The securities market is the most important segment of the financial market. If the latter is considered as a mechanism for the redistribution of funds between subjects of economic relations, then the securities market covers those relations in which savings and savings with the help of securities are converted into investments. Moreover, during the last two decades of the 20th century. There is a growing trend towards the relative substitution of many forms of attracting financial resources, such as bank loans, etc., with the issuance of securities. This process is called securitization and is manifested in the fact that on a global scale the predominant share of financial assets exists in the form of securities. This can be illustrated by the following data: at the end of the 1990s, the amount of resources in the form of cash and funds in current and time accounts of banks was almost 20 trillion dollars, the size of world GDP in 1999 reached approximately 30 trillion, and the volume of world markets securities by the beginning of 2000 amounted to about $72 trillion.
This situation is explained by the role that the securities market plays in a market economy. It provides economic entities with a wide range of tools for attracting financial resources or for their profitable placement on a variety of conditions, which allows taking into account the diversity of interests and opportunities of both those who issue (i.e. issue) securities and those who invest (i.e. invests) his funds in them.
The importance of the securities market for ensuring economic growth is revealed in its functions. These include:
- investment, the essence of which is the mobilization of savings and savings and their redistribution in the form of investment resources between industries and spheres of the economy;
- insurance, ensuring redistribution of risks and equalization of prices during trading of various types of assets based on the use of derivatives instruments of the securities market;
- informational, reflecting the impact of information on the progress of regular trading in securities on organized markets on the level of business activity and the reverse impact of economic conditions on securities quotes.
Along with these functions, the securities market also plays a role inherent in any market, namely: commercial, pricing, and regulatory. The implementation of the functions of the stock market is ensured by various categories of its participants in the process of their interaction. The totality of participants can be divided into two groups, one of which can include issuers and investors, and the other - professional participants, i.e. intermediaries of the securities market, constituting elements of its infrastructure.
The issuer can be the state represented by central or local authorities and non-state enterprises and organizations related to the production or financial sector and most often existing in the legal form of a joint stock company. Investors include legal entities or individuals investing in securities. The state may also appear as an investor, but mostly investors on the Russian stock market are individuals, i.e. The individual investor predominates, while the main issuer is the state. The investor owns the securities by right of ownership (or other proprietary right), and the issuer bears obligations to the investor to exercise the rights certified by the security. A special role belongs to institutional investors, i.e. such specialized credit and financial institutions as commercial and investment banks, insurance companies, pension and mutual funds. Their concentration of a significant amount of securities contributes to greater stability and sustainability of the stock market.
The category of professional participants in the securities market includes organizations and persons who ensure the conclusion and execution of operations (transactions) with securities between issuers and investors, as well as between groups and within groups of professional participants themselves. They include organizers of securities trading. They may exist in the form of an exchange or non-exchange organization and provide services that directly facilitate transactions. Professional participants also include brokers, dealers, fund managers, settlement and clearing organizations, depositories and registrars. A broker can be a legal entity or an individual acting on the basis of an agency or commission agreement at the expense of the client. Most often this is a brokerage company. Dealer is a legal entity that carries out transactions of purchase and sale of securities on its own behalf and at its own expense on the basis of public announcement of their quotations. The fund manager carries out transactions with securities in the interests of the client on his own behalf and for a fee within a certain period. In the settlement and clearing organization, during the reconciliation and adjustment of information on transactions concluded during trading, the mutual obligations of the parties for the supply of securities and settlements on them are determined and offset. Depositories provide services for storing securities certificates and (or) transferring ownership rights to securities. Registrars are engaged in the activities of maintaining a register of securities owners, which consists of collecting, recording, processing, storing and providing data about the register, i.e. on the list of securities holders as of a certain date.
By carrying out transactions with client securities temporarily transferred to him, a professional participant receives the status of a nominal holder - a person to whom a certain number of securities are recorded in the register, the owner of which he is not.
The segment of the stock market that covers the relationship between issuers and investors with professional intermediaries is called retail. The wholesale segment involves relationships between professional traders. Taking into account the specifics of the issuer, the stock market is divided into the market for government securities and the market for corporate securities (securities of joint stock companies). If we continue the classification by types of securities, we should distinguish the stock market and the bond market. Based on the trade organizer, the market is divided into exchange and non-exchange, and based on the time of execution of transactions - into spot and futures. It is extremely important to divide the stock market into primary and secondary.
Primary market is a market for the placement of new issues (issues) of securities. This is a market for issuers and investors; its main function is the accumulation of funds and their redistribution. In countries with developed economies, the share of the primary market does not exceed 5-15%; its resources are used to regulate the capital structure of corporations and the placement of securities during mergers and acquisitions. In the structure of the Russian stock market, the primary market predominates, which is explained by its emergence in the process of privatization, which served as the main method of denationalization of property, and the difficulties in placing repeated issues by joint-stock enterprises.
The circulation of securities occurs on the secondary market in the form of their first and subsequent resales. The main participants here are professionals, a significant proportion of whom are speculators as traders who are ready to take risks; their actions in the market give it greater liquidity. In the process of redistribution of property, a constant structural restructuring of the economy occurs. The weak development of the secondary market makes it difficult to resell securities and generally weakens incentives to invest in securities, significantly limiting the flow of financial resources into the real sector.
Secondary market divided by organized And unorganized. The organized market is represented primarily by the stock exchange, both in the classic form of a specially equipped structure, and in the form of a computer network with terminals of trading participants connected to it. The unorganized, retail, “street” market, also called “over the counter” trading, is represented by many traders and is characterized by the absence of a uniform exchange rate for the same securities and relatively small volumes of transactions concluded by the investor directly with the trader outside the trading system (for example, through a bank ).
The most important characteristic of the secondary market is liquidity, which reflects not only the trading volume, but also the variety of transactions, the number of securities traded and the number of professional traders. In conditions of high liquidity, the gap between the supply and demand prices in the securities market (spread) is minimal with insignificant price fluctuations from transaction to transaction, which is ensured by a high concentration of supply and demand. This helps establish a price that is perceived by paperholders and potential buyers as fair. It stimulates active buying and selling.
