The Brief Overview of the Stock Market Operations

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Being present in a technologically advanced era, the race to ultimately be the best in the field has now been considered as one of the top most priorities. With the competition getting tougher day by day, the road to being the absolute best accompanies the struggle; moreover, a smart mind that is adaptive and knows what to do and when to do! Hence, in order to grow significantly in this immensely speedy walk of life, what turns down to be one of the most prime ways to take things to a whole new level is the “Stock Market”.

The “Stocks” are a representation of the partial possession in an organization. Alluding to the accumulation of business sectors and trades where the issuing and exchanging of values occur, a 'Stock Market' is where the things get genuine. A place where the purchasing and offering of the securities and different sorts of securities happens, either through formal trades or over-the-counter markets, 'Stock Market' is otherwise called the 'Equity Market'. Being a key part of the free market economy, the Stock Market is known for giving the investors a cut of possession while likewise demonstrating the organizations with an immediate access to the capital.

How Stock Market Works

A stock trade encourages the stock merchants to exchange organizational stocks including different securities that summarize it. A stock might be purchased or sold just on the off chance that it is recorded on a trade. By doing so, the Stock Market is therefore, portrayed as a gathering spot of the stock purchasers and vendors. But that’s not all, there is certainly a depth to what the Stock Market does and what principle does it runs on. Hence, in order to have a much wider perspective to the working mechanism of the Stock Markets, described below are the two basic principles around which the idea of the Stock Market revolves:

  1. Providing Capital to the Companies: What the Stock Market is generally known for is the fact that it provides the companies sufficient amount of capital that they can use in the expansion of their businesses. This example can be easily understood by considering a scenario where a company puts up 1 Million shares for selling and selling price has been set up to be $10 a share. When all the shares of the concerned company has been sold out, the company gains a huge capital of $10 Million. This capital that has been gained through the selling of the equities can be used in the expansion of the business and for the similar activities. What turns out as one of the most emphasized reasons as to why the companies consider the Stock Market as a prime option for the gain of capital is because when this option is compared to the loans that the companies opt for, it yields to certain significant results. By taking loans from the bank or other resources, the companies that are looking for the investment in their business empires have to pay the debt and also the interest charges that build up as the time passes by. Contrary to that, the capital gained from the selling of the company shares does not require debts or interest rates to be paid. The only things that the companies pay for is the bank charges that look after the stock offerings.
  2. Giving the Investors an Opportunity to Share the Profits: The second purpose that the Stock Market serves is providing the investors with an opportunity to be indulged in the company’s profit and loss aspects and be directly linked with whatever financial ups and downs the company experiences. Allowing the investors to invest in the Stocks of the Publicly Traded Companies, the Stock Market also gives the investors the opportunity to earn through the stocks form one out of the two ways. One of the most basic ways is where the investor’s sells the equity that he has invested in when the selling rate goes greater than the purchasing rate at which the stock has been purchased. In order to have a better insight to it, a scenario can be explained where an investor has purchased a share for $10 per share and after a few intervals, the share has now reached to $15 per share. This is where if the investor would potentially sell out the shares that he owns, he would gain a good amount of profit and hence, it will be favorable in his favor. The other situation is where the Stocks pay out dividends over the regular intervals which means that a certain amount of money is paid per share to the owner of the share.

History of the Stock Market

As shocking as it might sound, the History of the Stock Markets dates back to almost 1500 years. Although the origins of the earlier Stock Market may date back to the 15 century, but it was originally not the era where the Stock Market was technically brought up. It was during the 16th century when the Stock Market was initiated by the East India Company. Amid the 16 century, British, French, and Dutch governments gave sanctions to the organizations that included East India in their names. It was evidently completed in the way where each of the products brought from the east was transported via ocean, including unsafe shipping methods that needed be given security. To moderate these dangers, Ship proprietors routinely searched out speculators to proffer financing insurance for a voyage. Consequently, speculators used to gett a bit of the fiscal returns acknowledged if the ship made it back effectively and safely.

The First Stock Exchange

Despite the fact that the Stock Exchanges were banned to carry out their processing during the very early period of the 18th century, it is still evidently proved that the London Stock Exchange was the first one that still operated, even at a small level. Since the ban lasted long enough for almost half a decade and it was during the year 1825 that the companies were not allowed to issue shares for their companies, the London Stock Exchange processed on a limited scale.

