THE GUYANA STOCK EXCHANGE MECHANICS OF TRADING By

  • Slides: 16
Download presentation
(THE GUYANA STOCK EXCHANGE) MECHANICS OF TRADING By George Edwards 5 th July, 2005

(THE GUYANA STOCK EXCHANGE) MECHANICS OF TRADING By George Edwards 5 th July, 2005 1

What GASCI Does • GASCI operates a market in securities which matches buyers and

What GASCI Does • GASCI operates a market in securities which matches buyers and sellers and generates “confirmed trades” which the brokers are legally committed to honour. • Trading is supported by a “Limit Order Book” • The settlement of the trade is between the brokers 5 th July, 2005 2

Buying or Selling of Shares • Investor wishing to buy or sell shares places

Buying or Selling of Shares • Investor wishing to buy or sell shares places an order with a broker. • To buy, the investor deposits funds with the broker to cover the proposed purchase. • To sell, the investor deposits the share certificate and a signed transfer form with the broker. 5 th July, 2005 3

Limit Orders and Discretionary Orders The investor may • Specify a price or a

Limit Orders and Discretionary Orders The investor may • Specify a price or a price range. • Give the broker the discretion to negotiate the most favourable price. Note: The broker is bound by law to obtain the best price available on the market for the investor i. e. for the buyer – the lowest price available for the seller – the highest price available 5 th July, 2005 4

In-house Crosses • If the broker has a matching order to buy/sell, the trade

In-house Crosses • If the broker has a matching order to buy/sell, the trade will be made in-house and reported to the Stock Exchange before the next trading session. • If the trade cannot be completed in-house, the broker takes the order to the Stock Exchange at the next trading session. Trading takes places on Mondays or Wednesdays when Monday is a Public Holiday. Trading starts at 10: 00 am 5 th July, 2005 5

Trading System • Bids and offers are recorded on the Limit Order Book. This

Trading System • Bids and offers are recorded on the Limit Order Book. This is viewed by all the brokers. • The Initiating Broker is the one who had entered the order display in the Limit Order Book. • The Responding Broker then tells the Initiating Broker (verbally) that he/she will buy/sell at the price entered by the Initiating Broker. 5 th July, 2005 6

Price & Time Priority • Buy orders are on the left and sell orders

Price & Time Priority • Buy orders are on the left and sell orders on the right of the Order Book. Orders are dealt with based on price and time priority. • Time priority between the brokers is set by the sequence the orders are entered on the Limit Order Book by each broker. • Price priority has preference over time priority; va buy order at a higher price has priority over a buy order at a lower price even if the lower priced order was entered first; va sell order at a lower price has priority over one with a higher price even if the higher priced order was entered first. 5 th July, 2005 7

The Limit Order Book Display (Brokers Only) 5 th July, 2005 8

The Limit Order Book Display (Brokers Only) 5 th July, 2005 8

Cross Trades during the Session • Broker promptly records customer order • Broker matches

Cross Trades during the Session • Broker promptly records customer order • Broker matches with another customer or • Broker verbally indicates the intention to do a cross for specific issuer. Provided no other broker intervenes, the broker may complete the transaction. 5 th July, 2005 9

Cross Trades cont’d • A broker may intervene by improving the price on either

Cross Trades cont’d • A broker may intervene by improving the price on either side of the cross. vif responding to an offer, the broker must bid higher than the cross price but not higher than the next best offer. vif responding to a bid, the broker must offer stock lower than the cross price but not below the next best bid. 5 th July, 2005 10

Limit Order Book - Cross 5 th July, 2005 11

Limit Order Book - Cross 5 th July, 2005 11

After the Trading Session • • • GASCI produces summary of reported trades for

After the Trading Session • • • GASCI produces summary of reported trades for verification by brokers – Trade Report After brokers verify the trades, GASCI confirms trades and issues a market contract for each buyer and seller. The Market Official prints the following reports for distribution to the Guyana Securities Council, Brokers and the Public : v Trade by Broker – shows all trades for each broker v The Trade Journal – shows all the trades for the session. v The Limit Order Book – shows the remaining unfilled orders for the respective issuers. v The Market Journal – shows the last trade volume and price details of all the issuers. 5 th July, 2005 12

5 th July, 2005 13

5 th July, 2005 13

Settlement • Settlement is the process of honouring a transaction securely and promptly a)

Settlement • Settlement is the process of honouring a transaction securely and promptly a) arrangements for payment by way of certified cheque or transfer of cleared funds b) arrangements for transfer of ownership by means of a transfer document and update of the shareholder register 5 th July, 2005 14

Market Side Settlement • Brokers settle with each other on “Settlement Date ” •

Market Side Settlement • Brokers settle with each other on “Settlement Date ” • Settlement date is: – Determined by market rules – T+5 – In accordance with the principle of delivery versus payment • Note: A Share Certificate is not needed for market side settlement – a signed transfer form certified by the Exchange is binding. 5 th July, 2005 15

Client Side Settlement • Settlement is complete when funds have been transferred from the

Client Side Settlement • Settlement is complete when funds have been transferred from the buyer through the buying and selling brokers to the seller. • Ownership is updated in the issuer’s books. 5 th July, 2005 16