The mechanism that guarantees the highest liquidity of the stock market is the stock exchange. According to Russian legislation, a stock exchange is recognized as a trading organizer that provides its members with a place for trading in securities and determines the time and rules of trading. It is created in the form of a non-profit partnership. During exchange trading, quotation occurs - the establishment of the market price of securities traded on the exchange. Securities of large and reliable issuers that have been listed are admitted to the exchange, i.e. the procedure for inclusion in the list of securities traded on a given exchange in accordance with its requirements for the issuer. Therefore, exchange prices are an indicator of general economic conditions. The peculiarities of the organization and activities of the exchange determine its functions:
- identification of equilibrium exchange prices in the quotation process;
- redistribution of property rights based on the accumulation and redistribution of temporarily free funds;
- maintaining liquidity and reliability of the securities market based on strict standardization of transaction terms and the creation of mechanisms to guarantee the execution of transactions;
- maintaining competition in the stock market based on the dissemination of information on trading volumes and price dynamics through mandatory publication of information.
The exchange has become a place for wholesale trading of securities due to the fact that the latter are endowed with all the properties of an exchange commodity: they are issued on a mass scale, are distinguished by their standard, interchangeability and constant price fluctuations. Securities as exchange-traded goods are the subject of exchange transactions, which are concluded through a professional intermediary - a member of the exchange, and are properly executed and registered. The system for organizing exchange trading is focused on high-quality execution by exchange members of clients' orders for the purchase and sale of securities. The types of applications, as well as the types of contracts for concluding transactions, are strictly standardized.
Trading participants who predict higher prices buy securities. By concluding a deal to purchase them at the current (still low) price, they take into account the possibility of resell the securities at a higher price in the future. Such stock market players are called “bulls”. Those who predict a decline in their market price are actively selling securities. Having entered into an agreement to sell securities at the current price, the trader can purchase them later, when the price has already fallen. At the time the transaction expires, he will receive for the securities he provided to the buyer a higher price that existed at the time the transaction was concluded. Such players are called “bears”.
The fact of the simultaneous existence of buyers and sellers of the same securities indicates the presence of polar opposite estimates of the trend in price changes. The one whose prediction is confirmed will win, and his partner in the transaction will suffer losses. Once upon a time, this led to constant sharp and unreasonable fluctuations in market conditions and made trading in securities an extremely risky activity. Possible excess profits did not always compensate for the risks of losses. Gradually, transactions whose terms made it possible to mitigate the negative consequences of an incorrect forecast became more and more widespread. Of course, the above diagram is quite arbitrary, since securities are sold and bought not only in connection with a possible change in their price; speculators often carry out purchases and sales, seemingly contrary to the price forecast. However, it generally explains the reasons for the variety of transactions in securities.
One of the main features of the classification of transactions with securities is the mechanism for concluding a transaction. From this point of view, transactions are divided into cash transactions, which include simple cash and margin transactions, and forward transactions, which are simple, conditional and extension (see Fig. 16.1.1). Cash transactions are otherwise known as cash transactions. They are subject to execution immediately or within several days, the number of which reflects the standard deadline for completing settlements. Simple cash transactions are not accompanied by additional conditions. Margin transactions (transactions with margin), as an additional condition, imply the possibility of purchasing securities with payment of part of their cost using borrowed funds with the obligatory payment of collateral against the funds received; Another type of such transactions is the sale of borrowed securities.
Futures transactions are concluded for the delivery of securities in the future at a predetermined price. When concluding simple (firm) forward transactions, the volumes and timing of delivery of securities (as well as any other asset) correspond to the individual needs of the participants in the transaction. Futures transactions are standardized in terms of volumes and delivery times and by types of securities. For all participants in futures trading, the counterparty for each transaction is the settlement and clearing structure within the exchange, which serves as an additional guarantee of timely completion of settlements in full. An additional condition of an option transaction is the right of one of the counterparties to refuse to execute the transaction if he is not satisfied with the price dynamics of the asset being traded. This right is paid for by a premium. Futures and options transactions are classified as contingent transactions.
A condition for concluding a renewal transaction is the possibility of extending its term if the moment the price reaches the predicted level is delayed. This opportunity is realized in the form of attracting an intermediate participant in the transaction, to whom, after the expiration of the transaction, the securities are sold for a certain period with the condition of repurchase at a higher price in the hope that then they can be sold even more profitably, since the price rises to the predicted value. This is a repo transaction. It is also called a purchase and sale transaction with buyback. A DEPO transaction is the reverse of a REPO transaction.
The dynamics of stock prices that develop during the conclusion of transactions reflects the state of not only the stock market itself. Their overall level, expressed by the index, serves as an important indicator of the state of the national economy1. The stock index fixes the market value of a set of securities, which is calculated using one of the methods for calculating the average value, based on the results of the trading day. Since stock quotes are used as prices, stock indices are otherwise called stock indices. Several indices are calculated for each national market. The main indices in the most developed stock markets include:
- the Dow Jones index, it is calculated in the USA based on the stock prices of 30 leading industrial companies;
- FT-SE-100 index (FTSI-100) based on shares of 100 issuers in the UK;
- Nikkei index in Japan, calculated on shares of 225 companies;
- German stock index DAX based on 30 companies;
- Hang Seng index in Hong Kong, calculated for 33 companies. In Russia, the most well-known are the indices of the Interfax and AK&M agencies. Analysis of the dynamics of the most important indices is an element of investment analysis in the stock market.
The securities market is regulated by both the state and voluntary organizations - professional participants in the form of self-regulation. It occurs in the process of creating a regulatory framework as a system for regulating the activities of all market participants and organizing control over the participants’ compliance with established norms and rules. The system of regulatory bodies for the Russian securities market has not been fully developed. In the sphere of circulation of government securities, the regulatory function is implemented primarily by the Ministry of Finance of the Russian Federation and the Central Bank of the Russian Federation. In the corporate sector - by the same bodies and the Federal Commission for the Securities Market. The situation on the stock market is monitored by the State Committee for Antimonopoly Policy and currency control authorities.
Topic 1: Fundamental concept of the securities market
Lecture material.
Stocks and bods market is a market in which the redistribution of monetary resources is carried out between their suppliers (investors) and consumers (issuers) on the basis of the circulation of securities as goods. In turn, this determines the functions of the securities market in macroeconomics, the pricing mechanism, the composition of market participants, segmentation, operating procedures, regulatory rules, etc.
