The securities market (in other words, the stock market) is an organized market, part of the financial market (in addition to bank loans) in which the purchase and sale of securities takes place. The main participants in the stock market are companies (issuers) issuing securities and individuals (investors) buying them.

1. Financial instruments of the stock market

Most companies begin their existence using their own funds or money from the founders. At the initial stage of development, the company has enough of its own funds, however, for further development, the company needs to expand production, for example, buy new equipment, launch a new service, or create a PR company. The company does not have enough income, so at the initial stage, the company can contact the bank and take out a loan. This is one of the simplest, but at the same time, expensive ways of borrowing for a company. Since the bank gives fairly limited amounts of money and at high interest rates from 20 to 25% per annum. This is primarily due to the fact that the bank evaluates only the tangible assets of the company (office, machine or computer); banks, as a rule, do not evaluate intangible assets.

In addition to bank loans at the initial level, a company can resort to private borrowing of funds using an instrument such as a promissory note. A note to a company would be the same borrowing as a loan from a bank, except that the note can be sold to almost anyone. That is, by issuing a bill, a company can receive money from a private investor at a lower interest rate than on a bank loan. This percentage can range from 14 to 24%.

Of course, both credit and bill debts are not entirely profitable for the company for the following reasons:

• the volume of borrowed funds is very limited, approximately 100 million rubles;
• high interest rates;
• When valuing a company, lenders do not value intangible assets.

Advantages of credit and row borrowing:

• to obtain bank loans and place its bills, the company can be organized in the form of ownership of a limited liability company (LLC);
• the company may not have a credit history.

By working with bank and bill of exchange debts, the company begins to acquire a positive credit history, which can allow it to move on to cheaper types of loans and receiving money. As soon as a company has a positive credit history and the financial community begins to “trust” the company, the organization can begin bond issues by issuing bonds on the market. In this case, the bond, although it is a debt instrument, like a bill of exchange, however, it has a number of key and distinctive points:

• a bond is an emissive paper (when issued, a bond must undergo mandatory registration with the Federal Financial Markets Service), but a bill of exchange does not;
• bonds are traded on the stock market, but bills are not.

Due to the fact that the bond, when issued, undergoes strict control by the FFMS (Federal Service for Financial Markets), it has the opportunity to enter the organized market, i.e. to the stock exchange. These securities provide high guarantees of reliability for potential investors. Due to the fact that the security will be traded on the stock exchange, the company has the opportunity to attract large financial resources from a large number of investors. She could not afford this by working with bills. If a company already has a credit history of bills and loans, it can issue its bonds at relatively low rates of return for investors. A decrease in bond yields is based on the fact that the investor has a certain confidence in the return of funds after the sale of bonds of a given company due to the high level of reliability of the organization.

The main indicator of work in the credit (debt) market is the annual profitability, be it a bank loan, a bill or a bond, which, in turn, directly depends on the reliability of the company. For example, a company issuing a bond has a yield of about 6-7% per year. Will an investor buy it if he can put his money in a bank without risk at a higher interest rate and with a higher return? No, because a potential investor wants to earn more than in a bank, and the company will be forced to increase its yield percentage to approximately 11-12% per annum in order to interest the investor and buy its bonds. If the company is well known and reliable. and has an impeccable credit history, then the percentage of yield on its bonds can be approximately equal to the yield in the bank. If the company is little known and does not have an extensive credit history, then the company, in search of investors, will have to increase the rates of return and make them much higher than at the bank.

Figure 1. Selecting a source of borrowing funds for the company.

In addition to debt instruments, to attract financial resources, a company can also use equity instruments, that is, issue (in other words, sell) its shares. By selling its shares, the company, as in the case of selling bonds, raises funds. But a bond is a debt that must be repaid (returned), and a share is part of a company that gives the right to manage the company and the right to receive part of its income. The downside of being able to manage a company's activities by purchasing its shares is that we do not receive guaranteed income from the sale of shares, unlike the sale of bonds. The positive side of issuing shares is that the company receives cash that does not need to be returned (selling shares is not a debt). The negative side is that by selling shares, the company's owners lose part of their control over the organization's activities. Because the investor who bought shares, first of all, has the right to manage the company in accordance with his share of shares.

2. Types of stock market

2.1. Primary market

Having decided to issue shares, the company, in most cases, turns to a professional participant - the underwriter, who takes upon himself all issues related to the placement (sale) of shares:

1. Preparation of financial statements.
2. Preparation of high-quality corporate governance.
3. Development of the transaction structure.
4. Valuation of the company.
5. Placing company shares.

An underwriter is an intermediary between the company (issuer of securities) and a potential investor.

Figure 2. Structure of interaction between the issuing company and the investor through the underwriter.

The market in which initial public offerings of shares occur is usually called the primary market. The peculiarity of this market is that only on it the company (issuer) receives money for its shares; on another (secondary market) the company will no longer receive money.

2.2. Secondary market

A secondary market is a market in which a stock or other security is resold by market participants. The secondary market can be either exchange-traded or over-the-counter. On the exchange secondary market, transactions for the purchase and sale of securities take place in specially equipped places - exchanges. In the over-the-counter market, purchase and sale is carried out either from hand to hand, bypassing all intermediaries, or through a broker company. On the exchange, due to the large number of participants, the price is considered fair (market); on the over-the-counter market, the price is determined only by mutual agreement directly between the buyer and seller. It is important to note that once a share has entered the secondary market, the company that issued it no longer receives financial resources, regardless of the rise or fall in its market value.

