Podcast
Questions and Answers
What is a synonym for a share in the context of financial markets?
What is a synonym for a share in the context of financial markets?
Equity securities can be in bearer form.
Equity securities can be in bearer form.
False
What are the two types of rights that shareholders have?
What are the two types of rights that shareholders have?
Pecuniary rights and Membership rights
Shareholders have the right to a _______________ share of the remaining equity if the corporation is liquidated.
Shareholders have the right to a _______________ share of the remaining equity if the corporation is liquidated.
Signup and view all the answers
What is the withholding tax rate in Belgium?
What is the withholding tax rate in Belgium?
Signup and view all the answers
Retail investors are exempt from withholding tax.
Retail investors are exempt from withholding tax.
Signup and view all the answers
Match the following types of dividends with their descriptions:
Match the following types of dividends with their descriptions:
Signup and view all the answers
What is a bonus dividend?
What is a bonus dividend?
Signup and view all the answers
What happens to foreign dividends if there is no double taxation treaty between the countries involved?
What happens to foreign dividends if there is no double taxation treaty between the countries involved?
Signup and view all the answers
An American Depository Receipt (ADR) is a type of bond issued by a foreign company.
An American Depository Receipt (ADR) is a type of bond issued by a foreign company.
Signup and view all the answers
What is the main purpose of an American Depository Receipt (ADR)?
What is the main purpose of an American Depository Receipt (ADR)?
Signup and view all the answers
The _______________ Doctrine is a concept that emphasizes the importance of shareholder rights.
The _______________ Doctrine is a concept that emphasizes the importance of shareholder rights.
Signup and view all the answers
What is the primary market related to?
What is the primary market related to?
Signup and view all the answers
A shareholder has the right to request the underlying shares of an ADR at any time.
A shareholder has the right to request the underlying shares of an ADR at any time.
Signup and view all the answers
The global depository receipt is also known as the _______________.
The global depository receipt is also known as the _______________.
Signup and view all the answers
Match the following terms with their definitions:
Match the following terms with their definitions:
Signup and view all the answers
What is considered the first stock exchange in the world?
What is considered the first stock exchange in the world?
Signup and view all the answers
The Scheldt was closed in 1585.
The Scheldt was closed in 1585.
Signup and view all the answers
What is the term for collateralized loans in the Dutch Republic?
What is the term for collateralized loans in the Dutch Republic?
Signup and view all the answers
The Dutch Republic introduced the first corporation that acted as a ______________ and issued shares.
The Dutch Republic introduced the first corporation that acted as a ______________ and issued shares.
Signup and view all the answers
Who is credited with introducing actuarial methods in the Dutch Republic?
Who is credited with introducing actuarial methods in the Dutch Republic?
Signup and view all the answers
Vereenigde Oostindische Compagnie (VOC) issued shares without dividends.
Vereenigde Oostindische Compagnie (VOC) issued shares without dividends.
Signup and view all the answers
Match the following financial instruments with their definitions:
Match the following financial instruments with their definitions:
Signup and view all the answers
What is the term for equities in companies?
What is the term for equities in companies?
Signup and view all the answers
In an order-driven trading system, what is the purpose of fixings?
In an order-driven trading system, what is the purpose of fixings?
Signup and view all the answers
In a quote-driven trading system, market makers/specialists can trade for their own account.
In a quote-driven trading system, market makers/specialists can trade for their own account.
Signup and view all the answers
What is the term for the process of paying/receiving money and receiving/delivering the stock?
What is the term for the process of paying/receiving money and receiving/delivering the stock?
Signup and view all the answers
MiFiD (Markets in Financial Instruments Derivatives) imposes a lot of rules towards _______________, among other things.
MiFiD (Markets in Financial Instruments Derivatives) imposes a lot of rules towards _______________, among other things.
Signup and view all the answers
What is a characteristic of the secondary market?
What is a characteristic of the secondary market?
Signup and view all the answers
Short selling is unrestricted in the secondary market.
Short selling is unrestricted in the secondary market.
