FREQUENTLY ASKED QUESTIONS
(You may also find our Glossary
- What is a Stock Market?
- What is being implemented in Guyana?
- What financial products are traded on exchange?
- Why does there have to be a special market for stocks and shares? Can’t they
be bought and sold like cars or houses or goods in any other market?
- What is a Stock Exchange?
- Does the Stock Market have to be organised by a Stock
- What is the use of a Stock Market – in general?
- What is the use of a stock market - in Guyana when so many people have so
- Why does it not use the Trinidad Stock Exchange?
- Who pays for the Stock Market?
- What does “Listing” mean?
- How can the Exchange enhance a company’s access to new
- Why should companies want to be “listed”?
- When should a company consider listing on the Exchange?
- How does a company prepare to list on the Exchange?
- Why should companies issue shares to the public?
- What else can companies issue besides shares?
- Will unlisted companies also be traded on the GASCI stock
- How can a stock market succeed if the economy is doing
- How can a stock market succeed if there are very few
- How can investors obtain reliable information from
- What information must issuers provide investors?
- What factors are important when analysing a company?
- How are stocks and shares valued?
- What makes the price of common stocks and bonds go up and
- What are the benefits of owning stocks?
- What risks are involved in owning common stocks?
- What makes the price of bonds go up and down?
- What are the benefits of owning bonds?
- What risks are involved in owning bonds?
- What are the risks of investing on the stock market?
- Who can use the market?
- How can you buy or sell securities on the Exchange?
- What does a limited service broker do?
- What does a broker/dealer do?
- How are securities paid-for on the Exchange?
- When does trading take place on Exchange?
- What about private deals outside the market?
What is a Stock Market?
A stock market is a place where stocks and shares are traded; it may either
be a physical room where the traders gather together or a communications network
linking the traders’ offices.
What is being implemented in Guyana?
The securities market in Guyana is being operated by the Guyana Association
of Securities Companies and Intermediaries (GASCI). Trading takes place at the
GASCI office where orders to buy and sell are matched on a computer-based “Limit
What financial products are traded on exchange?
Shares and bonds
Why does there have to be a special market for stocks and shares? Can’t they
be bought and sold like cars or houses or goods in any other market?
Stock markets need to be regulated more than other markets because they deal
in large amounts of money and because the customers and the members of the
market must have confidence in it. In particular they must be confident that
prices are fair and equally available to everyone; they must also be confident
that any trade executed on the market will be honoured.
What is a Stock Exchange?
A stock exchange is a company which organises and supervises a stock market
to be used by its members, either on their own behalf or on behalf of their
Does the Stock Market have to be organised by a Stock Exchange? Can’t it
be done by a computer bureau?
A stock market in Guyana must legally be organised and supervised by a
company whose members are traders on the market. Technically it is possible to
trade some securities in some countries without involving a stock exchange, but
it would not be feasible in Guyana even if it were legal.
What is the use of a Stock Market – in general?
A stock market allows owners of stocks and shares to dispose of them at a
fair price, it allows new investors to buy them at a fair price, and it allows
companies to sell new shares to finance the growth of their businesses. Most new
investment is by or for people saving up for their retirement. People buy stocks
and shares with the expectation that they will be able to sell them again,
unlike companies who generally issue stocks with no expectation of ever having
to buy them back. This means that older people selling their shares when they
retire have to dispose of them, not to the companies that issued them, but to
younger people who are building up their savings. This process cannot take place
unless there is a reliable marketplace in which to buy and sell. A further
benefit of a market is that it provides a basis for valuing businesses, whether
for the purposes of stock trading, or for establishing credit with banks and
other lenders, or for negotiating mergers and acquisitions.
What is the use of a stock market - in Guyana when so many people have so
The total volume of savings in Guyana is quite high, but it is held mainly in
cash or short term bonds. If it could be mobilised to help finance the growth of
the economy through purchase of new shares issued by companies, savers would
have a better return on their savings and the economy would grow. There is, in
fact, a shortage of stocks and shares in which to invest. If there were more
stocks available and a reliable market savings should increase and funds should
be attracted from overseas.