Figure 3.1. An example of changes in company shares.

When a company has shares and they are traded on an exchange, the company has real value. The value of all the company's shares constitutes its real value. This means that at a price per share of 50 rubles, the entire company is worth 5,000 rubles. This figure is obtained by multiplying 100 shares (the number of all shares in the company) by the exchange price of one share of 50 rubles. Now, having such a value, the company can quite easily attract bond and bill loans for significantly larger sums of money, namely 5,000 rubles, when a year ago it could have only 1,000 rubles.

Let's assume that after another year the price of the company's shares on the stock exchange has risen to 100 rubles.

Figure 3.2. An example of changes in company shares after a year of operation.

The company, in this case, can begin the procedure for additional issue of securities (sell another 5 shares). The company again turns to the underwriter and offers him 5 shares at a price of 95 rubles per share. As a rule, the price is set slightly below the exchange price to allow the underwriter to earn a little money, and there is a chance to immediately sell the entire block of shares. As a result of such a transaction (additional placement of shares), the company acquired 475 rubles, selling only 5 shares! If the company, during the initial offering, immediately sold 10 shares at a price of 10 rubles, then it would receive only 100 rubles. Many Western and domestic companies work this way. The most striking example was the procedure for additional placement of shares of Sberbank in 2007. At the current exchange price of 91,300 rubles per share, the share price for an additional placement was 89,000 rubles (see Figure 3.3).

Figure 3.3. Sberbank share price change chart.

4. Bond

A bond is a debt security that reflects a borrowing relationship between an investor and an issuer. Investors who purchase bonds are creditors. Issuers are enterprises, banks, and government agencies that issue bonds. They are borrowers. Currently, bonds as a financial instrument are very widespread. According to experts, the global bond market is worth more than 36 trillion. US dollars. And it surpasses the stock market in volume. Three countries (USA, Japan, Germany) account for more than 70% of the global bond market. The market for debt financial instruments is developing at a rapid pace. Over the past four years it has increased by more than 30%.

Most investment banks and securities firms are active in the bond market. And this is not surprising, since more than 90% of the value of securities around the world are bonds. Bonds are securities-based lending agreements for which there is no single lender, but rather a number of lenders lending their funds to a single borrower. A special feature of most bonds is that they offer a fixed interest rate coupon, which provides a known annual rate of return. Because loan agreements have a specified term, most bonds will be redeemable or term, meaning there will be a maturity date (to repay the principal amount).

4.1. Corporate bond

The main question to ask when purchasing corporate bonds is what purpose does the company need the funds for? To make a more informed decision on purchasing corporate bonds, it is recommended to get answers to the following questions:

• Will these funds generate enough income to pay interest and repay the principal when due on the repayment schedule?
• What assets will be provided as collateral for the loan?
• Does the borrower have the right to use these assets as collateral (i.e. are they collateral for some other loan)?
• How has the company performed over the last three financial years?
• What is the ratio between current debt and equity before and after the loan in question?
• By how much could a company's annual profit be reduced for the company to be able to continue servicing its debt?
• How much loss could the company sustain and still continue to service the principal on the proposed loan?
• Is the system for protecting non-shareholders, i.e. creditors, sufficiently effective?

The main buyers of bonds are:

• banks;
• pension funds;
• insurance companies;
• Mutual funds.

Like many other securities, a bond can generate income in two ways:

• in the form of an interest rate (coupon) on the loan, which in most cases is a fixed annual amount that is paid either semi-annually or once at the end of the year;
• as the difference between the purchase price of the bond and the price at which the investor sells the bond (which may be the maturity amount of the dated bond) or a discount.

Issuers issue a variety of types and types of bonds, each of which has specific properties. Therefore, an investor must know the properties of each type of bond well enough to make smart decisions when purchasing specific bonds. According to the method of securing bonds with specific property of the company, bonds are divided into mortgage and non-mortgage.

4.2. Secured Bond

Secured (mortgage) bonds are issued by an enterprise on the security of specific property available at this enterprise (buildings, machinery, equipment, etc.).

There are several types of covered bonds. Mortgage bonds are bonds issued against land or real estate. These bonds are the most reliable because they do not lose value over time. Therefore, by mortgaging real estate, a company can attract financial resources in an amount close to the value of the collateral.

For bonds with variable (floating) collateral, machinery, equipment, and materials act as collateral. The term "variable" (floating) lien emphasizes that the value of a property is subject to greater fluctuations than land or real estate. Security bonds are backed by stocks, bonds and other securities owned by the issuer. The value of the collateral is determined by the market price of these securities. Depending on the quality of the pledged securities, the amount for which bonds can be issued is determined.

Because this instrument is a "superior" debt instrument, it requires the company to use each year's profits (or its capital) to pay off this type of bond before other creditors' claims are satisfied.

4.3. Unsecured bond

Unsecured (mortgage-free) bonds are direct debt obligations of a company that are not secured by any collateral.
Claims of holders of unsecured bonds are satisfied in accordance with the general procedure, along with the claims of other creditors. The actual collateral for such bonds is the general solvency of the company. As a rule, large and well-known companies with a high rating and a good credit history resort to issuing unsecured bonds. The name of these companies already serves as a money return guarantee.

4.4. Convertible secured or unsecured bond

Convertible unsecured bonds are similar to the above and the only difference is that these bonds can be converted at some point in the future into equity instruments.

The most famous (if not the only) example of issuing corporate convertible bonds is the convertible bonds of JSC Oil Company LUKoil.

