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Stock Broker: Managing The Bulls And Bears

28 Jan 2019

stock Market, Stock Broking, Falling Shares, Bullish Market, Bearish Trend, are terms we often hear. Myriads of screens, cascading figures are something we have become familiar with, but do we really know all about it. Let’s take a tour in the world of Stock Exchange.

What is a Stock? To make it very simple, in order to start a business one needs to invest money. However, when few people come together to start a business and invest jointly, the ownership of the company is divided. These individual shares are called stocks. Depending on the investment the quantity of shares may differ, however, even a single share of the stock represents fractional ownership of the company in proportion to the total number of shares.

How did the stock market start? The Banks in Europe were unable to lend money to everyone who came asking for, and these important gaps left by the larger banks were filled by the money lenders. These money lenders traded debts between themselves. A lender looking out to ease out of a high-risk, high-interest loan might exchange it for a different loan with yet another lender. These lenders also purchased government debt issues. As gradually their business evolved these lenders began selling debt issues to the customers, who became the first individual investors. In the 1300's the Merchants of Venice were the pioneers in the field and were the first set of people who started trading securities.

The Belgians were the ones who could boast of a stock exchange dating back to 1531, in Antwerp. Stock Brokers and moneylenders would meet at the stock exchange to deal with business, government and even individual debt issues. In 1602 The Amsterdam Stock Exchange was established by the Dutch East India Company which was the first stock exchange to issue shares on the Amsterdam Stock Exchange. It was also the first stock exchange that issued stocks and bonds and was renamed the Amsterdam Bourse and the very first to formally begin trading in securities.  

The East India Company sent their ships on voyages that brought back goods from the East. These voyages were extremely risky as often the ships were the target of Barbary pirates, and other common risk like that of sea storms or ship getting lost due to poor navigation. In order to lessen the risk of losing a ship and ruining their fortunes the ship owners had long started the practice of advertising for investors who would put their money for the voyage in return for a percentage of the proceeds if the voyage was a successful one. In the initial days these investments were limited for only a single voyage. One the voyage was over, a new one would be created for the next voyage. However, with time the investors started spreading their risk by investing in several different ventures at the same time; this was a way of playing the odds against all of them ending in disaster. The East India Company also changed their business policies. The company started issuing stocks that would pay dividends on all the proceeds from all the voyages that the company undertook. These were the first step towards the modern method of joint stock companies that we see today. This also gave the companies the opportunity to demand more for the shares that they shared and it helped them build more fleets. As companies grew they also brought huge profit to the investors. Not just that the various companies that the East India owned also issued shares on papers which the investors could sell to other investors. As there were no stock exchanges in existence really people would track down brokers and folk around coffee shops in London to carry out their businesses. The debt issues and shares for sale were often written and pasted on the doors of the coffee shops or mailed as newsletters.

With the boom in stock market in London, businesses opened up overnight and people were issuing stocks and shares of crazy ventures. There was absence or rather no regulations and no ways to differentiate between genuine legitimate companies or illegitimate ones. As a result the big bubble finally burst when companies stopped paying dividends to investors and the government had to step in and England banned the issuing of shares. Though the London stock exchange was formally formed in 1773 but was unable to take off due to the laws restricting shares. 

The New York Stock Exchange was set up in 1817 and started trading in stocks right from its inception and became one of the largest most powerful and wealthy institutions in the world

With advanced technology a different type of Stock exchange came into existence in the form of NASDAQ, the brainchild of National Association of Security Dealers (NASD). Unlike New York Stock Exchange which has a physical location at the 11 Wall Street, the NASDAQ operates through a network of computers that runs business electronically and has the most number of companies listed. 

In India Bombay Stock Exchange and the National Stock Exchange both located in Mumbai. The Bombay Stock Exchange has been in existence since 1875. 

Who are a Stock Brokers and what are the job profiles of a Stock Broker? A Stock Broker is a registered representative, or an investment Adviser, a professional individual who executes buy and sell orders for his /her clients on stocks and other securities, either over the counter or through market listings for a fee. Stock Brokers are usually associated with brokerage firms and they handle transactions for both companies and individuals. They can also work independently.

How does one become a Stock Broker? One needs to have a Bachelor’s Degree in Finance or Business Administration to be a Stock Broker. Apart from these one needs to have a good understanding of accounting methods, financial laws and regulations, financial planning, financial forecasting, and principles of economics and currency. Stock Brokers should be registered with Securities and Exchange Board of India (SEBI).  One can also take a course in Stock Brokering. The BSE and NSE amongst other institutes offer certified courses in stock brokering. To work as a Stock Broker in India one also needs to have minimum two years of work experience at a stock broking firm or in a field that is related to securities or financial services. 

One can also take advice from the Career counselors to get a sound idea about the courses. There are several Career Counselors that one can go to including Online Career Counseling as well. 

Apart from these there are many Career Guide Services available online and one can go through those websites to get a good understanding of the Course. Many Career seminars also are held to help students select the course most suitable for them. The counseling also helps students understand their strengths and weaknesses and can work accordingly to better themselves.

 One can log on to the links listed below which will provide one with a good understanding of the courses available and how to go about cracking the exam:

Career Guide

Future Bright Program


By: Madhuchanda Saxena

Posted By - Assistant Editor


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