QUESTION FOUR: SECONDARY MARKET TRADING ON STOCK EXCHANGE The Zambian securities market has been designed as a "unified market" where virtually all trading is conducted through a stock exchange. This is in contrast to the "dual market" system in which only selected stocks are listed and traded on exchange (sometimes referred to as the organised exchange or exchange market) - and the balance traded off exchange as unlisted stocks (usually referred to as traded over-the - counter or OTC and sometimes called a decentralised market). The central market design of the Zambia market means that securities of public companies that are not listed are also quoted and traded on a second tier market within the Lusaka Stock Exchange (LuSE). With the above issues and in earnest efforts to ensure that the stock exchange reflects best and modern practices, a number of actions by both the Lusaka Stock Exchange and Government have been undertaken and many more initiatives underway to get to this end. Required a) Compare and contrast the various types of secondary market trading structures in the major world stock exchanges and making reference to our local (Zambian) environment (stock exchange) (4 marks b) You are an expert in the operation of the secondary stock markets and have been retained as a consultant to the LuSE to offer your expertise in modernising the Zambian stock market. What would you advise? (6 marks) c) As a consultant, what factors would you advise an investor to consider before investing in the emerging stock market of a developing country like Zambia? (3 marks) d) Discuss any benefits you can think of for a company to cross-list its shares on more than one stock exchange (3 marks) e) In comparison with other world practices, clearly explain how the LuSE index is computed (4 marks) Total 20 marks