The goals of the issue were to attract investment for the technical reconstruction of the JSC's subsidiaries and repay their debt to the federal budget.

From the issuing company's point of view, conversion can be seen as an advantage since it no longer has to worry about repaying the loan. However, since conversion only occurs when the yield on the equity instruments is equal to or greater than the yield on the bonds, this will mean that the company will have to pay dividends on these new shares, which will be higher than the current interest rate on the bonds.

4.5. Coupon bond

Coupon bonds can be issued with a fixed interest rate, the income on which is paid continuously in an unchanged amount throughout the entire circulation period of the bond.

Establishing a fixed interest rate is possible in a stable economy, when fluctuations in prices and interest rates are very small. In conditions of high and sharply changing interest rates, establishing a fixed nominal yield is fraught with high risk for the issuer. When interest rates fall, the issuer must pay investors income at the rate fixed when the bonds were issued.

Therefore, to avoid interest rate risk, issuers resort to issuing floating rate bonds. This type of bond became widespread in the United States in the early 80s, when interest rates were quite high and tended to change. Under these conditions, companies preferred to issue bonds with a floating interest rate tied to some indicator reflecting the real situation in the financial market. Typically in the United States, floating rate obligations are tied to the yield on three-month Treasury bills. When issuing such bonds, the interest rate is set for the first three months, and then every three months the rate is adjusted depending on the yield on Treasury bills. The real interest rate on bonds of a particular company consists of two components:

• interest rates on Treasury bills;
• additional risk premium.

4.6. Income bond

A special type are income bonds. The company is obligated to pay the owners interest income on these bonds only if it makes a profit. If there is no profit, then no income is paid. Income bonds can be simple or cumulative. For simple bonds, the company is not obliged to repay unpaid income for previous years in subsequent periods, even if there is a sufficiently large profit. For cumulative bonds, interest income not paid due to lack of profit accumulates and is paid in subsequent years.

4.7. Indexed bond

Indexed bonds are issued to protect the investor from depreciation of bonds due to inflation, changes in exchange rates, etc. A distinctive feature of indexed bonds is that the amount of coupon payments and the nominal value of the bonds are adjusted by a special coefficient reflecting changes in the corresponding indicator (inflation rate, exchange rate dynamics, etc.). Indexed bonds first appeared in the 70s in the UK. These years were characterized by unstable rates of economic development and relatively high inflation. In order to protect investors' funds from depreciation, the British government issued indexed bonds, for which the amount of coupon payments and the face value of the bond were adjusted depending on the rate of inflation.

In Russia, indexed bonds were issued by some companies to alleviate the problem of currency risk. An investor, buying a bond for rubles, assumes the risk of depreciation of the national currency. Having held the bond until the expiration date, upon redemption he will receive an amount in rubles equal to the face value. If during this time the dollar exchange rate increases significantly, then the real return for the investor may turn out to be negative. Therefore, to successfully place bonds, enterprises must offer a financial instrument that would protect the owners of ruble bonds from the depreciation of the ruble against the dollar.

4.8. Callable bond

By issuing bonds with a fixed coupon rate for a long period of time, the issuer bears interest rate risk associated with lower interest rates in the future. In order to insure themselves against losses when paying a fixed coupon income in the face of falling interest rates, companies resort to early redemption of their bonds. The right to early redemption means that an enterprise can repurchase bonds before the expiration of the officially established redemption date. In order to carry out such operations, the terms of the bond issue must stipulate the company's right to early redemption. Russian legislation allows early redemption of bonds. However, unlike Western countries, in Russia early repayment of bonds is possible only at the request of their owners.

4.9. Bond with partial early repayment

By issuing bonds with a lump sum maturity, the issuer will have to find a significant amount of cash on the redemption day to pay investors the face value of all redeemed bonds. To reduce the burden of lump sum payments, businesses resort to issuing bonds that are repaid gradually over a certain period of time. In this case, the company, simultaneously with the payment of the coupon, also repays part of the nominal value of the bond.

4.10. International bond

Some companies believe that currencies in international markets are more attractive to investors than those used in the domestic bond market. Accordingly, they can issue bonds on a foreign market in the currency of that country. Each country in which such issues occur tends to assign national names to such issues. The three main countries are:

• the United States, where non-US issuers issue dollar bonds called "Yankee" bonds;
• Japan, where non-new bonds of a non-Japanese issuer are called "Samurai";
• Great Britain, where sterling bonds of non-UK issuers are called "Bulldogs".

There are various types of bonds traded on world markets. Basically, two groups can be distinguished among them: foreign and Eurobonds.
A foreign bond is a bond issued by a foreign company in the market of another country in that country's currency. The most attractive markets for issuers are the US, UK and Japan, where enormous financial resources are concentrated. If an issuer from another country wants to raise capital in the US market, it issues bonds in US dollars, registers a prospectus in accordance with US law, and places the bonds on the US market.

Eurobonds are bonds that are simultaneously placed on the markets of several European countries. The Eurobond market developed in the 60s and 70s and gained great popularity both among issuers and investors. A distinctive feature of the Eurobond market is that the issuers are reliable borrowers whose reputation and creditworthiness are beyond doubt.

4.11. Government bond

The issue of government securities is aimed at solving the following tasks:

• covering the permanent state budget deficit;
• covering short-term cash gaps in the budget due to unevenness in tax receipts and expenses;
• attracting resources for the implementation of large-scale projects;
• attracting resources to cover targeted government expenditures;
• raising funds to pay off debt on other government securities;

Therefore, depending on the purpose of release, they distinguish:

• Debt securities to cover persistent government budget deficits that carry over from year to year. As a rule, medium- and long-term securities are issued precisely for this purpose and serve the systematic debt of the state.
• Securities to cover temporary budget deficits (cash gaps), which are formed in connection with a certain cyclical nature of tax receipts and constant expenditures from the budget.
• Targeted bonds issued for the implementation of specific projects. For example.

