Stock brokers role in nepal docx.pdf(MAHESH) (1).pdf

Role of Stock Broker in liquidity management 2015

Field work report writing Copy write @ Group E , NCC MBM, 3rd Semester Page 1

A FIELD REPORT WRITING ON

Role of the Stock Broker in Liquidity management

Kathmandu, Nepal

Submitted by:

Amit Gyawali

Jasmin Rajkarnikar

Kalpana Subedi

Mahesh Raj Joshi

Tikaram budha

Nepal Commerce Campus, New Baneshwor

Submitted to:

Mr. Nischal Risal

Faculty of Management

Nepal Commerce Campus

In partial fulfillment of the requirement for the degree of

Masters of Business Management (M.B.M)

Kathmandu, Nepal

July, 2015



1. Background of the study

A stock is a certificate representing ownership interest in a corporation. Like debt securities,

common stock is issued by firms or organizations to obtain fund. Securities market began with

the floatation of shares by Biratnagar Jute Mills Ltd. and Nepal Bank Ltd. in 1937. Introduction

of the Company Act in 1964, the first issuance of Government Bond in 1964 and the

establishment of Securities Exchange Center Ltd. in 1976 were other significant development

relating to capital markets. Nepal Stock Exchange, in short NEPSE, is established under the

company act, operating under Securities Exchange Act, 1983.After establishment of NEPSE only

started the systematic transaction of stocks in secondary market through stock broker in Nepal.

Stock brokers can generally be categorized into full-service brokers, discount brokers and online

brokers. While a full-service broker provides a bunch of services like investment research

advice, tax planning, retirement planning and facilitating the buying and selling of stocks,

discount brokers (or commission brokers) only perform buying and selling orders from their

clients on a commission basis. Their job doesnt entail providing analysis or advice to their

clients. Online brokers, on the other hand, offer online services and charge less commission.

The government has only permitted discount brokers to carry out stock brokerage services so

far, said Murahari Parajuli, deputy spokesperson of the Nepal Stock Exchange (NEPSE).

Trading through discount brokers means investors are left on their own to collect information on

companies and analyze their financial statements before choosing to invest in them. Full-

fledged stock brokerage firms are still a rarity since we are yet to reach international standards in

the way stocks are handled and traded, added Parajuli.

An aspirant broker needs to hold a graduate degree either in management or economics. Besides,

the candidate needs to have a minimum two-year work experience in the financial sector.

Moreover, all interested candidates need to score on analytical and communicative tests taken by

NEPSE. Upon meeting all the criteria, the Securities Board of Nepal (SEBON) certifies them as

stock brokers.

According to Parajuli, all the licensed stock brokers had their heyday while NEPSE kept soaring

until three years ago. He added that the last two years havent been fruitful due to several factors

restricting the growth of the stock market. Nanda Kishore Mundada, president of the Nepal

Stockbrokers Association, added that most stock brokerage firms were finding it hard to cover

their office expenses due to the stock market consistently falling into the red zone.



2. Basic Job description of Stock Broker

Job Duties

The focal point of a stock broker's job is finding and retaining a client base of investors with

substantial liquid assets. He advises them on when to buy and sell stocks and keeps them

apprised of market trends and projections. The broker uses a variety of sources to buy and sell

stocks, including online trading sites and floor brokers at stock exchanges.

Skill Requirements

Expertise in Economics, Finance and statistical analysis is necessary for the broker to

disseminate sound investment advice. Honesty and integrity attract investors to her and

encourage them to make referrals. Time management abilities enable her to act quickly on

buying and selling stocks.

Preferred Background

A bachelor's degree with emphasis in economics or finance is normally the minimum educational

requirement. Some employers require a master's degree in business administration. Large

investment firms frequently offer internships to promising job applicants.

3. Role of the Stock broker in liquidity management

1. Trading of security

One of the major roles of the stock broker in liquidity management is trading of various

securities in market. Seller can sell the security & buyer can buy the security through the help of

stock broker. The broker helps to maintain liquidity because seller can sale & collect the money

in their need of priority & urgency, similarly, broker facilitate the seller to sale their share in

optimum price.

2. Seeks Best Deal

A stock broker represents the client, seeking the best deal to buy or sell stocks. Most brokers deal

in all types of securities and many also handle commodity futures. An individual broker may also

advise a client on when to buy or sell a stock or what to watch for in market dealings, but is not a

licensed investment adviser.