Functions of the securities market boil down to the following: a) redistribution of monetary resources for investment purposes, b) redistribution (“purchase - sale”) of financial risks, c) disclosure and redistribution of information about financial risks, profitability and liquidity affecting investment decisions, e) indication of the state of the economy and its financial sector, f) determination of securities rates (pricing of stock instruments).
Relation to other types of markets . It is very important to correctly correlate the securities market with such types of markets as the capital market, money market, financial market, etc. First of all, traditionally these markets are represented by movement monetary resources.
In terminology accepted in domestic and international practice:
Financial market = money market + capital market
On money market movement of short-term (up to 1 year) savings is carried out, on capital market - medium- and long-term savings (over 1 year).
Stocks and bods market is segment financial market (both money market and capital market), which also includes the movement of direct bank loans, deposit market, currency trading, redistribution of monetary resources through the insurance industry, circulation of pension policies, intercompany loans, etc. (cm. scheme 1 )
Concepts stock market And securities market match up.
Scheme 1
| Financial market | ||
| MONEY MARKET | CAPITAL MARKET | |
| Stocks and bods market | ||
Structure of the securities market
The main components of any securities market are:
-issuers (persons who lack financial resources and attract them through the issuance of securities). In the case of non-issue securities, these are the persons issuing securities (drawers, check drawers)
-financial intermediaries – brokerage-dealer companies, through which the redistribution of free funds from investors to issuers of securities is carried out. They act for the account and in the interests of clients, buying and selling securities for them, or for their own account, maintaining market liquidity, opening bilateral quotes or acting as investors
-investors (persons who have surplus funds and invest them in securities) – a) retail investors – population, b) corporate investors – enterprises with free cash flows, c) institutional investors – enterprises that have surplus funds due to the nature of their activities (investment funds, pension and charitable funds, insurance companies, corporate investment plans, etc.)
It is customary to distinguish two main parts in the structure of the securities market: primary securities market and secondary securities market.
Primary market securities is the market for first and re-issues of stock instruments. In the primary securities market, the initial placement of securities among investors is carried out. A necessary condition for the full functioning of the primary securities market is full disclosure of information to investors, allowing them to make an informed choice of the type of securities.
The primary securities market is the market for first and re-issues of stock instruments. In the primary securities market, the initial placement of securities among investors is carried out, and free funds are distributed among industries and areas of the national economy. The criterion for this placement in a market economy is the income generated by the securities. The primary market acts as a means of creating an effective, from the point of view of market criteria, structure of the national economy; it maintains the proportionality of the economy at the current level of profit for individual enterprises and industries.
A necessary condition for the full functioning of the primary securities market is full disclosure of information to investors, allowing them to make an informed choice of the type of securities. The release of securities on the primary market involves a number of actions:
The issuer must develop conditions for issuing securities that ensure liquidity and demand for securities. Therefore, consultation with stock market professionals is necessary;
The issuer must enlist the support of a guarantor who can, for a commission, share with him the responsibility associated with the issue;
The issuer must register the entire issue of securities with the appropriate government agency, pay taxes and publish all necessary information about the issue.
The primary securities market is the actual regulator of the market economy. It largely determines the size of savings and investments in the country, serves as a spontaneous means of maintaining proportionality in the economy, meeting the criterion of profit maximization, and thus determines the pace, scale and efficiency of the national economy. The primary market involves the placement of new issues of securities by issuers. In this case, corporations, the federal government, and municipalities can act as issuers. The importance of these issuers in the market is determined by the state of the economy in the country and the general level of its development. Chronic government budget deficits in most countries determine the predominant role of the state in the securities market.
Secondary market securities is the market on which securities previously issued and placed on the primary market are traded during their life cycle. The most important feature of the secondary securities market is liquidity, i.e. the possibility of successful and extensive purchase and sale at low distribution costs. We can talk about creating an effective secondary securities market if the latter has a large number of sellers and buyers; and continuous trading and large volume of securities sales.
The secondary market is not intended to generate new funds for issuers. The secondary market necessarily carries an element of speculation. Since the goal of our activity is income in the form of exchange rate differences, and the exchange rate value is formed under the influence of supply and demand, there are many ways to influence the price of securities in the desired direction. As a result, in the secondary market there is a constant redistribution of property, which generally has one direction - from small owners to large ones.
The secondary securities market, concentrating the supply and demand of circulating securities, forms the equilibrium rate at which sellers agree to sell and buyers agree to buy securities, which is necessary when redistributing loan capital between industries and spheres of the economy, between business entities. Resaleability is an important factor taken into account by an investor when purchasing securities on the primary market. The function of the secondary market is to balance the securities market and ensure liquidity. A liquid market is characterized by a small gap between the seller's and buyer's prices; slight price fluctuations from transaction to transaction. Moreover, the higher the number of participants in the sale and the possibility of prompt resale of securities, as well as the higher the percentage of novelty of the securities offered for sale, the higher the liquidity of the market.
In accordance with world practice, the securities market is divided into two – largely independent from each other – markets: exchange and over-the-counter. The first involves transactions concluded on the stock exchange, the second - outside it.
The organized (exchange) market provides liquidity and regulation of the securities market, price determination, and accounting for market conditions. Procedural issues related to trading on such a market are strictly regulated by law and the rules of the exchange.
Thus, the stock exchange is a scientifically, informationally and technically organized securities market, operating on the basis of the following principles:
1) checking the quality and reliability of the securities being sold, followed by their inclusion in the quotation list - listing (reverse procedure - delisting);
2) establishment, on the basis of auction trading, of a single exchange rate for identical securities of one issuer;
3) transparency of transactions carried out on the stock exchange.
The main functions of the stock exchange include the mobilization and concentration of free cash capital and savings through the organization of the sale of securities; investment by the state and other business organizations by organizing the purchase of their securities; ensuring a high level of liquidity of investments in securities.
Over-the-counter market (over-the-counter market) is a way of organizing trading on the securities market by telephone and/or through electronic systems outside the exchange and, as a rule, with the participation of a dealer. The over-the-counter market does not impose very strict requirements on sellers and buyers and is characterized by a plurality of sellers and buyers; the absence of a single exchange rate for identical securities; prices are set through negotiations between the seller and the buyer; the absence of a single physical and methodological center for the purchase and sale of securities. In addition, participants in the exchange process act within the framework of a narrow specialization, and intermediaries in the over-the-counter market combine several functions.