Why does it not use the Trinidad Stock Exchange?
It might well be possible for some trading to take place in Trinidad through
the “listing” of Guyanese securities on the Trinidad and Tobago Stock Exchange,
but there would still be a need for trading to take place in Guyana, under
Guyanese law, settled in Guyanese dollars, recorded in Guyanese companies’
shareholder records and subject to Guyanese procedures and regulations
Who pays for the Stock Market?
Initially most of the costs of the GSC and GASCI are being paid for by the
British Government. In the longer term the main contribution to financing GASCI
is expected to come from issuers, through listing fees.
What does “Listing” mean?
“Listing” literally means being admitted to the Stock Exchange Official List
which indicates that the stocks and shares that are listed are freely
transferable and validly issued – not non-transferable, or forged, or otherwise
tainted; it also means that the issuer meets the requirements of law and
regulation in the management of its business and in the disclosure of adequate,
timely and accurate information about its business to investors.
How can the Exchange enhance a company’s access to new capital?
Listing makes companies more credit-worthy and reduces the cost of borrowing.
Listing also permits institutional investors who are not permitted to hold
unlisted securities to buy a stock. Listing also increases the visibility of a
Why should companies want to be “listed”?
“Listing” is a seal of approval; it is good for a company’s image; it may
reduce its cost of borrowing from banks; it may make it eligible to be invested
in by major financial institutions like certain US mutual funds which are only
permitted to buy listed securities. Listed shares are usually more highly valued
than unlisted; this usually makes the cost of new finance for listed companies
lower than for unlisted.
When should a company consider listing on the Exchange?
When the conditions for raising money at advantageous rates are favourable –
because the market is buoyant, or because the company is doing well, or both.
How does a company prepare to list on the Exchange?
It consults its professional advisers – lawyers, accountants and bankers. It
starts a dialogue with the Exchange or the listing authority. It starts
preparing as early as possible.
Why should companies issue shares to the public?
At first companies may be reluctant to issue shares because they may think
that it dilutes the ownership and that it requires them to disclose information
about their business that they would not otherwise have to reveal. But there is
a trade off; they can obtain additional capital and they can increase the value
of their business through public issue; they may also be able to issue new
shares to merge with or acquire other businesses. Most important of all, they
can reduce over dependence on bank borrowing which can be very risky.
What else can companies issue besides shares?
They can issue bonds which can replace borrowing from the bank at a lower
interest rate and for a longer term before repayment.
Will unlisted companies also be traded on the GASCI stock market?
How can a stock market succeed if the economy is doing badly?
Stock markets can function in bad times as well as good. Prices are lower and
trading less active, but the task of providing buyers and sellers with a service
can continue to be met. The important thing is to avoid excessive operating
costs which lead to the market organisation operating at a loss.
How can a stock market succeed if there are very few stocks?
Most stock markets round the world – excluding the senior markets of New
York, Tokyo, London and Frankfurt – concentrate the major volume of trading
activity on a relatively small number of stocks. This is particularly true in
the Caribbean. Whatever the size of the market and whatever the number of
securities traded, it is essential to match costs to expenditure. Very small
informal exchanges can succeed and fulfil their economic function just as well
as large formal exchanges.
How can investors obtain reliable information from companies?
Under the law all publicly held companies are required to be “Reporting
Issuers” subject to strict requirements on disclosure to investors and the
market, under the regulation of the GSC.
What information must issuers provide investors?
Issuers must provide investors with the information specified in the
Securities Industry Act making regular periodic reports and special ad hoc
disclosures when there has been a significant change in their business or their
What factors are important when analysing a company?
Profits, dividends, assets, management and prospects.
How are stocks and shares valued?
Common stocks represent a share in the ownership of a company and their value
mainly depends on the level of profits. Bonds represent debts owing by a company
and their value mainly depends upon financial strength.
