Capital market

Posted by Imam Larh on Thursday, 5 April 2018

Capital market
1. Understanding

The capital market is a vehicle to bring together parties that require long-term funds with those who have the funds.

2. Function

In the national economy, the presence of capital markets has functioned as:
  • long-term funding sources;
  • Alternative investment;
  • The top of the restructuring of company capital;
  • Tools to divest.
3. Types of Markets in Capital Markets

There are two types of markets in the capital market.

a. Primary Market (Primary Market / Initial Public Offering) Market where securities offer by syndicated underwriters and sales agents to public investors.

b. Secondary market (secondary market)

Markets where securities listed on the stock exchange are traded. The secondary market provides an opportunity for investors to buy or sell securities listed on the exchange after the initial offering. In this market, securities are traded from one investor to another.

Steps to supply and order securities in the primary market are as follows.

1. Underwriters and realtors make an initial public offering or bond of a company to a public investor by publishing it in a national newspaper and distributed to the public in the form of a prospectus, that is, any written information in connection with a public offering in order for the other party buying effect.

2. Investors interested in ordering shares or bonds contact the underwriters and realtors.

3. Investors make payments.

4. Underwriters and sales agents announce the results of the public offering to investors who have made the order.

5. Underwriters and issuers issuing shares or bonds shall process allotment of shares or bonds (allotment) to investors who have ordered. If the number of shares or bonds earned by the investor is less than the amount ordered, the excess funds of the investor will be returned.

6. Underwriters and realtors distribute stocks or bonds to investors.

4. Capital Market Supervisory Agency (Bapepam) 

To create regular, fair, efficient capital market activities and to protect the interests of investors and the public, the government established the Capital Market Supervisory Agency (Bapepam). The task is to conduct coaching, arrangement, and daily supervision of activities in the capital market.

Bapepam has functions, among others:
  • To arrange regulations on capital market;
  • Enforcing regulations in the field of capital markets;
  • Conducting guidance and supervision on the party obtaining the business license, approval and registration from Bapepam and other parties engaged in the capital market;
  • Establishing the principle of openness;
  • Resolve the objections filed by the parties imposed sanctions by the stock exchange
  • To stipulate capital market accounting requirements;
  • To carry out technical safeguarding of Bapepam's main duties in accordance with the policy of the Minister of Finance.
In performing its duties, Bapepam has the following powers.

a. Grant business license to:

1. Stock exchange,
2. Clearing and Guarantee Institution
3. Depository and Settlement Institution
4. Mutual funds,
5. Securities companies,
6. Investment advisers, and
7. Securities administration bureau.

b. Giving individual permission to:

1. Underwriter Representative,
2. representatives of securities brokers,
3. the deputy manager of the investment, and
4. representative of mutual fund securities agent.

c. Approve for custodian banks.

d. Conduct examination and investigation.

e. Establish terms and procedures for registration.

f. Require registration to the market support profession.

5. Institutions and Capital Market Supporting Professionals

In order for the activities to be carried out regularly and efficiently, activities in the capital market are supported by supporting institutions and professions.

a. Capital Market Supporting Institutions
1. An investment manager is a party whose business activities are managing securities portfolios for customers or managing collective investment portfolios for a group of customers, except insurance companies, pension funds, and banks conducting their own business activities under applicable legislation.

2. Custodian is a company providing services:

a. securities and other property related to securities and other services including receiving dividends, interest, and other rights;

b. complete securities transactions;

c. representing account holders who become their customers.

3. The trustee is a party representing the interest of debt holders.

4. Intermediary of securities trader is a company conducting the business of buying and selling securities for its own interest or the customer.

5. The underwriter is a company that makes a contract with the issuer to conduct a public offering for the interest of the issuer with or without the obligation to buy for unsold effects.

6. The Securities Administration Bureau shall be a company which is under contract with the issuer carrying out the recording of ownership of securities and the distribution of related rights

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