OTC trading is carried out by specialists: brokerage and dealer companies, often combining their functions. However, this does not mean that trading in securities in over-the-counter circulation is spontaneous. Over-the-counter turnover has its own organizational system. The over-the-counter market can be organized or unorganized.
An organized over-the-counter market presupposes the presence of firm rules and is based on computer communication, trade and service systems that unite professional intermediaries into a single computer market. An example of an organized over-the-counter market in the United States is the National Association of Securities Dealers Automated Quotations System (NASDAQ), which we mentioned above, which defines several levels of access to information and also defines requirements for listed shares (minimum shares in circulation, standards of declared capital and assets of the issuer, presence of at least two dealers, etc.)
The unorganized over-the-counter market covers all other transactions and methods of their organization. As a rule, the determination of the terms of transactions and their conclusion occur directly between market participants on the basis of direct negotiations.
In Russia, the over-the-counter market is associated primarily with the initial placement of securities. In the second half of the 90s. trading of corporate securities, primarily shares of privatized enterprises, was mainly carried out on the organized and unorganized over-the-counter market.
In turn, both the exchange market and the over-the-counter market take various forms of organization.
The simplest form of organizing stock trading is the spontaneous market. Here, sellers and buyers, communicating with each other, determine the level of supply and demand for certain securities and enter into transactions directly with each other. Concluding a transaction in a spontaneous market depends on how well chance brings sellers and buyers together, and the conditions for carrying out different trading operations can vary significantly even when they occur at the same moment. A spontaneous market is characterized by: the absence of a unified securities exchange rate, the lack of comprehensive information about the market; many traders.
Over time, spontaneous stock markets give way to other forms of organizing securities trading. One such form is simple auction markets. A simple auction is a mechanism for trading stock instruments, in which only buyers of securities are included in competitive relations. There is no direct competition between sellers. This form of securities trading is typical for securities markets that are at the initial stage of development.
Short-term government treasury bonds are distributed through simple auctions, and investment auctions organized by the property fund operate.
In addition to simple auctions, double auction trading systems in the form of call markets or continuous auctions can be used in the securities market. In such systems, not only buyers compete for the right to purchase securities, but also sellers for the right to sell them. A call is a market in which securities are sold over a specified period of time at a specific price that matches the offer.
Continuous auction - a market in which securities are sold at a price determined and constantly changing as a result of the interaction of supply and demand (typical of a stock exchange).
The traditional form of the secondary securities market is the stock exchange - an organized, regularly functioning market for securities and other financial instruments, one of the financial market regulators serving the movement of monetary capital.
The role of the stock exchange in the country's economy is determined primarily by the degree of denationalization of property, more precisely, the share of joint stock ownership in the production of the gross national product. In addition, the role of the exchange depends on the level of development of the securities market as a whole.
The stock exchange makes it possible to ensure the concentration of supply and demand for securities and their balance through exchange pricing, which truly reflects the level of efficiency of the functioning of share capital.
In addition to the above classification, the securities market can be segmented according to other criteria. By type of securities highlight:
Stock market;
Bond market;
Bills market;
Options market;
Market for deposits and savings certificates, etc.
By issuer The securities market can be divided into the market:
Private securities;
Government securities market;
By investors highlight:
Securities market for institutional investors;
Securities market for individual investors.
By territorial basis The securities market can be:
Regional;
National;
World.
Related information.
The securities market, despite its unity, can be divided into several segments, which are also called markets. They are characterized by specific conditions, trading participants, and securities traded on them.
The securities market is divided into two types:
1) primary;
2) secondary.
To put it in the most general terms, "primary market" is a term used to describe those times when securities first appear in the public arena, usually in exchange for cash.
The secondary market is a term used to describe when second and subsequent tranches of outstanding securities appear in the public arena; it is also the market in which securities that have previously entered the market are traded.
Legislatively primary securities market is defined as the relationship that develops during the issue (for investment securities) or during the conclusion of civil transactions between persons accepting obligations under other securities and the first investors, professional participants in the securities market, as well as their representatives.
Thus, the primary market is the market for the first and repeated issues of securities, where their initial placement among investors is carried out.
On the primary securities market, all types of existing securities are sold: shares and bonds of enterprises, short-term government securities, government foreign currency loan bonds, financial instruments (various certificates issued by banks, bills). Sales in the primary market are carried out through stock stores, as well as the existing system of intermediaries: brokers and commercial banks.
The most important feature of the primary market is full disclosure of information to investors, allowing them to make an informed choice of security for investment. All activities in the primary market serve to disclose information:
Preparation of the issue prospectus, its registration and control by state authorities from the standpoint of completeness of the presented data;
Publication of prospectus and subscription results, etc.
A feature of domestic practice is that the primary securities market still prevails. This trend is explained by such processes as privatization, the creation of new joint-stock companies, financing of public debt through the issuance of securities, re-registration of state foreign currency debt through the stock market, etc.
The primary market includes:
Stock market;
Bond market.
There are two forms of the primary securities market:
Private placement;
Public offer.
Private placement characterized by the sale (exchange) of securities to a limited number of previously known investors without a public offer and sale.
Public offer - this is the placement of securities during their primary issue through public announcement and sale to an unlimited number of investors.
The balance between public offerings and private placements is constantly changing and depends on the type of financing that businesses in a particular economy choose, the structural changes that the government makes, and other factors.
It is very important to note that the primary market is the market for new issues and the method that most borrowers use to raise new resources. For this market to operate successfully, it is vital that savers and investors have confidence that they are putting their money into this market for good reason. A weak primary market will undermine liquidity in the secondary market. Therefore, there is a need to provide accurate information so that investors can make comparisons with other forms of investment and decide whether to invest in each new issue. In other words, a good primary market must be selective in order to judge value.
On the other hand, the issuer needs a good primary market in order to ensure that the offer for the purchase of securities reaches the largest possible audience of potential investors, which should allow it to obtain the most favorable price for the securities offered.