Examples of issuing targeted bonds:

• In Great Britain, the government issued transport bonds, as a result of which resources were generated for the nationalization of transport.
• In Japan, government issues of construction bonds are widely practiced to implement large-scale road construction programs.
• In Russia, such securities can be considered the bonds of High-Speed ​​Railways JSC, which were issued under the guarantee of the Russian government; funds from the sale of these bonds were used to finance the construction of the Moscow-St. Petersburg railway.

Securities intended to cover public debt by enterprises and organizations were used quite widely in Russia in conditions of systematic non-payments, when enterprises did not pay to the budget, and the government could not pay for government orders. To solve this problem, the Ministry of Finance of the Russian Federation in 1994 - 1996 issued treasury bonds, carried out under government orders and financed from the federal budget. The state in the stock market is not only the largest issuer, accumulating funds from private corporate investors to cover general government expenses, but also the largest operator of the stock market.

Russian government securities include:

• government short-term obligations (GKOs);
• government long-term liabilities (GLO);
• domestic foreign currency loan bonds (OVVZ);
• short-term liabilities (CL);
• federal loan bonds (OFZ);
• bonds of the state republican internal 30-year loan of the RSFSR 1991 (GDO).

5. Promotion

A share is an issue-grade security that secures the rights of its owner (shareholder) to receive part of the profit of the joint-stock company in the form of dividends, to participate in the management of the joint-stock company and to part of the property remaining after its liquidation. A share is a registered security.

It follows from the definition that as soon as you buy a share, you immediately become the owner of this enterprise. This gives you the right to receive profits (dividends) and the right to manage this company (become a shareholder). But in practice it looks a little different. For example, if you bought one share of Norilsk Nickel for 5,000 rubles, then your vote at the shareholders meeting and the amount of dividends will be very small. Because Norilsk Nickel has millions of shares, and you have only one, which is one millionth of a percent of the company. Such shareholders are usually called minority shareholders.

There are ordinary and preferred shares.

5.1. Ordinary share

Ordinary shares give the right to participate in the management of the company, when 1 share corresponds to one vote at a meeting of shareholders, with the exception of cumulative voting, and participate in the distribution of profits of the joint-stock company. The source of payment of dividends on ordinary shares is the net profit of the joint-stock company. The amount of dividends is determined by the board of directors of the enterprise and recommended to the general meeting of shareholders, which can only reduce the amount of dividends relative to what is recommended by the board of directors.

5.2. Preference share

Preferred shares may impose restrictions on participation in management, and may also provide additional management rights (not necessarily), but bring constant (often fixed as a certain share of accounting net profit or in absolute monetary terms) dividends. As a rule, in Russia there are significant restrictions on participation in the management of companies, which is due to the fact that the mass privatization of enterprises according to types 2 and 3 provided for the transfer of Preferred Shares to the workforce, while depriving them of the right to vote at shareholder meetings.

Dividends on preferred shares are paid in accordance with the company's charter both from profits and from other sources. Currently, under Russian law, if dividends are not paid on preferred shares, they provide shareholders with voting rights at the general meeting of shareholders (with the exception of cumulative preferred shares).

By purchasing preferred shares, you are guaranteed to receive dividends, but you cannot vote at the shareholders meeting. And when you buy common shares, you can vote, but the amount of dividends is not known. To denote preferred and ordinary shares, the prefix “ap” and “ao” are used, respectively: Rostelecom-ap and Rostelecom-ao. In practice, the prices of such shares can differ greatly, for example: Sberbank-JSC costs 109 rubles per ordinary share, and Sberbank-up costs 77 rubles per preferred share. From a speculative point of view, this does not matter at all, since the prices for these shares will behave almost the same, if Sberbank-ao grew by 15% over the month, then Sberbank-up will also change by about 15%.

Figure 5.1. Chart of price changes for ordinary shares of Sberbank.

Figure 5.3-5.4. Comparison of rates of ordinary and preferred shares of Rostelecom.

6. Bill of exchange

A bill of exchange (from German Wechsel) is a security of a strictly established form, certifying the unconditional obligation of the drawer (promissory note), or another payer specified in the bill of exchange (bill of exchange - draft) to pay, upon the arrival of the period specified in the bill of exchange, a certain amount of money. The bill refers to order securities, that is, the transfer of rights under it is carried out by making a special inscription - endorsement. An endorsement can be a blank endorsement (without indicating the person to whom the execution should be made) or an order (indicating the person to whom the execution should be made). The person who transferred the bill by means of endorsement is responsible to subsequent holders of the bill for the possibility of exercising the rights under the bill.
Bills of exchange can be urgent and at sight. The term bill specifies the due date for payment. A bill of exchange on which the due date is not specified is considered payable at sight. Bills can be treasury, bank, commercial.

A treasury bill is issued by the government to cover its expenses and represents short-term obligations of the government with maturities of 3, 6 and 12 months.

A bank bill can be issued by a bank or an association of banks (issuing syndicate). The return to the holder of the bill is determined as the difference between the redemption price, which is equal to the par value, and the selling price of the bank bill, which is less than the par value. The advantage of a bank bill is that the latter is a means of payment, is a way to profitably place capital, and has multiple turnover.

