ORGANIZATION & FUNCTIONING OF SECURITIES MARKET.

What is a market?

Market is the means through which buyer and seller are bought together for exchange of goods and services

1. Market do not need physical location
2. Market doesn't necessarily own goods or services
3. Market can deal in any variety of goods and services

Characteristic Of Good Market

we will discuss markets for different investments such as stock, bonds, options and futures in throughout the world. We will refer to these market using various terms of quality such as strong, active, liquid or illiquid. There are many financial market, but they are not all equal-some are active and liquid, other are relatively illiquid and inefficient in their operations.The following characteristics that investor look for when evaluating the quality of a good market.

1.Timely and accurate information
2.Liquidity

• Marketability
• Price certainty
• Price continuity-Depth

3. Transaction cost

internal efficiency (when cost of the transaction minimal)
4.External or Informational efficiency

Market prices reflect all available information about assets. 
Organization Of Securities Market

There are two types of organization of securities market.

1. Primary Market
2. Secondary Market

Primary Market

The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.

1.Government Bond Issue

Government bond is debt security loaned by a government to assist government spending, most often issued in the country's local interest.

      There are various types of government bond issues by the government of Pakistan are as follow.

• Pakistan Investment Bonds.
• U.S Special Dollar Bonds.
• Wapda Bonds.
• National Saving Bonds.
• Sukuks (Islamic Financial Certificate).

 2.Municipal Bond Issues

          A municipal bond, commonly known as a muni bond, is a bond issued by a local government or territory, or one of their agencies. It is generally used to finance public projects such as roads, schools, airports and seaports, and infrastructure-related repairs.

Methods To Sold

1. Competitive Bid: The bond issue is sold to the bidding syndicate of underwriters that submits the bid with the lowest interest cost in accordance with the stipulations set forth by the issuer.
2. Negotiated Sales:Involve contractual arrangements between underwriter and issuer where in the underwriter helps issuer prepare the bond issue and set the price and has the exclusive right to the issue.
3. Private Placement:Involve the sale of a bond issue by the issuer directly to an investor. 

Underwriting Function

1. Origination:Involve the design of the bond issue and initial planning.
2. Risk-Bearing:The underwriter acquires the total issue at a price dictated by the competitive bid.
3. Distribution: selling it to investor, typically with the help of a selling syndicate that includes other investment banking firms and /or commercial bank.

3.Corporate Bond Issues

    Corporate bond issues are almost always sold through a negotiated arrangement with an investment banking firm that maintains a relation ship with the issuing firm.

4.Corporate Stock Issues

  The ability to issue fixed-income securities to get new capital, corporations can also issue equity securities generally common stock for corporations, new stock issues are typically divided into two groups.

1. Seasoned Equity Issues:New shares offered by firms that already have stock outstanding.
2. Initial Public Offering(IPO):Involve a firm selling its common stock to the public for the first time. At the time of an IPO offering, there is no existing public market for the stock that is the company has been closely held  

Private placement Rule 144 A

Allows corporation to place securities privately with large sophisticated institutional investor without extensive registration document. It also allows these securities to be subsequently traded among these large sophisticated investors ( those with assets in excess of $100 million).