Share Market: Process Essay

Question:

What is the share market? How the buying and selling process of the share market work and what is the role of the broker?

Answer:

According to asx.com.au (2016), Share market can be defined as the stock market where the aggregate of buyers and sellers of stocks are listed on the share exchange along with those that are traded privately.

Buying and selling of stocks:

A stock market is a place where traders of shares purchase and sells the shares of companies listed at ASX. The buying and selling of shares works in the following ways;
a. Finding the symbol: All the stocks that are listed in the stock exchange have their own symbol assigned to them. This assigned symbol is shorter than the name of the company and it is easy to list the stock of companies on stock charts and on trading windows.
b. Arranging a broker: Brokers have the power of purchase and sell of shares. An individual can find a broker either by searching online or by calling stock brokers who are listed in the directory. An individual must have its “Demat” account set up which enables the transmission of money to different account through mail or wire transfer.
c. Trading fees: Trading fees is charged by a broker when an individual decides to buy and sell stock under agreed trading fee. This represents that an individual pays a specified sum of fee during the purchase of stocks and another fee when he sells it (Thomas 2013).
d. Trading of shares: When an individual decides to purchase stocks he must either tell his “broker in full time” or he can purchase shares by “Clicking” on “Buy” button listed on the screen. The trader then buys the stock and records it in the stock purchase register. This makes an individual the owner of stocks.
e. Holding of shares: An individual can ask for paper share certificate. Paper share certificate indicates that these are actual piece of stocks which represents that the individual is the owner of shares in the company whose stock is listed in the ASX listings (asx.com.au 2016). The broker then enters the stocks and records the purchase in his investment account which signifies that an individual is now the owner of electronic shares:

Role of broker:

The role of broker is defined below;
a. Trade Handling: The broker takes order from clients for purchase and sell of stocks by passing it to the brokerage firms through network floor trading. In a market like ASX as soon as the transaction is completed the broker relays the information to client for transfer of stocks.
b. Test and registration: The trader and the broker are under the regulation of ASX and certain other specified markets. An individual broker must undergo test administered by Australian Ministry of finance (Liu et al. 2016). Once the broker passes the test he must complete his registration through a brokerage firm.
c. Payment through Commissions: Individual stock brokers are paid through commission which is a percentage of the value of shares traded. Some of the brokers offer discounts by offering trading of stock at fixed price.
The current number of listed entities on ASX is 2,200 listed companies. Since the year 2008, percentage increase in the number of listed companies in ASX is 23.40% as of 30th June 2016 (asx.com.au 2016).
Directors have the duty and obligation under the “Corporation Act 2001 and General laws”. It is noteworthy to denote that Directors form an essential component of corporate governance as each director are placed under the apex structure of financial and management accounting. Below listed is the role of financial and management accounting for board of directors in providing financial information for decision making purpose;
Keeping financial records for managerial decision making:
Financial information should have the capability to satisfy following obligations which are as follows;
a. Financial information should be such recorded that it must explain the organizational transactions along with its financial position and performance to the board of directors
b. Financial information should represent true and fair views of the financial statement to be prepared and audited so that the boards of directors are able to designs and implements appropriate control and processes.

Obligations for financial reporting:

Every organization must register their financial report with the ASIC and the report must include information for director’s declarations;
a. Information provided by management accounting decision should have a reasonable ground to believe that the directors should ensure that the company should have the ability to pay off its debts as and when they become due (Price 2014).
b. The financial information should comply with the needs of the accounting standard and must give true and fair of the books of accounts to the directors for decision making related to performance of the organizations and any consolidated entry.
The benefits of incorporation of business are as follows;
Protecting the personal assets:
Incorporating the business is one of the best possible procedures of protecting the personal assets. The benefits of incorporation of business enables a firm to own property, incur liabilities and can be sue or be sued in the name of the company (Devereux and Liu 2013). As a separate legal entity, a corporation has the responsibility of its own debts; this signifies that the creditors of the business can claim for payment based on the assets of the corporation.
Easy access to capital:
Incorporating a business enables the firm to raise capital as it can issue shares of stocks. Such capital raising process enables a business to grow and develop. Incorporating a business generally has the access of source of capital through which they can pay off their debts.
Enhancing the credibility of business:
It is noteworthy to denote that benefits of incorporating a business go beyond finance. Creditors, customers and other business associates perceive an incorporated organization more stable than those which are not incorporated.

Perpetual existence:

A corporation can continue to exist regardless of any circumstances. A business continues to exist even though its directors, members or shareholders leave the organization. A business is created by law and only law can bring an end to a business firm (Schwartz 2012).
The above stated case study reflects that being the manager of the large organization ethics is the branch of philosophy which investigates the morality and varieties of interest under which the conduct of human is directed and may accordingly be appraised. One of the central reasons concerning ethics in decision making is the justification of expression regarding the rightness and the wrongness of chosen course of action. The situation involves that being the manager of a large entity where recommendations is to be made regarding a job tender which is worth a million of dollars having a significant share of interest in the tendering companies involves ethical decision making. However, the present study involves ethical issues and making recommendations regarding the viability of decision making;
a. First Scenario: The first ethical issues involve the intentional approach which enables manager to take decision weather declaring the interest would suit according to the desired outcomes.
b. Second Scenario: Another ethical issues concerning decision making is the praiseworthy or blameworthy of the manager who opts out of the decision making process and neither takes part in any recommendation activities.
c. Third Scenario: The third issues involve goodness or badness of the consequences of not declaring the interest and continue to perform the job by making recommendation.
Out of the three possible course of actions declaring the interest and being the part of the decision making process along with providing the recommendation for the concerned organization. In terms of ethical issues, the above stated situation is best possible option for the managers to take part as the price of the contract depends upon the bidding procedure of the tender. As mentioned earlier that, the questions involves the intentions, means and ends of the managers concerning the case study. Once the tender for the main contract is obtained, the intention to bid for the contract can be justified by the managers due to the availability of tendering period time. If the intention of the managers is completely to enhance the profit of the organization the indentations of manager can be economically justified.
Commenting on the manager’s intentions, the best possible course of action for the above stated case study is declaring the interest and making recommendation for worth million dollars tender will be the most suited practice.

Reference List:

Devereux, M. and Liu, L., 2013. Small Business Incorporation: the Role of Corporation Taxation. Working Paper.
Devereux, M. and Liu, L., 2016. Stimulating investment through incorporation(No. 1607).
Liu, W.M.R., Soo, J.I.Z. and Warren, G., 2016. The Impact of Broker Market Structure on Stock Liquidity. Joshua Iyn Zhou and Warren, Geoff, The Impact of Broker Market Structure on Stock Liquidity (July 6, 2016).
Nyombi, C., 2014. Lifting the veil of incorporation under common law and statute. International Journal of Law and Management, 56(1), pp.66-81.
Price, J., 2014. Audit quality: The role of directors and audit committees.Governance Directions, 66(7), p.392.
Schwartz, A.A., 2012. The Perpetual Corporation. George Washington Law Review, 80, p.764.
Thomas, W.A., 2013. Provincial Stock Exchanges. Routledge.
Tucker, P., Haliassos, M., Kockelkoren, T., Ureta, J.C., Gonz?lez-P?ramo, J.M., Schock, L.J., Mayer, C. and Wymeersch, E., 2015. Challenges in Securities Markets Regulation: Investor Protection and Corporate Governance. SUERF Studies.
www.asx.com.au, (2016). Home - Australian Securities Exchange - ASX. [online] Asx.com.au. Available at: [Accessed 29 Jul. 2016].

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