Signup and view all the answers
Match the following trading systems with their characteristics:
Match the following trading systems with their characteristics:
Signup and view all the answers
In the context of settlement, T+2 refers to the _______________ settlement system.
In the context of settlement, T+2 refers to the _______________ settlement system.
Signup and view all the answers
What happens to foreign dividends if there is no double taxation treaty between the countries involved?
What happens to foreign dividends if there is no double taxation treaty between the countries involved?
Signup and view all the answers
An American Depository Receipt (ADR) is a type of negotiable certificate issued in the US by a US bank.
An American Depository Receipt (ADR) is a type of negotiable certificate issued in the US by a US bank.
Signup and view all the answers
What is the main purpose of an American Depository Receipt (ADR)?
What is the main purpose of an American Depository Receipt (ADR)?
Signup and view all the answers
An American Depository Receipt (ADR) is a negotiable certificate in registered form issued in the US by a US bank, which certifies that a specific number of foreign shares have been deposited with an overseas branch of the bank (or another _______________).
An American Depository Receipt (ADR) is a negotiable certificate in registered form issued in the US by a US bank, which certifies that a specific number of foreign shares have been deposited with an overseas branch of the bank (or another _______________).
Signup and view all the answers
What is the primary market related to?
What is the primary market related to?
Signup and view all the answers
Retail investors are exempt from withholding tax.
Retail investors are exempt from withholding tax.
Signup and view all the answers
Match the following terms with their definitions:
Match the following terms with their definitions:
Signup and view all the answers
What is the main difference between the shareholder model and the stakeholder model?
What is the main difference between the shareholder model and the stakeholder model?
Signup and view all the answers
What is the formula for calculating market capitalization?
What is the formula for calculating market capitalization?
Signup and view all the answers
The free float market capitalization is often used to track market trends.
The free float market capitalization is often used to track market trends.
Signup and view all the answers
What is the market capitalization range for a mid-cap company?
What is the market capitalization range for a mid-cap company?
Signup and view all the answers
A company with a market capitalization of over 200 billion USD is classified as a _______________ cap.
A company with a market capitalization of over 200 billion USD is classified as a _______________ cap.
Signup and view all the answers
What is the main reason for the shift from mutual member-owned floor trading exchanges to publicly owned computer-based trading exchanges?
What is the main reason for the shift from mutual member-owned floor trading exchanges to publicly owned computer-based trading exchanges?
Signup and view all the answers
Match the following asset classes with their corresponding market capitalization ranges:
Match the following asset classes with their corresponding market capitalization ranges:
Signup and view all the answers
The government regulation of the market has remained unchanged over the years.
The government regulation of the market has remained unchanged over the years.
Signup and view all the answers
What is the primary purpose of automation in settlement systems?
What is the primary purpose of automation in settlement systems?
Signup and view all the answers
Study Notes
Stocks and Equity
- Stocks can be shares or bonds, but in this context, "stock" refers to a share.
- Equity securities represent a nominative or dematerialized ownership interest in a corporation.
Equity Holder and Their Rights
- Shareholders have two types of rights: pecuniary rights and membership rights.
- Pecuniary rights include:
- Entitlement to distributed profits (dividends)
- Pro rata share of remaining equity in case of liquidation
- Pre-emptive right in case of new share issues
- Bonus share (scrip issues) and stock split participation
- Membership rights include:
- Voting rights
- Right to ask questions at the Annual General Meeting (AGM)
- Power to hire or fire members of the Board of Directors (BoD)
- Right to exercise control over the Executive Committee (Exco)
- Right to call for an extra AGM
Dividends
- Dividends can be in the form of cash, stock, or choice dividend.
- Timing and source of dividends include:
- Interim dividend (paid out of realized profit)
- Final dividend
- Bonus dividend (paid out of reserves)
Withholding Tax
- Institutional investors are exempt from withholding tax.
- Retail investors are not exempt.
- In Belgium, the withholding tax is 30%.
- Foreign dividends are taxed twice if there is no double taxation treaty between countries.
Alternative to Dividends
- No specific information provided.
The Frieman Doctrine: The Shareholder Model
- No specific information provided.