Bonds – which are documents acknowledging a debt by the issuer of the bonds
to the holders of the bonds - are valued by reference to the rate of interest
paid to the holders of the bonds. The Government can raise money at the lowest
rate of interest; publicly owned bodies may have to pay a little more and
private borrowers have to pay more again, depending on their creditworthiness
and the size and liquidity of the issue. In other markets good quality corporate
bonds can have an interest rate about one percent more than a government bond
(meaning that if the Government is borrowing at 5%, a good corporate issuer may
borrow at 6%)
Shares – which represent part ownership of a company – are usually valued
partly by reference to the dividend they pay (which is comparable with the
interest received on a bond) and partly by reference to the profits earned by
the company and available to pay dividends or to be reinvested by the company in
fixed or working capital.
For both bonds and shares, the income is measured by the “yield” and for
shares the profit is measured by reference to the “price earnings ratio”.
Other measures that affect valuation of shares are “cash flow” and “asset
What makes the price of common stocks and bonds go up and down?
The stock market rises and falls with investor confidence
What are the benefits of owning stocks?
It gives the investor an opportunity to participate in the success of a
company through increasing dividends or increasing asset value.
What risks are involved in owning common stocks?
The risk that the companies who have issued the stocks are unsuccessful or,
ultimately, insolvent, in which case the value of the common stock may be nil,
In addition the price of common stocks is relatively volatile, moving up and
down with the market.
What makes the price of bonds go up and down?
Bond prices rise and fall with interest rates, partly on changes in inflation
expectations and partly on the supply and demand for credit.
What are the benefits of owning bonds?
A relatively secure and predictable monetary return in the form of interest
and/or repayment at a premium over the cost of purchase. The price of bonds is
relatively more stable than of common stocks.
What risks are involved in owning bonds?
Default in the payment of interest and/or the repayment of capital.
What are the risks of investing on the stock market?
The price of stocks and shares can go down as well as up.
Who can use the market?
Only brokers and dealers who are both registered with the GSC and who are
members of GASCI are permitted to trade directly on the stock market, but anyone
may place an order with a broker dealer to buy or sell stocks and shares.
How can you buy or sell securities on the Exchange?
Go to a registered broker, licensed by GASCI
What does a limited service broker do?
A limited service broker executes transactions on behalf of investors, but
does not provide advice or other ancillary services.
What does a broker/dealer do?
A broker dealer carries on business both as an agent for his customers and as
a principal for his own account.
How are securities paid-for on the Exchange?
The buyer of a security pays his broker who pays the seller’s broker who pays
the seller; at the same time, the seller passes evidence of ownership to his
broker who passes it to the buyer’s broker who passes it to the buyer. It is
good practice for payment of money to be matched by transfer of ownership at
When does trading take place on Exchange?
Initially once a week during a short trading session; in the future it will
be continuous between brokers’ offices
What about private deals outside the market?
Private deals are permitted but they are subject to stamp duty.
The price at which a security is offered for sale
The value of a company shown in its balance sheet as shareholders capital and
reserves divided by the total number of shares outstanding
The highest price at which a security is being bid and the lowest price at
which it is being offered
An offer to buy a security
A person engaged in the business of effecting transactions in securities for the
account of others [SIA]
The issuance of bonus shares to shareholders; such an issue does not change the
value of the company, it simply increases the number of shares outstanding.
Short-term investments (usually no longer than three (3) months) with
insignificant risk of changes in value, that can be readily converted to
The increase or decrease in a company's cash due to
operating, investing and financing activities. Cash refers to cash on hand, cash
at bank and cash equivalents.
A person providing settlement related services specified in SIA s.3(1)(h)
Collective Investment Scheme
An arrangement with respect to property of any description the purpose or effect
of which is to enable the persons taking part to participate in or receive
profits or income arising from such property. [SIA - abbreviated] Unit trusts
are collective investment schemes.
Any issue of shares that are (1) called "common stock" or (2) not designated as
being other than common stock (e.g. "deferred" stock, or "non-voting" stock, or
"preferred" stock) or (3) limited in their entitlements to less than those
specified under "share" in this glossary.