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The Stock Market Games in the UAE

Being set up in the 1970's, the United Arab Emirates is an uprising nation; having the most noteworthy per capita GDP's across the globe (HighBeam Research, 2005). Making it the envy of numerous propelled nations, the country's GDP depends intensely on the salary from oil and gas. The high gas costs have empowered the pioneers of the nation to fund improvement and foundation ventures which will, in the long run, help the broadening of the economy with a specific end goal to limit its reliance on oil and gas incomes. Since the UAE, with an elected arrangement of government, takes after an open monetary system, the UAE money related markets have as of late extended to exchange globally with other monetary markets. As per (Al-Shayeb, A. and Hatemi-J, An, in press, 2013) the Security and Commodities Authority (SCA) has a predominant administrative part in overseeing and managing the UAE securities exchanges and arranging their exercises as per Federal Law no 4/2000. In the year 2000, the SCA allowed both the ADX and the DFM to start to work in the budgetary markets.

Abu Dhabi Security Exchange

Being established in the year 2000, the Abu Dhabi Security Exchange operates under the UAE Local Law No. 3of 2000. As per the law, the ADX has complete authority to execute its processing as a legal entity of an autonomous status for the Stock Market. Considering the power that has been vested in the Abu Dhabi Security Exchange as per the Local Law No.3 of 2000, has the authority to set up branches and franchises outside the United Arab Emirates. With the affiliations of Abu Dhabi Government, Security and Commodities Authority, World of Federation Exchanges, and Arab Federation of Exchanges, the Abu Dhabi Security Exchanges.

Dubai Financial Market

Dubai Financial Market, a capable capital market center which grasps global prescribed procedures to meet the developing needs of its speculators locally and universally, the Dubai Financial Market works as an auxiliary market for the exchanging of securities issued by open shareholding organizations. These incorporates securities issued by elected or nearby governments, neighborhood open establishments and shared finances and additionally other nearby or remote Dubai Financial Market endorsed budgetary instruments. Set up in the year 2000, the Dubai Financial Market is an open establishment with a free legitimate element by ethicalness of Decree 14/2000 issued by the Government of Dubai.

ADX and DFM; Statistical Comparison

Considering the expectations behind the foundation of the financial markets of the UAE, it can legitimately be said that the motivation behind this progression was to guarantee that the outside financial specialists would likewise locate an appropriate stage where they could contribute and get an arrival in view of the budgetary execution of nearby organizations. Considering the two of the top rated Stock Exchanges working in the UAE to fulfill the needs, both the DFM and the ADX serve these requirements significantly well (RAO, 2008). Knowing the fact that both Abu Dhabi Security Exchange (ADX) and Dubai Financial Market (DFM) are the top rated financial markets that is in the UAE, the competition between the two has always a very tough one. Since 2004, there has been a noteworthy advancement of the Stock Exchanges and the volume of capital and posting that has been invested in the UAE has expanded extensively. The quantity of open shareholding organizations has developed from 17 to 127 in the 10 years period, ranging from 2000 to 2010. The capital correspondingly expanded from one billion to five billion AED.

Statistical Analysis

The year 2013 has honey bee striking for the Stock Exchange Market in the UAE since the Foreign speculators demonstrated exceptional enthusiasm for the UAE neighborhood budgetary markets. The sum put by remote speculators in UAE advertise demonstrated an aggregate buy estimation of AED 101.38 billion. In the meantime the remote Investors paid an aggregate deals estimation of AED 97.68 billion. Along these lines, a Net Foreign Investment of AED 3.7 billion was recorded at Emirates Security Market. While, amid the year 2012, the sums in a similar class demonstrated an AED 1.46 billion speculation. This implies the sum in 2013 was more than double the sum in 2012.

Between the years 2009 to 2013, the total investments in the Abu Dhabi Security Exchange and Dubai Financial Market was found out to be double than the year 2012. The reason behind this is that during the year 2013, there was an increased number of local investments that were made in the UAE. The total inflow cash was found out to be 3.701 Billion AED.

Conclusion

Since 2005 the UAE has enabled the non-natives to put resources into the UAE advertises keeping in mind that the end goal to grow put value volume for investors in UAE organizations does not get compromised. Subsequently, the UAE Government goes for enhancing the UAE's GDP through remote direct venture. Considering that, the UAE Government plans to carry out such aims in the future which will satisfy the UAE's open financial procedure of differentiating its national pay from non-oil-area exercises.

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