Theory question 103
Stock Exchange(a) State four functions of money.
(b) Explain how the following operators function on a stock exchange: (i) Bull; (ii) Jobber; (iii) Broker; (iv) Stag.
Show the model answer
(a) Any four: medium of exchange; measure (unit) of value; store of value; standard of deferred payment; unit of account.
(b)(i) Bull: a speculator who buys shares expecting prices to rise, so he can sell at a profit later.
(ii) Jobber: a dealer who buys and sells securities on his own account (with brokers, not the public) and earns the difference between buying and selling prices (jobber's turn).
(iii) Broker: an agent who buys and sells securities for members of the public and earns a commission (brokerage).
(iv) Stag: a speculator who applies for new shares when first issued, hoping to sell them at a profit as soon as dealing starts.
Bull expects rising prices; bear expects falling prices; stag deals in new issues.