STOCK MARKET TRADING TERMS

 

 

BASIC TERMS

 

Stocks

 

are ownership securities, which give owner certain rights, which are defined by Law for securities and financial markets, Company Law, Firm constitution and Foundation act of firm. Stocks give right to owner to participate in company management and in the share of profit. Those stocks are management stocks. Along with them, there are also priority stocks that mostly don’t give management right to owner, but they provide priority for dividend payment. Priority stocks can be cumulative, participative and cumulate – participate. Stocks can be on name or on carrier.

 

1.      During issuing or emission of stocks, total company capital is divided on certain number of stocks, and that is nominal stock value. 

2.      Accountable stock value is representing countable category, which is divided accountancy value of stock capital with number of issued stocks.

3.      But, the most important is market stock value, which is representing value, by which is possible to buy stocks, or to sell on market. Market stock value does not have any connection with nominal and accountable stock value, because it is created based on bid and ask.    

 

Stock company

 

is company which can be founded by legal and physical persons, in purpose of doing some business, and their basic capit is establihed and divided on stocks, with nominal value. Sum of all nominal values of stocks is basic capital for stock company.

 

Brokers

 

are authorized persons by Securities and Exchange Commission or National bank of Serbia (depend on securities kind which are subject of business) so they can be intermediares in trading of securities, giro money, gold and goods. Receiving authority from those institutions is connected with level of capital, which they have to possess and for qualification level of employees. Role of broker is to mediate between investor (buyer of security or good) and owner (of goods or security). In difference from other intermediares, brokers are obligated to stricly follow rules, which regulate their work.

 

BUYING AND SELLING SECURITIES

 

     If You wish to sell securities which You possess or to buy some other securities, Brokerage firms are there to help You in securities trading, that is Authorized Broker needs to present You and to explain conditions of trading, and services which offers Brokerage firm.

 

      Why do You need  Broker? If You want  to realize Your intentions to buy or sell securities, only way, according to Law, is  through authorized broker on Stock market, that is through authorized broker of Stock market member.

 

     If You decide to employ Brokerage firm, You will be offered Contract for openning and handling securities account and Intermediation in stock trading, which has all necessary elements of future collaboration between You and Brokerage firm. For services, brokerage firm is charging, based on Contract, brokerage commission from tariff, which is approved by Securities and Exchange Commission.

 

 

TRADING WITH STOCKS FROM PRIVATIZATION

 

     According to Law for securities and financial markets, there is obligation of controling and taking evidence of stock owners, for all Firms at Central securities, depository and clearing house. All Issuers are obligated to comply theirs Stockholder books with Database of Central register, to open emission account and to call their stockholders to open Owners accounts.

 

     Stockholders are obligated, according to Law for securities and financial markets, to open owners accounts with Broker diler which they choose, and in compliance with that they have rights to trade with their stocks. 

Stocks received from free distribution in previous privatisation processes, can be sold or kept, also it is possible to transfer those stocks on inheritance by usual court procedure.

 

     It is important to accent, that it is possible to trade with stocks only if they are on Belgrade stock exchange listing, which means they are rated on stock market. When You sign Contract with Brokerage firm and perform procedure of transferring securities on account, You can give orders for buying or selling stocks.

 

Procedure for buying stocks:

 

·         Copy of identification card and copy of opened Resticted account for stock buying in Bank (member of Central securities, depository and clearing house)

·         After signing Contract with brokerage firm, client goes to bank where consign money on account and signs authority for Brokerage firm to possess means from this account 

·         Issuing buy orders for stocks in accordance with amount on client account

 

 

Procedure for selling stocks:

 

·         Ownership certificate for stocks

·         Copy of identification card and copy of opened Restricted account for selling stocks

·         Signing Contract with Brokerage firm, and transferring securities on securities account

·         Giving sell order

 

 

 

Stock trading can be done if there is interest on both sides, one for selling and one for buying. Broker - diler, member of stock exchange, gives order for trading to Stock Market broker, who puts order in trading computer system. For price determination, it is important to mention existing methods on Belgrade stock exchange:

 

1.      Method of surmount price (on scheduled auction it is determinate unique price of trading, by which can be connected the biggest number of orders for selling and buying),

2.      Method of continuous trading (Buy orders are realized completely according to criteria of priority of time, until there is available quantity for selling. If there is larger amount in buy order than in sell order, transaction is executed for amount which is equal to amount in sell order).

 

After executing orders on auctions, Sales agreements are made. Obligations from Sales agreement (paying to seller and transfer of stocks to buyer) are fulfilling within 3 (T+3) working days.