There are several methods for listing securities on an organized primary market. These include:
1) direct invitation by the company. The Company invites the public to subscribe for its securities at a fixed price through the publication of a prospectus; all necessary formalities and underwriting (guarantee of issue) are carried out by the issuing company (usually an investment bank/securities company);
2) offer for sale. This method can be used in a situation where one of the original or existing shareholders wants to offer their shares to the public. The company may organize a syndicate of banks and brokerage firms that purchase the entire issue for distribution to their clients. Old shareholders may have the first right to purchase shares offered;
3) tender offer. The investor is invited to participate in a competition to purchase shares at the minimum price. After the filing deadline, the company's financial advisors calculate the "exercise price" that will allow the issuing company to raise the maximum amount of funding required; the exercise price may be lower if the company is targeting a particularly wide range of shareholders (a large number of shareholders holding a small number of shares each) . As a result of competitive bids, a company may acquire much more equity than if it had allowed speculative investors to profit from the first-day bidding premium, which can happen if the issue was underpriced. If someone acts as an underwriter for an issue, then it (the issue) will be sold at the minimum tender price;
4) private placement. A method in which an investment bank subscribes to shares on offer after identifying a small group of clients to whom it will then resell the shares. Or the investment bank may be used as an agent and be responsible for finding final investors for the issuing company. This method is often cheaper for the company than a public offering, since even though the price may be slightly lower for clients (in order to make the investment more attractive and compensate for its potential illiquidity), it will still be less than the cost of underwriting, which in this case is not necessary.
However, it should be noted that securities regulators generally insist on protecting the interests of investors, which is determined by the requirement for a minimum number of shareholders and a certain percentage of shares that must be sold to the public (usually 25%). This last requirement is typically met through the use of a second investment bank or brokerage firm that distributes the shares. Using a method such as hosting can not only be a cheaper method for small releases, but also the fastest. There is also a higher probability of a successful issue, especially when there are already companies queuing up for subscription or sale, which can absorb all available funds;
5) reverse takeover through conditional issue of securities. A method by which a private company can achieve listing in a situation where a public company offers its shares in exchange for the opportunity to purchase the assets of the private company; if a controlling stake is transferred to a private company, then it can in fact be considered to have privileges in terms of raising funds, since it has received a listing;
6) admission of shares to quotation on the stock exchange. With this method there is no need to issue new securities, but the company's share capital must be sufficiently paid up in order to gain access to listing or quotation on the stock exchange. It should be understood that with this form of offer the company does not raise any new funds. A company must provide an admission document, but generally is not required to provide a prospectus unless the company plans to issue additional shares or raise funds following admission.
While one of the primary challenges facing the securities market is to provide an efficient mechanism for raising capital for economic growth, it is equally important to provide opportunities to earn a return on the risk taken by those who provide the capital.
Under secondary stock market refers to the relationships that arise during the circulation of securities previously issued on the primary market. The basis of the secondary market is made up of transactions formalizing the redistribution of spheres of influence of investments of foreign investors, as well as certain speculative transactions.
The most important feature of the secondary market is its liquidity, i.e. the possibility of successful and extensive trading, the ability to absorb significant volumes of securities in a short time, with small fluctuations in rates and at low sales costs.
The secondary securities market is divided into an organized (exchange) market and an unorganized (over-the-counter or “street”) market.
Classification of the securities market by trading organization includes:
Exchange market;
Over-the-counter (retail) market;
Electronic market.
According to the types of securities traded, in particular, on the Russian market today the following are distinguished:
1) government securities market;
2) the stock market, in which, in turn, there are three main segments (sometimes called echelons): “blue chips” (the most liquid shares of the largest Russian companies), shares of the “second echelon”, which are approaching them, but have not yet achieved the appropriate liquidity , and shares of enterprises that practically do not appear on the market;
3) the local securities market (mostly municipal bonds or bonds of a federal subject);
4) markets for bills of exchange from different issuers;
5) derivatives markets (mainly futures).
The most developed is the exchange market. It is characterized by high turnover, which makes it possible to create a highly efficient infrastructure that can take on most of the risks and significantly speed up transactions and reduce unit overhead costs. The price for this is strict standardization of the transaction, strict restrictions on the activities of market participants, and increased obligations regarding maintaining liquidity and reliability.
Organized market (exchange) is an auction type market. It is characterized by public, transparent bidding, open competition between buyer and seller, with a mechanism for drawing up bids and offers for sale, which can serve as the basis for concluding transactions. This is the circulation of securities on the basis of firm, stable rules between licensed professional intermediaries - market participants on behalf of other market participants.
The stock market is the trading of securities on the stock exchange. This is always an organized securities market, trading on it is carried out strictly according to the rules of the exchange and only between exchange intermediaries, who are selected among all other participants.
An organized or exchange market is exhausted by the concept of a stock exchange as a special, institutionally organized market on which securities of the highest quality are traded and transactions on which are carried out by professional participants in the securities market.
Unorganized market (free, retail, over-the-counter) This is the circulation of securities without observing rules that are uniform for all market participants. Trade takes place spontaneously, in contact between the seller and the buyer. Information about completed transactions is not recorded.
In cases where transactions are small, it is still unprofitable to execute them through large specialized trading systems. This is due to purely economic parameters. In this case, the buyer goes directly to the dealer and buys the paper directly from him. As an example, we can point to many of our banks that sell savings loan bonds to the public. This is a special segment of the securities market, differing from the exchange market in many respects. It is called the retail (over-the-counter) market (OTS - market from the English Over the Counter - trading from behind the counter).
Let us note that sometimes on the over-the-counter market, on the contrary, very large transactions are made, for example, the purchase and sale of a controlling stake. In general, this is a market for individual, non-standardized transactions.
The over-the-counter market is the trading of securities bypassing the stock exchange, the sphere of circulation of securities that are not admitted to quotation on stock exchanges. New issues of securities are also placed on the over-the-counter market. The over-the-counter market is organized by dealers, who may or may not be members of a stock exchange.
An organized market requires that shares and bonds offered for sale undergo special registration and satisfy a set of additional conditions that provide maximum business information about the business for whose financial support these particular securities are issued. Their purchase and sale is carried out through an application on the stock exchange, and all related procedural issues are strictly regulated by the rules of this exchange and state legislation.
