The representatives (licensed salesmen) of these accredited stockbrokers convene daily, at certain specified hours, on the “trading floor” of the exchange, where they sell and buy shares of stocks for the account of their clients. They execute orders in the market to the greatest possible advantage of their customers, by buying at the lowest possible price or by selling at the highest possible price.
There are two (2) types of stockbrokers:
• Traditional – those who assign a licensed salesman to handle your account and to take your orders via a written instruction or a phone call
• Online – those whose main interface is the internet where clients execute their orders and access market information online
LISTED COMPANIES
Listed companies, also called “issuers”, are those whose shares of stock are traded on the Exchange. These companies qualified with the stringent listing and reportorial requirements of the PSE, and have gone through initial public offering (IPO) or listing by way of introduction.
As of August 2011, the PSE there are 249 listed companies in the PSE. These are classified into six different sectors: Financials, Industrial, Holding Firms, Property, Services, and Mining and Oil.
CLEARING HOUSE
Securities Clearing Corporation of the Philippines (SCCP)
The SCCP is a wholly owned subsidiary of the Exchange. It was established to ensure the orderly settlement of equity trades executed at the PSE. The SCCP uses the Central Clearing and Central Settlement (CCCS) system purchased from the Capital Markets Co. (CAPCO) of Belgium.
CLEARING HOUSE
Securities Clearing Corporation of the Philippines (SCCP)
The SCCP is a wholly owned subsidiary of the Exchange. It was established to ensure the orderly settlement of equity trades executed at the PSE. The SCCP uses the Central Clearing and Central Settlement (CCCS) system purchased from the Capital Markets Co. (CAPCO) of Belgium.
SCCP is responsible for establishing the cash and securities liabilities and entitlements of its clearing members, synchronizing the settlement of funds and the transfer of securities based on the delivery-versus-payment model or multilateral net settlement; guaranteeing the settlement of trades in the event of a trading participant’s trade default in order to ensure the finality and irrevocability of all Exchange trades through its fails management procedures; implementing appropriate risk management measures in order to mitigate risks inherent in the clearing and settlement of Exchange trades and the maintenance and administration of the Clearing and Trade Guarantee Fund (CTGF).
DEPOSITORY
Philippine Depository and Trust Corp. (PDTC)
The PDTC acts as securities depository or “custodian” of listed shares of stock that are traded at the PSE. It was organized to establish a central depository in the Philippines and to implement scripless trading.
The PDTC performs book-entry transfer of securities:
DEPOSITORY
Philippine Depository and Trust Corp. (PDTC)
The PDTC acts as securities depository or “custodian” of listed shares of stock that are traded at the PSE. It was organized to establish a central depository in the Philippines and to implement scripless trading.
The PDTC performs book-entry transfer of securities:
1. From seller’s to buyer’s accounts during settlement of Exchange trades;
2. From one PDTC participant to another per client instruction, and;
3. From lender’s to borrower’s account for loan transactions.
2. From one PDTC participant to another per client instruction, and;
3. From lender’s to borrower’s account for loan transactions.
SETTLEMENT BANKS
The PSE has three (3) accredited banking institutions where trading participants make and receive payments for stock transactions.
The settlement banks accept deposits of funds for payment of securities bought, confirm payments of due clearing obligations to SCCP, debit buyer’s cash account and credit seller’s cash account during settlement, and receive and/or return cash collateral put up by clearing members to cover their daily trade negative exposures.
TRANSFER AGENTS
The stock transfer agent is considered the “official keeper” of the corporate shareholder records. The stock transfer agents provide the issuer or the listed company with a list of holders of its securities. They effect transfer of beneficial ownership and process corporate actions like stock or cash dividends, stock rights, stock splits, and collation of proxy forms.
TRANSFER AGENTS
The stock transfer agent is considered the “official keeper” of the corporate shareholder records. The stock transfer agents provide the issuer or the listed company with a list of holders of its securities. They effect transfer of beneficial ownership and process corporate actions like stock or cash dividends, stock rights, stock splits, and collation of proxy forms.
