Benefits and Objectives of the Principle of Openness

Oct 13, 2025 by wbrum.org 80 views

Implementation of the Principle of Openness in Stock Trading in the Primary and Secondary Markets

The capital market plays a vital role in a country's economy, and one of the most crucial principles in the capital market is the principle of openness. This principle is not just a rule, but it is the soul of all activities in the capital market itself. In this article, we will discuss the benefits and objectives of applying the principle of openness in the primary and secondary markets, how to arrange stock trading in both markets, as well as regulations related to the principle of openness governing stock trading.

Benefits and Objectives of the Principle of Openness

The principle of openness provides significant benefits for all market participants, both investors, companies, and regulators. In the context of the primary market, openness allows companies to convey relevant information to potential investors. Through prospectus documents, prospective investors get important data that helps them make rational investment decisions. In the secondary market, information disclosure plays a role in creating an efficient market. With the same access to information, all investors can assess the value of stock more precisely, which in turn will affect the dynamics of stock prices.

The principle of openness is essential in maintaining the integrity of the capital market. It ensures that all market participants have access to the same information, which helps to prevent insider trading and other forms of market manipulation. By providing transparent and accurate information, the principle of openness helps to build trust among investors, which is critical for the development of a healthy and efficient capital market.

In addition to its benefits for investors and companies, the principle of openness also has a positive impact on the overall economy. By providing a transparent and efficient capital market, the principle of openness helps to facilitate economic growth and development. It allows companies to raise capital more easily, which enables them to invest in new projects and expand their operations. This, in turn, creates new job opportunities and stimulates economic growth.

Stock Trading Arrangements in the Primary Market and Secondary Market

In Law Number 8 of 1995 concerning the Capital Market, there are provisions governing stock trading. For example, Article 7 paragraph (1) and Article 9 paragraph (1) regulate the obligation to deliver information by companies that offer shares, and Article 95 emphasizes the importance of regular, reasonable and efficient trade. This arrangement serves to protect investor rights and maintain capital market integrity.

Meanwhile, the secondary market regulation is more complex because here shares have been actively traded. Stock prices in the secondary market are strongly influenced by information obtained from various sources, such as financial statements and industrial news. Information disclosure in the secondary market allows market participants to make better investment decisions, based on data and actual facts.

The principle of openness is further regulated in Chapter X (Articles 85-89) Capital Market Law. In trading stocks in the primary market, information about stock offers must be clearly conveyed through prospectus. This is an obligation that must be met by companies that want to raise funds through the issuance of new shares. With the prospectus, investors get a complete picture of the company, including risk and investment opportunities.

In the secondary market, the principle of openness is very important in determining stock prices. Transparent and accurate information helps create trust among investors, which in turn can stabilize stock prices. Unclear or lack of information can cause excessive speculation, which can interfere with market stability.

Setting the Principle of Openness

The principle of openness is a fundamental concept in the capital market, and it is essential to establish clear regulations and guidelines to ensure its implementation. In the primary market, the principle of openness is implemented through the requirement for companies to provide prospectus documents to potential investors. This document provides a detailed description of the company's financial situation, business plan, and risk factors.

In the secondary market, the principle of openness is implemented through the requirement for companies to disclose accurate and timely information about their financial performance and business activities. This information is made available to the public through various channels, such as financial statements, press releases, and investor presentations.

Regulations Related to the Principle of Openness

The principle of openness is regulated by various laws and regulations, including the Capital Market Law and the Securities and Exchange Commission (SEC) regulations. The Capital Market Law requires companies to provide prospectus documents to potential investors, while the SEC regulations require companies to disclose accurate and timely information about their financial performance and business activities.

In addition to these regulations, there are also industry-specific regulations that govern the principle of openness in the capital market. For example, the Financial Industry Regulatory Authority (FINRA) regulations require broker-dealers to provide accurate and timely information to investors about their financial products and services.

