Definition
A Listed Security refers to any stock, bond, or other security that is traded on a stock exchange. It has completed necessary requirements and paid the associated listing fees to the exchange. This term represents those securities that have been accepted for trading purposes by a recognized and regulated exchange.
Key Takeaways
- A Listed Security refers to the stock or any other security that is officially listed on an exchange platform, making it accessible for buying and selling in a secondary market.
- Before a security can be listed, it must meet certain requirements such as minimum market capitalization, minimum public float, minimum annual income, minimum price, and a satisfactory corporate governance. These requirements vary depending on the specific exchange platform.
- Being listed on an exchange enhances a security’s visibility and credibility, thus potentially attracting more investors. However, it comes with ongoing compliance requirements and costs for the issuer.
Importance
The term “Listed Security” is important in finance as it refers to stocks, bonds, derivatives, or other financial assets that are officially recognized and traded on a specific stock exchange.
This official listing implies that the securities have met certain regulatory standards of the exchange, increasing trust among investors and traders.
Listed securities are easily tradable, providing companies with easier access to capital, and investors with the ability to sell their investments in a transparent, regulated environment.
Thus, the term signifies liquidity, regulatory oversight, and fosters a more efficient market.
Explanation
The primary purpose of a Listed Security is to provide an organized, regulated, and transparent marketplace for buying and selling securities with relative ease. Listing enhances a firm’s credibility and visibility amongst investors, lending it a sense of legitimacy and robustness, which in turn might assist in attracting more individuals or institutional investors.
The transparency of a listed security in a regulated market provides essential knowledge about prices, trades, and market depth, enabling investors to make informed decisions. Furthermore, Listed Securities are used by companies to raise capital via issuing shares, which can be utilized for a range of business ventures such as expansion, research and development, or debt repayment.
It also allows shareholders to share in the success and growth of the company through corresponding growth in stock value and dividends. Also, for investors, it provides liquidity, as these securities can be easily bought and sold on an exchange, ensuring that their investment is not locked up indefinitely and can be converted into cash quickly if needed.
Hence, Listed Securities play a central part in the global finance ecosystem.
Examples of Listed Security
New York Stock Exchange (NYSE): Founded in 1792, the NYSE is one of the largest exchanges globally, where publicly traded companies, such as Apple Inc., Microsoft Corp., and Coca-Cola Co., have their stocks (equity securities) listed. Investors can buy or sell these securities during trading hours.
NASDAQ: The National Association of Securities Dealers Automated Quotation System, NASDAQ, is the second-largest exchange in the world by market capitalization. Technology companies like Amazon, Google, and Facebook have chosen to list their securities here. It is a dealer’s market where all the trading is done electronically.
London Stock Exchange (LSE): It is one of the oldest stock exchanges globally, where companies from various sectors have their securities listed. LSE includes renowned companies such as British Petroleum (BP), GlaxoSmithKline, and HSBC Holdings among the listed securities. Each of these exchanges operates under a regulatory authority ensuring that transactions are carried out in a controlled and transparent environment.
FAQs About Listed Security
What is a Listed Security?
A listed security is a financial investment item that is traded on a stock exchange. These could be shares of a company, bonds issued by government entities, derivatives, and other kinds of investment instruments.
Why do companies choose to list their securities?
Companies list their securities to increase their capital by attracting investors. It also adds visibility and credibility to the company’s standing in the market. Finally, public companies can use their stock as currency for mergers and acquisitions.
What is the listing process?
The company initially makes an application to the exchange for listing their securities. After thorough due diligence, if the exchange is satisfied that the company meets all their requirements, the securities are included on the exchange for trading.
What are the benefits to investors of investing in listed securities?
In general, investing in listed securities provides several benefits to investors. Investors can easily buy or sell their shares as they are listed on a public exchange. They are also protected by various rules and regulations that govern these securities’ trading. In addition, they also can get regular information on the company’s performance because public companies are required to publish regular reports.
Related Entrepreneurship Terms
- Stock Exchange
- Securities Market
- Secondary Market
- Trading Volume
- Initial Public Offering (IPO)
Sources for More Information
- Investopedia: A comprehensive resource for understanding investment and finance terms.
- Fidelity: A great source for learning about different investing strategies and finance terminologies
- NASDAQ: This official site of an important exchange can provide thorough understanding of listed securities and other similar terms.
- Financial Industry Regulatory Authority (FINRA): An independent, authorized source for financial terms and regulations.