The free market in this sense does not impose strict requirements on sellers and buyers. There are legislative norms that provide complete control over business activities. To the same extent as in the organized market, companies issuing securities bear administrative and criminal liability for deceiving or misleading the buyer. Intermediaries act in accordance with official rules and regulations for customer service, and the purchase and sale of securities itself is subject to legal registration and is of an absolutely legal nature.
An organized securities market – a system of stock exchanges – has the following essential features:
1) transactions are made frequently;
2) there is almost never a large gap between the demand price and the supply price;
3) transactions are carried out in a short time; as a rule, there are no significant price fluctuations.
All this is ensured by a set of targeted organizational actions.
It is necessary that the circle of holders of securities of each company be as wide as possible. In addition, short-term buying and selling transactions should be encouraged in every possible way. Another important factor is the presence of a large number of large companies, but medium and small companies must be represented in the organized market.
It should also be noted that the organized market has the ability to self-accelerate and self-slow down. An active market creates the impression of easy liquidity of securities, which stimulates their purchase. In addition, it attracts with a variety of opportunities, which increases the number of transactions on a credit basis.
A free securities market can be characterized as a market that does not have a specific location, transactions in which are carried out outside the exchange. Another name - telephone market - indicates the main method of carrying out transactions.
The free market represents a second, no less important area for the distribution and circulation of investment resources. In some types of securities it is inferior, but in others it is significantly superior to the exchange system. This applies primarily to government and municipal bonds, shares of many banks, insurance and investment companies. Along with them, a huge number of issues usually circulate on the free market, which, for various reasons, cannot be traded on the stock exchange.
These include the following:
Issues aimed at a limited circle of potential buyers, requiring special distribution methods;
Small releases;
Papers with a very high price;
Securities in which supply matches demand, i.e. the buyer is widely known and it is easy to distribute the papers;
Securities issued on the security of real estate;
Papers closely related to regional economic complexes or social and production infrastructure;
Paperless form of issue when the issuer does not want to advertise himself.
Also on the free market, transactions are made with shares of large companies circulating in the exchange system.
The main participants in the free market are broker-dealer offices, which are characterized by a relatively narrow specialization in types of securities and transactions, as well as banks and investment companies. In turn, banks are divided into investment banks, whose main activity is the subscription to the distribution of shares and bonds of various corporations, and commercial banks, which are mainly engaged in the sale of federal and local bonds on the free market. A significant number of transactions in the free market are carried out not on a commission basis, but on a net (or dealer) basis. This means that services are provided to clients for the sake of income from the difference in prices - from the subsequent resale of securities by the dealer at a higher price or from their purchase for clients at a lower price.
The free market is always not only under state control, but also under the control of the association that unites these market entities. In all developed capitalist countries, participants in the free market, like participants in stock exchanges, are subject not only to legal, but also to professional and qualification control.
Commission fees in a free market are not regulated by general rules. In fact, commissions range from minimum values on the organized market to 5% (and sometimes higher) of the transaction amount on the free market.
The secondary market consists of two parts. One of these parts can be described as a market for "used" securities. The second part consists of additional issues of securities already outstanding, regardless of whether the issue results in raising new funds or not.
The following are the methods used to obtain listing for new issues of existing securities that are already listed:
1) listing through execution or conversion. New securities or new issues of already listed securities may be listed through the exercise of an option on new shares (employee or executive bonus schemes) or through the conversion of a listed security into another form of security, or through the subscription of warrants for conversion into another form valuable papers;
2) release of rights. The company wants to raise additional funds through the issue and listing of a new issue of ordinary shares, subject to preferential terms, at a fixed price (usually slightly below the current market price). If one of the shareholders does not want to purchase these rights, they can be sold outside the company, and the premium, i.e. the amount in excess of the issue price, will be credited to the account of the refusing shareholder;
3) open offer. The offer is submitted to shareholders, inviting them to subscribe to purchase additional shares at a fixed price, but (unlike a rights issue) the number of shares purchased will not necessarily depend on the number of shares the shareholder already owns. This process results in a higher price because shareholders willing to pay more will receive more shares. From a regulatory perspective, there is a trade-off between the principle of preemption and the fact that the company raises additional funds;
4) bonus or capitalization issues. Shares are created by capitalizing reserves and distributed free of charge to existing shareholders in proportion to the number of shares they already own.
Securities can be traded on traditional and computerized (electronic) markets.
In the electronic market, trading is carried out through computer networks that unite the relevant stock intermediaries into a single computer market, which is characterized by:
Lack of a physical place where sellers and buyers meet;
Full automation of the trading process to enter your orders for the purchase and sale of securities into the trading system.
Electronic securities markets arose later than stock exchanges - with the advent of modern communications and computer science. Currently, their turnover is comparable to that of the stock exchange. There were several systems of this kind in Russia, but today only the Russian trading system actually works.
Trading in it is carried out by professional brokers and dealers, united in the associations PAUFOR (Professional Association of Russian Stock Market Participants) and NAUFOR (National Association of Russian Stock Market Participants). In these trading systems, blue chip shares (RTS) and second-tier shares (RTS-2) are traded. The difference from exchange trading lies mainly in the mechanism for executing transactions: having established quotes for the security of interest in the electronic system, the market taker trader contacts directly the market maker who issued the quote and enters into a standardized transaction.
Derivatives markets. It is worth special mentioning the role of the organizer of trading in derivatives markets. Since a futures contract represents a mutual obligation to buy (respectively sell) the underlying security at a certain time and at a pre-agreed price, the role of the trade organizer is primarily to ensure the fulfillment of this obligation. This is achieved by making a special collateral - margin - by both parties to the transaction. In the event that one party fails to fulfill its obligations, the margin is used to compensate the other party for the loss.
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Structure of the modern securities market
The structure of the classic securities market - the market of developed countries - can be represented as the following diagram:
Thus, the modern securities market consists of three main divisions: the primary over-the-counter market; stock Exchange; organized secondary over-the-counter market (“street market”). The primary and "street" markets are over-the-counter. The stock exchange and the street market, with rare exceptions, perform the functions of secondary markets. On the stock exchanges of individual developed countries, in addition to the main one, there are alternative markets. They have less stringent requirements for the quality of securities and are designed to facilitate access for individual issuers to the stock exchange. The turnover volume of these markets is significantly lower than the main one.