A practice by which stocks and shares listed on one exchange are also listed on
another in a different country.
A person engaged in the business of buying and selling securities for his own
account who holds himself out, at all normal times, as willing to buy and sell
securities at prices specified by him. [SIA]
(i) Another word for dividend.
(ii) A specialised term for the purposes of the SIA relating to newly issued
securities or securities subject to public offerings.
A share of profits paid out to shareholders
Earnings per share
The net profit available to shareholders divided by the total number of shares
A person, including an issuer itself, who by reason of his relation to an issuer
has access to confidential, price-sensitive information
A bank, investment company, insurance company, building society, unit trust,
mutual fund or other entity providing savings facilities to the public.
(i) A natural person carrying on the business of broking or dealing [SIA].
(ii) Any broker who acts as an agent between investors.
Initial Public Offering, a first public offer of stock by an issuer, often
connected with "going public" by obtaining a listing on the stock exchange.
A company or public sector body that issues stocks.
Ease with which stocks may be bought and sold, demonstrated by the volume of
purchase and sale activity, the availability of buyers and sellers ready to
match incoming orders, and the low level of dealing expenses
Limit Order Book
A record maintained by the Stock Exchange of unexecuted orders - usually on a
(i) The start of trading on the stock market
(ii) A "single price auction" procedure to establish the price of a security at
the start of trading
(i) An instruction by a customer to a broker to buy or sell a stock
(ii) A regulatory pronouncement by the GSC or GASCI
Over the Counter Market
A securities market that is not associated with an exchange, also called an OTC
In laws and regulations, and in this Glossary, "person" means both a natural
human being and a legal person such as a company
A nominal value which may be assigned to shares in a company's balance sheet; it
has no connexion with the market price or the asset value and companies may
assign no par value to their shares
Price Earnings Ratio
The market price of a share divided by the earnings per share
A company any of whose issued shares or debentures are or were part of a
distribution or an offer to the public, or, which has issued a security that is
beneficially owned by more than fifty persons.
An issue of new stock to which existing stockholders have first choice (called
A capitalisation issue
A very general word for financial instrument going beyond stocks and shares
[Full definition in SIA s.3(2)(t)]
A company which carries on a business of trading in securities on behalf of
others and includes a broker, a dealer, an underwriter, an investment adviser,
or a combination of these. [SIA abbreviated]
A stock exchange
A natural person who carries on the business of acting as a broker, a dealer, a
trader, an underwriter, an investment adviser or a combination of these. [SIA
An association of securities companies and intermediaries, a clearing agency or
a securities exchange. [SIA]
UK term for "Transfer Agent" - see below.
The day upon which a trade is settled and the contractual obligations between
the buyer and seller in respect of the trade are discharged.
The time between trade date and settlement date: the international standard is
Fractional ownership of a company, entitling the holder to vote at general
meetings, to receive dividends approved at general meeting, to participate in
distribution of capital, and to participate in liquidation.
An increase in the number of shares by subdivision; the effect is the same as a
Single Price Auction
A trading system which processes a large number of buying and selling orders
simultaneously to generate the single price at which the greatest volume of
orders can be matched.
See Self-Regulating Organisation
A general word for a financial instrument issued by the company, whether
evidence of a debt (a bond), or of ownership (a share)
(i) US term for a stock market transaction. It is a contractual agreement
between buyer and seller to transfer ownership of a specified number of shares
or quantity of stock for a specified payment on "settlement day".
(ii) A general term in the SIA (3)(2)(z) applying to transactions in general and
to activities in furtherance of transactions.
The process by which ownership of stocks and shares is transferred from seller
to buyer; in Guyana full legal ownership is transferred when seller and buyer
have signed a transfer form.
US term for Service Registrar, that is a company that maintains shareholder
registers on behalf of issuers
The income received from a security as dividend or as interest expressed as a
percentage of the market price of the security. The yield on a share which had a
market value of $10 and received a dividend of $1 per year would be 10%