Get to know the Definition, How it Works, along with the Duties and Roles of the Stock Exchange in Indonesia

Investing has become a common activity among today’s society. This is due to the circulation of funds that allow investors to get profits, both in the short, medium and long term. 

There are many ways that investors can do to invest their capital. For example, stocks, bonds, cryptocurrencies , and so on. Not only how to invest their capital, but also where or through what platform they invest.

One of the places that can be a place for investors to invest is the stock exchange. Simply put, the stock exchange can be thought of as a market. Of course, the market for investing. To understand it better, the following is an explanation of the meaning, workings, duties, and roles of the stock exchange.

Understanding Stock Exchange

stock Exchange

In general,  the stock exchange is a market that is engaged in buying and selling securities. In that sense, the stock exchange is a place for buying and selling securities based on Law no. 8 of 1995, regarding the capital market is goods in the form of securities, such as stocks and bonds. So, the stock exchange can be interpreted as a place for buying and selling securities.

Like a market, the stock exchange is a place to conduct securities transactions, such as the exchange, purchase, sale, and even printing of company shares publicly. With the existence of a stock exchange, market participants, both sellers and buyers, can safely trade shares or other instruments and have zero or low operational risk confidence.

Indonesia has a place for buying and selling securities called the Indonesia Stock Exchange (IDX) or the Indonesian Stock Exchange (IDX). BEI is the official Indonesian stock exchange that facilitates all transactions for buying and selling shares of publicly traded companies .

How the Stock Exchange Works

How the Stock Exchange Works

As previously mentioned,  a stock exchange  is a collection of shares of companies that are traded. However, the companies listed on the stock exchange are only public companies or publicly listed companies . That is, all corporate actions can be publicly owned or purchased.

All buying and selling processes will be facilitated by the stock exchange so that companies can land on the market. However, to achieve this goal, of course, the company must comply with the terms and conditions issued by the stock exchange. In principle, companies that have the potential to become large companies with large capital will also be easily registered.

Activities on the stock exchange can help companies to increase the required capital. This capital is obtained from investors who invest in IPO companies listed on the stock exchange. To get this additional capital, the company sells half of the company’s shares to the general public.

Indonesia Stock Exchange Tasks

The duties  of the Indonesian stock exchange are as follows.

  • Facilitating efficient, fair and orderly trading of securities and securities.
  • Providing facilities along with supporting and supervising all activities that occur in securities.
  • Draft annual routine budgets and record profits by submitting reports to OJK, as the capital market supervisor.

The Role of the Indonesia Stock Exchange

The role of the Indonesian stock exchange is divided based on its duties, namely as a facilitator or as a supervisor.

1. IDX’s Role as Facilitator

  • Provide a forum for buying and selling securities.
  • Making regulations regarding transaction activities on the stock exchange.
  • Authorized to record all securities instruments.
  • Processing liquidation of instruments.
  • Transparency of stock exchange information.

2. IDX’s Role as Supervisor

  • Monitor all securities activities.
  • Prevent the occurrence of fraud or price fraud.
  • Stop trading when it finds evidence of infringement by the issuer.
  • Revoke securities rights for infringement of certain securities.

Stock Exchange Terms

There are certain terms that need to be understood when playing stocks on the stock exchange.

Term Definition
issuer Parties who make public offerings for sale to the public based on the procedures contained in the applicable law. 

Issuers can be individuals, companies, joint ventures, associations, organizational groups.

Securities Evidence of ownership of capital in the form of securities and can be traded.

Securities can be in the form of stocks, bonds, notes, certificates of deposit, coupons, guarantees, and so on. 

Capital market The capital market is an activity related to securities trading activities. In addition, the capital market is also related to public companies related to securities issued and institutions and professions related to securities.

Types of Stock Market in Stock Exchange

There is not only one type of stock market on the stock exchange, but in the stock exchange there are various types of stocks. The shares listed on the stock exchange are as follows:

1. Regular Market

This stock market is a market with trading based on a bargaining process through a continuous auction market through JATS. Although the auction takes place continuously, there is still a completion of the auction process. This settlement is carried out 2 working days after the exchange transaction.

There are requirements that investors need to meet to carry out transactions in the regular market. These requirements are as follows.

  • The shares owned meet the standard of one lot or the equivalent of 100 shares.
  • The entered buying and selling prices are adjusted to the price fractions determined by the Exchange.

2. Negotiated Market

Similar to the regular market, this type of stock market operates based on a bargaining system. However, this bidding is done directly and individually, not through auction. So, the solution is done individually as well.

The individual process referred to is a process between exchange members, customers and exchange members, customers through one exchange member, exchange members with the Indonesian Clearing and Guarantee Corporation or KPEI. After the negotiation process has resulted in an agreement, the results are processed through JATS. However, exchange members can submit a sale and purchase offer through advertising and it can be changed or canceled before JATS or the Jakarta Automated Trading System executes the agreement. 

3. Cash Market

This type of market is very similar to the regular market. In fact, another name for this market is the regular cash market. The process carried out in this market is exactly the same as the regular market, namely by negotiating through continuous auctions. The difference is that the settlement is carried out on the same exchange day as the transaction on the stock exchange.

Capital Market Instruments

The capital market in the stock exchange sells various types of investment products. Some of the instruments or types of investment products available on the Indonesia Stock Exchange (IDX) are as follows.

  • Stocks
  • Bond
  • mutual funds
  • ETF
  • Derivatives

Grow Capital by Investing in the Indonesia Stock Exchange!

The Indonesia Stock Exchange is a place to trade securities in Indonesia. You can develop investment capital through the Indonesian stock exchange through its various products. You don’t need to worry when investing in the IDX, because this market is an official forum. 

Even so, you still need to be careful and wise when using each product on the IDX. It is also necessary to pay attention to aspects related to your investment activities, such as the company you want to invest in and also the investment method. If these aspects are considered, your investment activities will run smoothly and the possibility of getting abundant profits is greater.

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