A commercial (trade) bill is used to finance trade transactions. It is issued by an enterprise on the security of goods when making a trade transaction as a payment document or as a promissory note. There are three parties involved in a transaction using a bill of exchange: the debtor (drawee), the original creditor (drawee) and the one to whom the amount should be paid - the remittor. Usually the drawee expresses his consent (emphasis) to pay the debt. This agreement makes the bill legal tender. The bank usually acts as the remitter. The creditor approaches the bank with a bill of exchange, on which the debtor's emphasis is recorded in writing, and receives money in return. This procedure is called bill discounting. The amount of money given by the bank to the drawer is less than the amount indicated on the bill. This difference provides the bank with income. Discounting a bill represents the issuance of a loan to the lender. Bill circulation is carried out according to the following scheme:

1. Delivery of goods.
2. Accent of the bill at the bank where the buyer is serviced.
3. Transfer of bill.
4. Payment order to the bank servicing the seller for payment of this bill
5. Discounting the seller's bill within the discount rate.
6. Presentation of a bill of exchange for payment on the due date.
7. Receiving payment.

A bill of exchange is one of the oldest financial instruments. It originally appeared in Italy in the 12th century, so many terms associated with bills (endorsement, aval) are of Italian origin. In those days, the bill was used in transactions related to currency exchange. The money changer, having received the funds, issued a promissory note, payment for which could be received elsewhere. Due to its flexibility and convenience, the bill quickly spread throughout Europe. The increase in the volume of bill transactions required the legislative consolidation of established business customs, and in 1569 the first bill charter was adopted in Bologna.

Initially, the holder of the bill was prohibited from transferring his rights to other persons, but by the beginning of the next century, these restrictions became a deterrent to trade, and they were gradually abolished. It became possible to transfer bill rights by placing a special order of the bill holder - endorsement (from the Italian in dosso - back, ridge, reverse side, since this inscription was made, as a rule, on the reverse side of the bill).

In Russia, the bill appeared at the beginning of the 18th century due to the development of trade relations with the German principalities, therefore the Russian word “bill” comes from the German wechsel (exchange, transfer). On the basis of German bill of exchange legislation, the first Russian Bill of Exchange Charter was written in 1729; however, direct borrowing of foreign law norms did not meet the requirements of Russian reality. The charter regulated bill relations related to the transfer of funds in the most detail, while in Russia the practice of using bills of exchange for processing loans became most widespread.

The Russian bill of exchange charter of 1902 lasted until the October Revolution of 1917. The decree of the Council of People's Commissars of November 11, 1917 declared a two-month moratorium on bill payments, as well as bill protests. Subsequently, the circulation of bills on the territory of the RSFSR was significantly reduced. However, in connection with the transition to the New Economic Policy (NEP), in 1922 the Regulation on Bills of Exchange was adopted, according to which cooperatives and banks were allowed to issue and accept bills of exchange for accounting, as well as use them for processing credit transactions.

The bill of exchange was put into circulation for the second time on the territory of Russia by Resolution of the Presidium of the Supreme Court of the RSFSR dated June 24, 1991 No. 1451-I “On the use of the bill of exchange in economic circulation of the RSFSR. Also, this Federal Law eliminated a number of controversial issues relating to the issuance of bills and the calculation of interest and penalties, and also limited the circle of persons who can be obligated without restrictions on promissory notes and bills of exchange, excluding from it the constituent entities of the Russian Federation, urban, rural settlements and other municipalities . Currently, on the territory of the Russian Federation, this law is fundamental in regulating bill relations.

7. Warrant

The warrant has two uses. First, a warrant is a certificate that gives the holder the right to buy securities at a specified price for a specified period of time or indefinitely. Sometimes a warrant is offered along with the securities as an incentive to purchase them. Secondly, a warrant is a certificate of a warehouse about acceptance of a certain product for storage. A warrant is a document of title transferred by way of endorsement (i.e., endorsement). It is used when selling and pledging goods. Warrants can be either registered or bearer. The warrant consists of two parts: the warehouse itself and the pledge certificate. The first certificate serves to transfer ownership of the goods upon sale, the second - to obtain a loan secured by the goods with notes on the terms of the loan. In this case, the warrant is transferred to the creditor by endorsement. The lender can make a further transfer, in particular, to the holder of the warehouse receipt upon repayment of the loan. When a warrant changes hands, the product can change its owner many times, remaining in the same place, i.e. at the warehouse of the business entity from which the cash warrant was received. To receive the goods from the warehouse, it is necessary to present both parts of the warrant indicated above.

8. REPO transaction

A REPO transaction is a transaction with securities, consisting of two parts, the execution date, which is determined by the settlement code and the REPO term. Under the first part of a repo transaction, on the execution date, the seller of securities is obliged to deliver securities, and the buyer is obliged to pay cash.

Repo transactions with securities are concluded in the “Repo with shares” and “Repo with bonds” trading modes.

The list of securities admitted to trading in the “REPO with shares” and “REPO with bonds” trading modes is established by a decision of the General Director of the Exchange.

The “Repo with shares” and “Repo with bonds” trading modes provide the opportunity to conclude transactions with an execution date on any day, starting from the next day after the day the transaction was concluded until the selected date of its execution, inclusive. The execution date of the second part of the repo transaction is the date defined as T+x+k, where T+x is the due date for the execution of the first part of the repo transaction, and k is the term of the repo transaction. (k takes a value from 0 to 180 calendar days, x - from 0 to 2 calculation days).