It represents the area of the first sale and purchase of securities of new issues - hence its name. In developed countries, this is primarily a corporate bond market. The turnover of other types of securities here is significantly less. A feature of the primary over-the-counter market is the absence of a permanent place and time for trading. Its main purpose is to finance the reproduction process.
It is a very specific place and time for trading. Here, securities that have passed through the primary market are mainly resold. This is typical for many countries, in particular the USA and Japan. In some Western European countries (France, for example), securities can be supplied directly from the issuer for initial sale on the stock exchange. In this case, it performs the functions of the primary market. Stock exchange turnover in developed countries is dominated by shares, although purchases and sales of other types of securities also occur. The role of the stock exchange is to redistribute capital and, therefore, it is an essential element of the modern economic mechanism.
"Street" (organized secondary over-the-counter) market represents the sphere of predominantly direct (without an intermediary) transactions for the purchase and sale of securities that have passed through the primary market. They are carried out between institutional entities, usually financial institutions. Trading occurs using automated trading systems through telecommunication networks, through electronic terminals located in the offices of the entities. It is carried out in large lots (packages) of securities, i.e. on a wholesale basis.
All divisions of the securities market are highly organized and completely manageable. They are managed by both the state and self-regulatory organizations of professional participants in the securities market, for example NASD in the USA or NAUFOR in the Russian Federation. The National Association of Securities Dealers (NASDAQ) Automated Quotation System was the world's first automated electronic over-the-counter secondary market for securities.
Structure of the Russian securities market, as well as in other countries, is characterized by the presence of primary and secondary markets, as well as markets by type of stock instruments and transactions. The functions of the primary and secondary markets in the Russian Federation are not as clearly separated as in the “West”. Appearance primary over-the-counter market associated with the release into circulation in 1992 of the State Privatization Check or Voucher. In the middle of the last decade of the last century, the turnover of the primary over-the-counter market consisted mainly of shares. They were placed by open or closed subscription, through stock stores, post offices and other channels.
Currently, the initial over-the-counter offering of shares and corporate bonds is carried out either by the issuer independently or with the help of an intermediary company (agent), which is a professional participant in the securities market. The first method in the practice of our country is much more widely developed than the second. On the one hand, this is due to the desire of many issuers to save money by eliminating the services of intermediaries. On the other hand, many professional intermediaries do not yet have sufficient financial capabilities or experience in organizing an over-the-counter initial public offering of securities.
The initial over-the-counter placement of stock instruments, according to the legislation of the country, can also be carried out through the formation of an issuing syndicate (consortium). Syndicate participants include in their structure a manager firm, an underwriter and sales agents. However, this practice is currently poorly developed on the Russian market.
In addition, the country has a fairly well organized and implemented initial stock exchange valuable papers. This mainly applies to government bonds placed at auctions through the mediation of the MICEX Stock Exchange.
The secondary securities market of the Russian Federation is also divided into over-the-counter and exchange.
Main secondary over-the-counter market Until recently, the country was dominated by the non-profit partnership Russian Trading System (RTS), created in 1995, which has had the status of a stock exchange since 2001. There are other secondary over-the-counter markets operating in the country.
Secondary exchange turnover carried out on stock exchanges and, in rare cases, on other exchanges. Today there are 10 stock exchanges in the Russian Federation, including the RTS Stock Exchange and the MICEX Stock Exchange. Back in 1995 there were more than 60 of them.
Derivatives markets (derivatives markets) appeared almost simultaneously (since 1990) with the emergence of real securities markets in the Russian Federation. The first were the currency futures markets. Then futures for GKOs, shares and stock indices began to be used. The main centers for trading derivatives instruments until 1998 were: the Moscow Central Stock Exchange (MCSE), MICEX and the Russian Exchange (RB). As a result of the crisis, the main segment of this market - GKO futures - ceased to exist, and the Republic of Belarus suffered bankruptcy.
Created: October 30, 2011 Views: 24153Introduction
2. Structure of the securities market in Russia
Conclusion
List of used literature
Introduction
In developed securities markets, it is customary to try to predict development and try to influence it, striving at the macroeconomic level, in industries and companies to create strategies that would ensure the competitiveness of the market, its survival and development. In the early 70s, serious problems arose in the US stock market associated with the rapid growth of volumes and fragmentation of the market, a decrease in its transparency, and high transaction costs. The US Securities and Exchange Commission proposed in its report “Statement on the Future Structure of the Securities Markets” (1972), dedicated to the future structure of securities markets, to make the necessary changes - the creation of a National Market System. This system was created. In the 90s, rapid technological changes and the desire to maintain the primacy of the US stock market led to the appearance of a new report by the Securities and Exchange Commission, the purpose of which was to assess market development trends until 2000, as well as to determine what government policy should be in help to the market. As a result, the entire Commission's activities in the 90s were filled with initiatives that supported the open and innovative nature of the US stock market. Crises of 1987 and 1997 led to a prompt investigation into the causes and immediate attempts by the state and the professional community to prevent new falls in the securities market.
The Russian stock and government securities markets became the detonator of the financial crisis of 1997–1998. Unfortunately, the crisis in Russia did not lead to effective attempts by the state and most of the professional community to understand its lessons, evaluate the fundamental causes, and create policies that would ensure the positive development of the financial sector, especially the securities market.
The purpose of the test is to study the structure and regulation of the Russian securities market.
Objectives of the test: to consider the structure and current state of the securities market in the Russian Federation.
1. General characteristics of the securities market
The formation of fictitious capital is associated with the emergence of loan capital. Fictitious capital arises as a consequence of the acquisition of securities that give the right to receive a certain income (interest on capital). The initial form of fictitious capital during the period of pre-monopoly capitalism and “free competition” were government bonds.
