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Why It’s Important for the Securities Exchange Market to be Regulated Before investing in the securities market, it is important to educate yourself on how it works. You can end up losing money if you do not understand the basics of the securities market. Before investing in the securities of a particular company, consider its present and future financial prospects. Apart from this, you have to watch the economy to predict whether the value of the company whose stocks you have bought will appreciate or depreciate. If the stocks will depreciate, you should sell. On the other hand, if they will appreciate, you should buy. One of the options that you have on keeping your money safe while still having easy access to it is investing in securities. Securities are traded on a physical exchange or over the counter. You need to hire a broker to trade the securities you want on your behalf. At the exchange counters, stocks of smaller companies, mutual funds as well as bonds are traded. Stock exchanges are usually reserved for trading shares of larger companies. There are various stock exchange around the country. The one in New York is the biggest in the world. The broker will receive a commission when you trade a company’s stock through his or her company. You cannot buy securities as an individual. The government has formed a specific body to be in charge of regulating the securities exchange. Investors can undergo huge losses due to specific activities that can happen in the stock markets. For instance, investors are bound to undergo losses when a company involves itself in insider trading. The national securities investigation authority ensures that the companies being traded on the securities exchanges are following ethical trading procedures. This means the companies cannot play with investors’ perception by inflating the value of their stock prices. Individuals or companies that are found guilty of stock price manipulation are usually prosecuted.
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There are many factors that affect the performance of the economy. The government, through the securities regulatory body, ensures that the stock markets reflect the trough state of the economy. If there is no regulation of the securities market, investors are bound to go to losses due to unfair trading practices. Moreover, the public may lose confidence in the stock markets and make it difficult for companies to raise the funds they need for growth.
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The government ensures that companies listed on the stock markets are following sound trading practices. The regulators company also ensure the companies listed on the stock exchanges have sound financial policies.