Features of the trading modes “REPO with shares” and “REPO with bonds”:

• using a discount to the market price of the previous trading day when concluding repo transactions (changing the mechanism for concluding a repo transaction);
• the use of compensation contributions as a standard exchange mechanism for controlling market risks and reducing the risk of non-fulfillment of obligations. The mechanism of compensation contributions (as an optional feature) is activated through the ability of counterparties to determine the maximum and minimum discount values ​​when concluding a transaction. The legal nature of compensation contributions represents the early partial fulfillment by one of the parties of its obligations under the second part of the repo transaction, i.e. making a compensation contribution reduces the obligations (and claims) of counterparties under the second part of the repo transaction;
• concluding transactions without control of collateral under the first part of a REPO (S0), as well as transactions with the fulfillment of obligations under the first part of a REPO on a deferred period - 1 or 2 days after the date of conclusion of the transaction (S1, S2);
• concluding intraday repo transactions (fulfillment of obligations for the first and second parts of which occurs on the same day);
• concluding repo transactions with the possibility of fulfilling obligations under its second part for a period of up to 180 calendar days, and not only within the current coupon period.

At the trading participant’s workplace in the “REPO with shares” and “REPO with bonds” trading modes, you can submit addressless and addressed REPO orders to the trading system. Details of targeted orders: repo amount, number of securities and initial discount value are interrelated. The indication by the Trading Participant in the targeted REPO (bond) order of any two details is sufficient for the calculation of the third detail in the Trading System. Each trading day, starting from the date of proper execution of the first part of a repo transaction concluded in the “Repo with bonds” trading mode and the terms of which set the maximum discount values, until the date following the date of actual execution of the second part of this repo transaction, or the date of non-execution of this REPO transactions, the Trading System calculates the current discount value.

If the current discount value exceeds the maximum limit value of the discount, the buyer under the first part of the repo transaction has an obligation to deliver the Compensation contribution in the form of securities on the next settlement day (by partial preliminary delivery of securities under the second part of the repo transaction). If the current discount value becomes less than the minimum limit discount value, the seller under the first part of the repo transaction has an obligation on the next settlement day to make a Compensation contribution in cash (by partial advance payment under the second part of the repo transaction). The procedure for making Compensation Contributions is determined in accordance with the Clearing Rules. Partial payment of compensation contributions is not permitted.

In the “Repo with shares” and “Repo with bonds” trading modes, it is possible to execute a repo transaction ahead of schedule, starting from the settlement day following the day of execution of the first part of the transaction.

9. Legal basis of securities

It should be remembered that holders of debt instruments generally do not have the right to vote at company meetings on matters that affect the company, but they do have a vote where their rights are concerned. In addition, the rights of securities holders include:

• receiving notice (or confirmation) of the principal amount and terms of the loan;
• receiving fixed (or floating) interest on the principal amount of debt;
• receipt of the agreed repayment amount (usually the same amount as the principal amount of the debt) on the repayment date (unless repayment was made earlier under the terms of the agreement);

the right to require the company to repay a loan early if the value of the company's assets falls below a specified level (i.e., the assets securing the loan).

Owners of debt instruments have only one obligation to the company, which is that they must provide the company with an amount equal to the amount of the loan agreement.

When a company is liquidated, bond holders have more privileges than stock holders. If a company is liquidated, then the liquidation commission must first settle the company's principal debts, namely, make payments on bonds.
After settlement with all creditors, the remaining property is distributed among the shareholders. First, arrears of dividends, if any, and the amount of liquidation value are paid to the holders of preferred shares, and then to the holders of common shares.

During a reorganization (division, merger or transformation) of a company, its securities may be: divided, merged or renamed.

Division of the company. At the beginning of 2006, the MMC Norilsk Nickel company announced a reorganization, namely the spin-off of the Polyus Gold company. As a result, each owner of MMC Norilsk Nickel shares received shares of the Polyus Gold company, according to the ratio - for each share of MMC Norilsk Nickel, one share of the Polyus Gold company was issued.
Company merger. In October 2006, the Purneftegaz company and OJSC NK Rosneft merged, after which the shares of the Purneftegaz company were converted into shares of the Rosneft company, with a coefficient of 0.16. That is, 16 shares of the Purneftegaz company could be exchanged for 100 shares of the Rosneft company.

Transformation of the company. In June 2006, Gazprom acquired the Sibneft company, as a result of which the company was renamed GazpromNeft. Holders of shares of the Sibneft company exchanged their securities for shares of the new company Gazprom Neft in a ratio of 1:1. After which the shares of Sibneft ceased to exist and shares of the Gazprom Neft company appeared on the market. This transformation did not affect the change in the stock price, which can be seen in Figure 9.1-9.2.

Figure 9.1-9.2. Transformation of the Sibneft company into the Gazprom Neft company.

10. Transfer of ownership rights to securities
10.1. Purchase and sale

In most transactions, the transfer of ownership of securities occurs under a purchase and sale agreement, where one party (the seller) undertakes to transfer ownership of the goods to the other party (the buyer), and the buyer undertakes to accept the goods and pay money for them.

The agreement usually stipulates the price per share. Assuming that it is not the shares themselves that are transferred, but the rights under them, since trading is carried out not in securities, but in the rights that they provide to their owner.

10.2. Mena

When concluding an exchange agreement, each party undertakes to transfer ownership of one product to the other party in exchange for another. The rules of purchase and sale apply to the exchange agreement. In this case, each of the parties is recognized as the seller of the goods, which it undertakes to transfer (Article 567 of the Civil Code of the Russian Federation), and the buyer of the goods, which it undertakes to accept in exchange. The advantage of this type of agreement is that there is no need for counter cash flows. However, this is only possible if the packages of securities intended for exchange are recognized as equivalent. If this is not the case, then one of the parties pays the amount agreed upon in the contract.

