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Questions and Answers
What is the primary purpose of the initial public offering (IPO)?
What is the primary purpose of the initial public offering (IPO)?
Which of the following best describes the secondary market?
Which of the following best describes the secondary market?
What document must a company issue when intending to make shares publicly available?
What document must a company issue when intending to make shares publicly available?
What role do participating organizations play in the stock market?
What role do participating organizations play in the stock market?
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What determines the share price in the secondary market?
What determines the share price in the secondary market?
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What is the primary focus of the money market?
What is the primary focus of the money market?
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Which of the following instruments is NOT considered a security?
Which of the following instruments is NOT considered a security?
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What is an investment bank primarily involved in?
What is an investment bank primarily involved in?
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Which market is associated with high liquidity and marketability?
Which market is associated with high liquidity and marketability?
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What includes both cash market and derivatives market?
What includes both cash market and derivatives market?
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Which of the following broadly describes securities?
Which of the following broadly describes securities?
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What is a characteristic of the capital market?
What is a characteristic of the capital market?
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What type of market involves trading smaller, unlisted securities?
What type of market involves trading smaller, unlisted securities?
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What significant change occurred in the KLSE in January 2004?
What significant change occurred in the KLSE in January 2004?
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What was the main purpose of the Capital Market Masterplan launched in February 2001?
What was the main purpose of the Capital Market Masterplan launched in February 2001?
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What fee reduction was implemented in July 2001 for clearing fees?
What fee reduction was implemented in July 2001 for clearing fees?
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Which new system was launched in December 1999 to improve trading?
Which new system was launched in December 1999 to improve trading?
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What was the effect of implementing the T+3 settlement cycle in December 2000?
What was the effect of implementing the T+3 settlement cycle in December 2000?
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Which market was launched in March 2002?
Which market was launched in March 2002?
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What condition was implemented in March 2002, aimed at regulating trading practices?
What condition was implemented in March 2002, aimed at regulating trading practices?
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What was the primary goal of the Taskforce on Corporate Disclosure Best Practices established in August 2002?
What was the primary goal of the Taskforce on Corporate Disclosure Best Practices established in August 2002?
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What rights do ordinary shares grant to their holders?
What rights do ordinary shares grant to their holders?
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Which year marked the introduction of the Securities Industry Act in Malaysia?
Which year marked the introduction of the Securities Industry Act in Malaysia?
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What significant change occurred in the Malaysian stock market in 1987?
What significant change occurred in the Malaysian stock market in 1987?
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Which of the following was introduced as part of the 1984 developments in Malaysian Securities?
Which of the following was introduced as part of the 1984 developments in Malaysian Securities?
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When did the Malayan Stock Exchange officially form?
When did the Malayan Stock Exchange officially form?
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What was the main purpose of the Capital Issue Committee formed in 1968?
What was the main purpose of the Capital Issue Committee formed in 1968?
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Which event did not occur in the 1990s regarding the Malaysian stock market?
Which event did not occur in the 1990s regarding the Malaysian stock market?
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What was the effect of the 1973 separation of the Stock Exchange of Malaysia and Singapore?
What was the effect of the 1973 separation of the Stock Exchange of Malaysia and Singapore?
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What significant action took place in 1993 regarding the Securities Commission?
What significant action took place in 1993 regarding the Securities Commission?
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Which year saw the implementation of the T+5 Rolling Settlement System?
Which year saw the implementation of the T+5 Rolling Settlement System?
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In which year was the Malaysian Rating Corporation (MARC) established?
In which year was the Malaysian Rating Corporation (MARC) established?
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What was introduced as part of trading improvements in 1994?
What was introduced as part of trading improvements in 1994?
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Which of the following occurred in 1998 in relation to the Kuala Lumpur Stock Exchange (KLSE)?
Which of the following occurred in 1998 in relation to the Kuala Lumpur Stock Exchange (KLSE)?
