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A Challenge for Traditional Ways of Dealing in Stocks (Part 1)

12 November 2007 - Features - Editor

The Internet has always threatened the early 20th century format of trading in stocks. The situation in which promoters needed exchanges to find capital at costs and risks lower than prevalent for bank loans has evaporated in large measures. This is especially true of well administered countries, and mature economies as well.

Professional executives, and high-profile owners can raise all the funds they need without having to float stocks through intermediaries. Accounting systems have also evolved through software to levels in which prospective owners can see a company’s books in the same ways as regulators. Statutory accounting systems are known to have limitations, which small circles of investors can break through best and most effectively.

Specialist dealers and brokers have always competed with traditional Exchanges. They can not only meet statutory disclosure standards, but improve them or observe more taxing guidelines as well. They have not always been inviting for small investors, but that trend has begun to change of late. Pink slip stocks are mostly of low values. It is not known why exactly top corporations avoid these circles of dealers, but the system is certainly open for adaptation by interested companies. Financial institutions rule the roost when it comes to acquisition moves, so there is no reason why they should not enter fields of routine trading.

How Promoters Should Market Their Stocks

Trading must start by owners wishing to share ownerships of companies by offering stocks. Even today, some of the best enterprises on the globe remain secret in private, without bothering to offer stocks to the investing public. Celebrity managers can raise all the funds they can use merely by asking and do not need to market their ideas on wide bases. However, such enduring successes are rare, and most companies have to work hard at keeping investors interested in their stocks. Stock market conventions in this respect can be self-defeating, with executives torn between the long-term interests of enterprises for which they are responsible, and short term pressures from uncommitted investors. The inherent liquidity of stocks may help brokers who work on slim margins in hopes of rapid and massive turnovers, but those with long gestation investments and high fixed costs cannot afford capricious movements in their stocks.

There is strong potential demand for more stable ways of distributing stocks than is does by major Exchanges. This can be done directly through groups of traders, or can use financial institutions as intermediaries with the investing public. An interesting aspect of such financial services is to move beyond national boundaries to find quality funding for stocks on global scales. Not all countries are equally developed and liberal in this respect, which makes some of them particularly suited for international transactions.

A Challenge for Traditional Ways of Dealing in Stocks (Part 2)

 


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