10.3. Donation

With the adoption of the new Civil Code of the Russian Federation, the execution of a gift agreement is now significantly different from the previously accepted form. In Art. 574 of the Civil Code of the Russian Federation establishes a simple written form of a gift agreement for the donation of movable property, which includes securities. If previously in almost all cases the contract had to be certified by a notary, now this is not required. The gift agreement and/or transfer order can be presented by both the donor and the donee. The gift agreement must indicate how many securities the donor transfers to the donee.

Transfer of property rights as a result of inheritance. When resolving issues of inheritance of securities, the registrar makes changes to the register on the basis of the following primary documents:

• certificate of right to inheritance, executed by a notary;
• court decisions.

An application or death certificate is not grounds for making changes to the register. However, sometimes cases arise when non-standard actions of the registrar are required. This is relevant if:

• the shareholder does not have a will and heirs;
• the shareholder's heirs did not make a claim on the securities.

11. Derivatives

Derivatives include instruments such as forwards, futures and options. There are several names for these types of instruments: derivatives, futures contracts or derivatives. All these names, although different, mean the same thing.

11.1. Forward

To fully understand these tools, let's look at a historical example. In the 50s and 60s in the USA there was a grain exchange, where anyone could come with money and buy grain, or, on the contrary, bring their own grain and sell it, receiving money for it. For example, the current price for grain is $100 per ton, but the farmer does not yet have this grain. He will produce grain only three months later on day X, and if the price drops to $50 per ton, he will incur losses; if it rises to $150, he will receive an excess profit. What should I do?

Figure 11. Possible price options for a farmer’s sale of grain.

A farmer can come to the stock exchange and, having found a counterparty, enter into an agreement with him that on day X he will sell him (the counterparty) one ton of grain for $100; the agreement implies only monetary settlements. Please note that the farmer only signed the contract; no one paid anyone the money itself. Now there are two possible scenarios: the price of grain on day X will be $50 or $150. Option one. The price of grain decreased over the course of three months and on day X amounted to $50. The farmer sells one ton of grain on the exchange for $50, and turns to the counterparty under his contract and asks to reimburse him for the difference in price. The contract states the sale price is $100, and the current price is $50, which means that the counterparty must pay the farmer $50. Financial result of the entire transaction: + $50 - sale of real goods on the exchange, + $50 payment from the counterparty, total: $100.

Figure 11.2 Selling grain for $50.

Option two. The price of grain rose for three months and on day X it was $150. A farmer sells one ton of grain on the exchange for $150, and now the counterparty under the contract approaches him and asks him to reimburse him for the difference in price. The contract states the sale price is $100 and the current price is $150, which means the farmer must pay the contracting party $50. Financial result of the entire transaction: + $150 - sale of real goods on the exchange, - $50 payment of the difference under the contract to the counterparty, total: $100.

Figure 11.3 Selling grain for $150.

For any price change, the farmer received his $100. This type of transaction is usually called hedging, and the agreement concluded between the farmer and the counterparty is a forward agreement.

Forward is an agreement for the purchase and sale of goods in the future.

Hedging is insurance against changes in the price of a product.

11.2. Futures

The transaction described above gained great popularity and scope among market participants, so the financial community decided to standardize forward transactions and make forward an exchange instrument. To do this, it was necessary to standardize in the forward:

• underlying asset - clearly link the forward to a specific commodity: grain, oil, gold, etc.;
• delivery date - clearly indicate the delivery date of the goods: in a month, three months or six months;
• scope of the contract - clearly indicate the volume of delivery of goods: one forward one ton, two forwards two tons and so on.

By introducing such standards into a forward contract, we got a new exchange instrument, futures. A futures is an exchange instrument for the purchase and sale of goods in the future, that is, a futures is a standardized forward.

We will look at how futures work using the following example. There is a real commodity exchange where you can buy and sell certain lots of grain. The current grain price is $100 per ton. If the price of grain is forecast to rise to $120, and having $100 in our account, we can buy one ton and wait for the increase. But at the same time, we can simply enter into an agreement to buy grain on day X at a price of $100 by purchasing a futures contract. Due to the fact that a futures is an exchange contract, it means that the guarantor of its execution is the exchange. The exchange, in turn, requires a certain guarantee amount from both the buyer and the seller of the futures for the obligations of the futures. This guarantee amount is usually 20% of the price of the product itself. In our example, the guarantee amount will be $20 for one futures contract, which means that with $100 in our account, we can buy five futures contracts.

Figure 11.4 Grain purchase $100 per ton.

By purchasing five futures contracts, we undertake the following obligations: on day X (delivery date) we are obliged to buy five tons of grain at a price of $100 per ton. When purchasing a futures contract, no one pays money to anyone, and only the guarantee amount is reserved.

Over a period of time (no more than three months), the price increased to $120 per ton. This means we can now sell five futures contracts at $120.

Figure 11.5 Selling grain at $120 per ton after 3 months.

By selling five futures, we undertake the following obligations: on day X (delivery date) we are obliged to sell five tons of grain at a price of $120 per ton. Now the exchange sees that we have counter obligations, five futures to buy at $100 and five futures to sell for $120. This means that our obligations are canceled and the difference between them is credited to the account: $120 - $100 = $20 * 5 (number of futures) = $100. The exchange also releases previously reserved funds of $100. As a result, the transaction accounted for $200.