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What change occurred in the share application process in 1994?
What change occurred in the share application process in 1994?
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Which organization was established in 1991?
Which organization was established in 1991?
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Which significant change occurred in trading procedures in 1995?
Which significant change occurred in trading procedures in 1995?
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Study Notes
Introduction to Financial Market
- This chapter introduces the financial market, its objectives and types of securities.
Objectives of Study
- Students should understand money market and capital market.
- Students should understand securities market, participating organizations (investment banks and stock broking firms).
- Students should understand types of securities traded in Malaysia, and the history and development of the equity market there.
What are Securities?
- Securities are a generic term for any instrument traded on a stock exchange.
- Examples include stocks/shares, debentures, notes, bills, and bonds.
- Securities represent ownership or debt.
- Securities are exchangeable or saleable in the market.
Types of Securities Traded in Malaysia
- Ordinary shares/stocks: give holders ownership rights, including profit sharing (dividends), voting rights in company decisions, and the right to elect/dismiss company directors.
- Preference shares
- Bonds
- Loan stocks/notes
- Debentures
- Property trust units
- Warrants
- Call warrants
Participating Organizations
- Definition: A company that deals in securities and holds a dealer's license issued by the Securities Commission (SC).
- Universal Brokers/Investment Banks: merged with or acquired, 3 or more other SBCs, filled the qualifying criteria set by the SC/Bursa Malaysia, and have SC approval in writing.
- Non-Universal Brokers: participating organizations that are not universal brokers.
History & Development of Equity Market in Malaysia
- 1930s: Singapore Stockbroker's Association.
- 1937: Malayan Stockbrokers' Association (no public trading).
- May 9, 1960: Formation of Malayan Stock Exchange.
- 1961: Introduced Board System with shared linkage; stock listings.
- 1964: Formation of Stock Exchange of Malaysia.
- 1965: Separate Malaysia and Singapore stock exchanges.
- 1973: Formation of Securities Industry Act 1973.
- 1973: New Kuala Lumpur Stock Exchange (KLSE).
- 1980s: 1983 Securities Industry Act (SIA) replacement, introduction of SCANS (Clearing system), KLSE Composite Index launched, and corporatization of SBCs, and others.
- 1990s: Delisting of Singapore companies, Malaysian Central Depository set up, introduction of various systems, establishment of the Security Commission (SC), and more.
- 2000s: Implementation of various systems like technology sector, improved brokerage rates, and stock short names.
- 2001: Reduction of clearing fees, new Capital Market Masterplan (CPM), and launch of Malaysian Derivatives Exchange.
- 2002: Reduction of clearance fees to 0.04% for minimum to maximum of RM200, PN4 Condition sector, and MESDAQ market launch.
- 2003: Standard Board lots of 100 units were implemented.
- 2004: KLSE was 'demutulized and name changed to Bursa Malaysia'.
- 2005: Bursa Malaysia issued prospectus for an IPO, announcement of profit by Bursa Malaysia, and the organization of 'Invest Malaysia 2005'
Primary vs. Secondary Market
- Primary market: Market for new security issues sold to the public (Initial Public Offering (IPO)) through an issuing a prospectus.
- Secondary market: Market where securities are traded after initial issuance, with stock price determined by demand and supply.
Definition of Securities under CMSA 2007
- "Securities" means debentures, stocks, or bonds issued or proposed to be issued by any government, shares or debentures of a body corporate or an unincorporated body, unit trusts, or prescribed investments, and any right, option or interest in respect of these but does not include futures contracts.
Individual Tutorial Questions
- These will be addressed in separate notes related to each question. (For example, a note on the definition of securities, or the regulations for a stock market)
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Description
This quiz covers the fundamentals of the financial market, including its objectives, different types of securities, and the specifics of the market in Malaysia. Understand the distinction between money market and capital market, as well as the role of various participating organizations. Dive into the history and development of the equity market along with the various types of securities traded.