From Shareholder Model to Stakeholder Model
- No specific information provided.
American Depository Receipts (ADRs)
- ADRs are negotiable certificates issued in the US by a US bank.
- They certify that a specific number of foreign shares have been deposited with an overseas branch of the bank.
- Dividends can be received, and voting rights can sometimes be exercised.
- ADRs give non-US listed firms access to the US market.
Primary Market
- No specific information provided.
Some Financial History
- The London Trade Exchange was established.
- Antwerp came under siege in 1585, and the Scheldt was closed in 1587.
- The Dutch Republic introduced huge financial innovations, including:
- Collateralized loans
- "Lijfrente" (annuities)
- Actuarial methods (developed by Johan de Witt)
- The first corporation that acted as a legal person and issued shares
- Johan de Witt (1625-1672) was a significant figure in financial history.
- The Vereenigde Oostindische Compagnie (VOC) issued shares with dividends in 1602.
- The first stock exchange in the world was established in Amsterdam.
- The oldest book on stocks, forwards, and options was written.
Secondary Market
- Orders are entered into an order book, which can be classified into market orders, conditional orders, and other types.
- Conditional orders include limit orders, stop-loss orders, hidden orders, and fill or kill orders.
- Fixings assign buy orders to sell orders, following market regulations.
Quote Driven Trading
- Market makers/specialists provide quotes in the form of a bid and an ask price.
- Bid-ask spreads are implicit transaction costs.
- Market makers may trade for their own account or on behalf of clients.
- Transactions between market makers are facilitated by interdealer-brokers.
Settlement
- Settlement is the process of paying/receiving money and receiving/delivering the stock.
- T+2 (rolling settlement, spot transactions) and "Quinzaines" (fortnightly account system, forward transactions) are common settlement methods.
Constraints on the Free Market
- MiFiD (Markets in Financial Instruments Derivatives) imposes rules on business conduct, best execution, and KYC.
- Trading limits have been installed, including market-wide and stock-specific circuit breakers.
- Limit-up/down rules implement a trading collar.
- Short selling restrictions, such as the up-tick rule, are in place.
- Market conduct forbids some trading by insiders.
Secondary Market Trends
- There is a shift from retail investors to institutional investors.
- Foreign dividends are taxed twice if there is no double taxation treaty between countries.
- Administrative costs of handling have to be paid as well.
Equity Holder and Their Rights
- An Alternative to Dividends exists for equity holders.
The Frieman Doctrine: the Shareholder Model
- The Frieman Doctrine is a model that outlines the rights of shareholders.
From Shareholder Model to Stakeholder Model
- The Stakeholder Model is an alternative to the Shareholder Model.
American Depository Receipts (ADRs)
- ADRs are negotiable certificates in registered form issued in the US by a US bank.
- ADRs certify that a specific number of foreign shares have been deposited with an overseas branch of the bank.
- Dividends can be received, and voting rights can sometimes be exercised.
- At any time, the holder of the certificate can request the underlying shares.
Primary Market
- The primary market has undergone changes, including a shift from mutual member-owned floor trading exchanges to publicly owned computer-based trading exchanges.
- Automation of settlement systems has occurred.
- Government regulation of the market has changed.
Second Markets
- Second markets exist for shares that do not (fully) meet the listing requirements.
- These markets are less regulated and illiquid.
Composition of the World Stock Market
- The composition of the world stock market is a key concept.
Asset Classes
- Market capitalization (market cap) is a key concept in asset classes.
- Market capitalization is calculated by multiplying the price per share by the number of outstanding shares.
Market Capitalization Based Asset Classes
- Asset classes can be categorized based on market capitalization, including:
- Mega cap (> 200 billion USD)
- Large cap (10 billion to 200 billion USD)
- Mid cap (1 billion to 10 billion USD)
- Small cap (300 million to 1 billion USD)
- Micro cap (50 million - 300 million USD)
- Nano cap (< 50 million USD)
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Learn about the characteristics of stocks and equity, including the rights and benefits of being an equity holder. Understand pecuniary and membership rights, dividend distribution, and more.