The transformation of free competition capitalism (laess faire) into monopoly capitalism, with the formation and growth of joint stock companies, contributed to the emergence of a new type of securities - shares. As capitalism developed, joint stock companies began to turn into complex monopolistic associations (concerns, trusts, cartels, consortia). Their development in conditions of intense competition and the development of the scientific and technological revolution led to the attraction of not only share capital, but also bond capital. This led to the issuance and placement by private companies and corporations, in addition to shares, of bonds, that is, the implementation of bond loans. The structure of fictitious capital consists of three main elements: shares, private sector bonds and government bonds. With the development of capitalism and its transformation into state-monopoly capitalism, the private sector and the state increasingly attract capital by issuing shares and bonds, thus increasing fictitious capital, which significantly exceeds the actual, real capital necessary for capitalist reproduction. In the conditions of speculative transactions, fictitious capital, representing securities, in a modern market economy acquires independent dynamics that do not depend on real capital.
At the same time, fictitious capital reflects the objective processes of fragmentation, redistribution, and unification of existing real productive capital. If in the monopoly stage of capitalism fictitious capital was concentrated on the stock exchange, then in the conditions of state-monopoly capitalism a significant share of it was concentrated in banks and other financial institutions. In the structure of fictitious capital itself, the share of government bonds has sharply increased, which is due, firstly, to the crisis of public finances and, secondly, to increased government intervention in the economy. In Western European countries, Japan and a number of developing countries, government loans to a certain extent also reflect the development of state ownership. The swelling of fictitious capital due to the issuance of government loans to cover budget deficits serves as a source of inflationary processes, depreciation of money, and therefore currency shocks.
The independent movement of fictitious capital in the market leads to a sharp separation of the market value from the balance sheet, increasing the gap between the real value of material assets and their relatively fixed value represented in securities.
A further increase in the volume of fictitious capital strengthens the fetishization of economic relations in the modern market economy of capitalism. The sources of income for various elements of fictitious capital are completely disguised. In conditions of frequently changing conditions, fictitious capital is one of the most unstable indicators of a market economy. Fictitious capital is especially sensitive to fluctuations and changes in the loan capital market, the movement and accumulation of money capital, as well as shocks in the credit and financial sphere. A particularly negative impact on the downward trends of fictitious capital is caused by an increase in bank rates and speculative transactions with securities and currency. Discrepancies and imbalances in the dynamics of fictitious and real productive capital are accompanied by depreciation of fictitious capital, leading to a fall in securities prices and stock exchange crashes (financial shocks of 1970, 1987 and 1997, as well as 2000-2001).
The securities market reflects all the fluctuations of fictitious capital, a huge number of speculative transactions with securities, especially with derivatives.
Currently, in leading Western countries with developed market economies, three securities markets exist, operate and develop: over-the-counter (primary); secondary (stock exchange); street market, or market “over the counter” (cover the connter). All of them represent a very necessary and important element of market economics, especially its credit and financial superstructure.
These markets that make up the structure of the securities market, opposing each other, complement each other. This contradiction is due to the fact that, fulfilling the general function of trading and circulating securities and mobilizing capital, they are guided by specific methods for selecting and selling securities. The over-the-counter primary market covers only new issues of securities and mainly the placement of bonds of commercial and industrial corporations. The latter, through investment and commercial banks and banking houses, come into direct contact with financial institutions, which purchase these securities. On the contrary, old issues of securities and mainly shares of commercial and industrial corporations are quoted on the stock exchange. If the reproduction process is mainly financed through over-the-counter trading, then on the stock exchange, through the purchase of shares, control over corporations and firms is seized, control is formed and redistributed between various financial groups. A certain part of the financing is also carried out through the exchange (mainly through small and medium-sized investors).
The peculiarity of the exchange is that the individual investor dominates here, although there is a process of monopolization of its “iteration” on the part of credit and financial institutions. On the over-the-counter market there is a collective investor represented by large financial institutions with long-term cash reserves (insurance companies, investment companies, private pension funds, commercial banks). Throughout the entire post-war period, both in practical and theoretical terms, the question of the ratio of over-the-counter and exchange turnover.
A special place in the structure of the securities market is occupied by the street market, which arose in the 60-70s. last century in a number of Western countries (USA, Japan) and was originally designed for shares of newly created small companies to which the primary exchange market was inaccessible.
In the 60s XX century There was a tendency towards an increase in the importance of over-the-counter primary turnover, since the broad process of updating fixed capital created a huge need for the issuance of new issues of securities. However, the exchange was unable to fully restore its mechanism, which was destroyed during the Second World War.
The processes of mergers and acquisitions that began, as well as the general scale of centralization of capital in developed countries, due to the needs of production, the scientific and technological revolution and simply the struggle of various monopolistic groups that occurred after the so-called recovery period, significantly revived the activity of the stock exchange. Medium and small individual investors began to be widely involved in its operations. At the same time, the impression that the role of the exchange was declining was due to the active penetration of large financial institutions into its operations. However, financial and industrial groups used banks and other financial institutions controlled by them to expand their operations on the stock exchange in order to reorganize the production structure of the economy.
Over-the-counter trading, like the stock exchange, has its own methods of trading securities, mainly bonds. In the 90s New methods of placing corporate securities, the so-called underwriting, have become widespread - direct placement, public offering, competitive bidding - allowing for closer ties between the issuer of securities and their buyer (investor). The organizing intermediaries here are investment and commercial banks, banking houses, and brokerage firms. New methods of over-the-counter trading have found widespread use in the USA, Canada, Western Europe and Japan.
Paper The most important role in the functioning of the securities market is played by its infrastructure, which facilitates the conclusion of transactions and serves as information support for issuers, investors and professional intermediaries. The infrastructure of the securities market includes: 1) trade organizers - exchanges and trading systems that organize regular trading in securities; 2) systems...
By solving all the above issues, the company develops its investment policy, which it then strictly follows, and in accordance with the specifics of which the company issues securities if its management has considered it appropriate to seek financial resources on the stock market. But in the life of any company, sooner or later there comes a time when its further development due to negative...
Compliance with the relevant regulations in force in the country. 2. Issuance of licenses by government authorities for the right to engage in any type of activity in the securities market. In Russia, licensing is carried out by the Federal Commission for the Securities Market or bodies authorized by it on the basis of a general license. In addition to licensing, state control over the activities of professional participants...
Series, within which all securities are exactly the same in their characteristics, or non-equity (individual)); - form of ownership and type of issuer, i.e. the one who issues a security to the market (state, corporations, individuals); - level of risk (high, low, etc.); - availability of income (whether some income is paid on the security or not); - form...