Conclusion

The principle of openness is a pillar that supports trust and efficiency in the capital market. The application of this principle in the primary markets and the secondary market not only protects the interests of investors but also contributes to the development of more transparent and regular capital markets. With a clear arrangement and obligation to deliver information, the capital market can function optimally, support economic growth, and provide benefits to all parties involved.

In conclusion, the principle of openness is a fundamental concept in the capital market, and its implementation is essential for maintaining the integrity and efficiency of the market. By providing transparent and accurate information, the principle of openness helps to build trust among investors, which is critical for the development of a healthy and efficient capital market.
Frequently Asked Questions (FAQs) about the Principle of Openness in Stock Trading

The principle of openness is a crucial concept in the capital market, and it is essential to understand its implications and benefits. In this article, we will address some of the frequently asked questions (FAQs) about the principle of openness in stock trading.

Q: What is the principle of openness in stock trading?

A: The principle of openness in stock trading refers to the requirement for companies to provide transparent and accurate information about their financial performance and business activities to the public. This information is made available through various channels, such as financial statements, press releases, and investor presentations.

Q: Why is the principle of openness important in stock trading?

A: The principle of openness is essential in maintaining the integrity and efficiency of the capital market. It helps to build trust among investors, which is critical for the development of a healthy and efficient capital market. By providing transparent and accurate information, the principle of openness helps to prevent insider trading and other forms of market manipulation.

Q: What are the benefits of the principle of openness in stock trading?

A: The benefits of the principle of openness in stock trading include:

Increased transparency: The principle of openness provides investors with accurate and timely information about a company's financial performance and business activities.
Improved investor confidence: By providing transparent and accurate information, the principle of openness helps to build trust among investors, which is critical for the development of a healthy and efficient capital market.
Reduced risk: The principle of openness helps to prevent insider trading and other forms of market manipulation, which can reduce the risk of investment.
Increased efficiency: The principle of openness helps to facilitate the trading process by providing investors with accurate and timely information.

Q: How is the principle of openness implemented in the primary market?

A: In the primary market, the principle of openness is implemented through the requirement for companies to provide prospectus documents to potential investors. This document provides a detailed description of the company's financial situation, business plan, and risk factors.

Q: How is the principle of openness implemented in the secondary market?

A: In the secondary market, the principle of openness is implemented through the requirement for companies to disclose accurate and timely information about their financial performance and business activities. This information is made available to the public through various channels, such as financial statements, press releases, and investor presentations.

Q: What are the consequences of non-compliance with the principle of openness?

A: The consequences of non-compliance with the principle of openness can include:

Fines and penalties: Companies that fail to comply with the principle of openness may be subject to fines and penalties.
Loss of investor confidence: Non-compliance with the principle of openness can lead to a loss of investor confidence, which can negatively impact a company's stock price.
Damage to reputation: Non-compliance with the principle of openness can damage a company's reputation and lead to a loss of business.

Q: How can investors ensure that they are complying with the principle of openness?

A: Investors can ensure that they are complying with the principle of openness by:

Reading and understanding financial statements: Investors should read and understand financial statements to ensure that they have accurate and timely information about a company's financial performance and business activities.
Monitoring company announcements: Investors should monitor company announcements to ensure that they are aware of any changes to a company's financial performance or business activities.
Seeking professional advice: Investors should seek professional advice from a financial advisor or broker to ensure that they are complying with the principle of openness.

Q: What is the role of regulatory bodies in enforcing the principle of openness?

A: Regulatory bodies, such as the Securities and Exchange Commission (SEC), play a critical role in enforcing the principle of openness. They are responsible for ensuring that companies comply with the principle of openness and for taking enforcement action against companies that fail to comply.

Q: How can companies ensure that they are complying with the principle of openness?

A: Companies can ensure that they are complying with the principle of openness by:

Providing accurate and timely information: Companies should provide accurate and timely information about their financial performance and business activities.
Disclosing material information: Companies should disclose material information about their financial performance and business activities.
Maintaining transparency: Companies should maintain transparency in their financial reporting and business activities.

By understanding the principle of openness and its implications, investors and companies can ensure that they are complying with the principle and maintaining the integrity and efficiency of the capital market.