3. Handling the Trade

A broker takes an order from a client to buy or sell a stock, passes it along through his brokerage

firm's network to a floor trader - in a market like the NEPSE. Once the transaction is completed,

the broker relays the information to the client and arranges to transfer any stock certificates or

other paperwork.

4. Paid on Commission

Individual brokers are paid on commissions, usually as a percentage of the value of the trade.

Commissions and fees vary. Some brokerage firms call themselves "discount brokers," offering

trades at a single price. Brokers generally are governed by a "suitability role," meaning they

should recommend only investments that meet a client's financial goals and needs.

5. Size intermediation (Matching)

Another major role of stock broker in liquidity management is size intermediation in terms of

fulfilling your requirement. For example, you are going to buy 500 kitta of Mega Bank Limited,

but there were only 300 Kitta share, in this situation, the stock broker can purchase 300 kitta

from one seller & remaining 200 Kitta from another seller & ultimately you will have 500 kitta

in your hand.

6. Test and Registration

Both brokerage firms and individual brokers are regulated by the Securities and Exchange

Commission and specific markets, like the NEPSE. An individual broker must pass a test

administered by the SEBON. Once a candidate passes that test, he must complete registration

through a brokerage firm, which in some cases requires registering with a securities commission

in each city in which he does business.

7. Recruit New Clients

One of the main roles of a stock broker is to recruit new clients. Brokers use several tactics to

attain new clients. They could call prospects, introduce themselves and offer a free consultation.

Brokers contact the people they know such as family members, friends and past co-workers.

They ask their current clients to refer their friends and family to them. Brokers also hold free

seminars in their community where they offer advice on a financial topic such as planning for



retirements. The broker's hope when holding these seminars is that some attendees will become

clients.

8. Build Relationships with Clients

A major attribute of good stock brokers is that they know how to build relationships with their

clients. After a broker gets a new client he must learn about the client's financial situation and

goals. He also must understand the client's tolerance for risk. Brokers need to get to know their

clients in order to be able to give them appropriate advice and plan long term investment

strategies that will meet their financial goals. Brokers should build a trusting relationship with

their clients so that they remain clients for a long time.

9. Advise Clients

After a broker understands a client's financial situation and the goals they are striving for she will

make recommendations regarding the client's investment portfolio. The broker will use her

knowledge and training to advise the client about portfolio changes and new investment

opportunities. Brokers must always have the client's best interest in mind when making

recommendations. Also, they are required to only give advice that is suitable for the client's

goals, financial situation and risk tolerance.

10. Execute Trades

When a client decides to buy or sell an investment, the broker fills out the appropriate forms and

executes the trade. It is the broker's responsibility to ensure that the trade was filled properly.

11. Monitor Clients' Portfolios

It is the broker's another role to keep watch over his clients' investments. If market conditions

shift or a client's financial situation changes the broker must recommend the appropriate course

of action. As a result, it is important for a broker to keep in close communication with his clients.

The broker also must have a deep understanding of the markets and watch the market action on a

daily basis.



12. Requirements

Brokerage firm requirements for individual brokers vary, but most require some on-the-job

training before an applicant takes a test. Generally a candidate must have worked for a

brokerage firm for at least four months before taking the test. Some brokerages require up to

two years of experience to become a registered broker.

4. Summary & Conclusions

A stock broker is an agent who represents clients to buy or sell stocks and other securities. The

term is applied to both companies that deal in securities and their employees, who technically are

registered representatives working for the brokerage. To most investors, however, the broker is

the person they call when they want to invest in or trade stocks. Most individual brokers work in

offices far removed from the stock trading floors.

There were only starts Broker firm after establishment of Nepal Stock Exchange (NEPSE) in

Nepal. Initially Broker number "1" is established namely Kumari Securities ( Pvt) Ltd, Director

of this firm is Badri Prasad phuyal ( Cell no: 9851074240), Batuleghar, Kathmandu Nepal.

Presently altogether there are 5o listed broker in NEPSE who are engaging in trading the

securities in secondary market. Share broker have no direct role in primary market, but we

cannot even imagine of secondary market without broker in the context of Nepal. Hence in this

scenario there is key role of share broker for the functioning of trading activities. Such role

should be fulfilled by the stock broker in effective & efficient manner to achieve individual as

well as organizational goal in the dynamic environment.

Documents

Stock brokers role in nepal docx.pdf(MAHESH) (1).pdf