11.3. Options

In the world of investing, an option is a contract entered into between two persons whereby one person gives the other person the right to buy a certain asset at a certain price within a certain period of time or grants the right to sell a certain asset at a certain price within a certain period of time. The person who received the option and thus made the decision is called the option buyer, who must pay for this right. The person who sold the option and who responds to the buyer's decision is called the seller of the option.

There is a wide variety of contracts that have features of options. Many varieties can be found even among widely used financial instruments.

There are two main types of options: call and put options. Currently, such contracts are presented on many exchanges in the world.

11.3.1. Call Options

The most well-known option contract is a call option on a stock. The owner (buyer) of a call option has the right, but not the obligation, to buy the underlying asset (stock or commodity) at a predetermined price (strike) within a certain time. Please note the following four points that are stipulated in the contract:

• a company whose shares can be purchased;
• number of shares purchased;
• the purchase price of shares, called the execution price, or strike price;
• The date when the right to buy is lost, called the expiration date.

For example, the current price per share is $100. We buy one call option for $5 with a strike of $100. This means that for a certain time (for example, three months) we have the right to buy a share at a price of $100, but importantly, only the right, not the obligation, to buy this share. For this right (option) they paid $5.

Figure 11.6. Buying a call option on a stock at $100.

If three months later on day X (delivery date) the price per share rises to $150, then the financial result will be as follows. With a call option, we can buy a stock at $100 and immediately sell it at $150. And that turns out to be + $50 to the account, but we should not forget that this option was purchased for $5, which means that $5 should be subtracted from the income received ($50). The total for the transaction is $45 profit.

If three months later on day X (delivery date) the price per share fell to $50, then the financial result would be as follows. With a call option, we can buy the stock at $100, but at $50 we don't have to. So, in this case, we simply do nothing. As a result, our financial result will be $5 (the funds that were paid for the option).

The second type of option contract is a put option.

11.3.2. Put Options

The owner (buyer) of a Put option has the right, but not the obligation, to sell the underlying asset (share or commodity) at a predetermined price (strike) within a certain time. Please note the following four points that are stipulated in the contract:

• a company whose shares can be sold;
• number of shares sold;
• the selling price of shares, called the execution price, or strike price;
• The date on which the right to sell is lost, called the expiration date.

A put option, in fact, is a mirror image of a call option; if in a call option you can buy, then in a put option you can sell.
For example, the current price of a stock is $100, we buy one put option for $5 with a strike price of $100. This means that for a certain period of time, say three months, we have the right to sell a share at a price of $100, but importantly, only the right, not the obligation, to sell this share. For this right (option) they paid $5.

Figure 11.7. Selling a put option on a stock at $100.

If three months later on day X (delivery date) the price per share falls to $50, then the financial result will be as follows. Having a put option, we can buy a share for $50 and immediately sell it at a price of $100, receiving + $50 in the account, but we should not forget that this option was purchased for $5, which means that $5 should be subtracted from the received income of $50. The total for the transaction is $45 profit.

If three months later on day X (delivery date) the price per share has risen to $150, then the financial result will be as follows. With a call option, we can sell the stock at $100, but at $150 we are not obligated to do so. So, in this case, we simply do nothing. As a result, our financial result will be $5 (the funds that were paid for the option).

12. Stock exchanges in Russia

A stock exchange is a commercial company specially registered and licensed by the Federal Service for Financial Markets, which can be considered an organizer of trading.

It follows from the definition that there can be many stock exchanges in a country, since they are not state-owned and can compete with each other.

List of stock exchanges in Russia:

• MICEX - Moscow Interbank Currency Exchange;
• RTS - Russian Trading System;
• MFB - Moscow Stock Exchange;
• SPbFB - St. Petersburg Stock Exchange;
• Exchanges of other cities.

The Moscow Exchange, St. Petersburg Exchange and exchanges in other cities, as a rule, are created in order to solve local problems. For example, a certain region issues its bonds; for ease of interaction with investors, it is better to place this issue on the exchange that is located in this region, and not place it on central exchanges. As a rule, the most liquid stocks and bonds are traded on the central exchanges (MICEX and RTS).

12.1. MICEX

The MICEX exchange is divided into several sections: stocks, bonds and currencies. This exchange is the undisputed leader in Russia for the following reasons:

• high technical equipment. All trading takes place electronically;
• thoughtful clearing. One of the first exchanges that introduced the delivery versus payment procedure, when you buy a share, it gives it to you instantly;
• a large number of participants. This is primarily due to the fact that this exchange operates Internet trading systems;
• large turnover of financial assets and transactions in one day.

The MICEX Stock Exchange trading system implements the following technological schemes for conducting the initial placement:

1. Auction to determine the price:

• auction at cut-off price. A preliminary collection of applications from potential investors is carried out indicating the desired purchase price of the security. Then the issuer, based on submitted purchase orders, determines the placement price of its securities; with this placement scheme, all transactions are made at a single placement price determined by the issuer, provided that the price specified in the purchase application is not lower than the placement price;
• auction at bid price. A preliminary collection of applications from potential investors is carried out indicating the desired purchase price of the security. Then the issuer, based on submitted purchase orders, determines the placement price of its securities; with this placement scheme, transactions are carried out at prices specified by investors in purchase orders, provided that the price specified in the purchase order is not lower than the placement price.

2. A competition (auction) to determine the coupon rate (the placement scheme is similar to those described above, but the investor indicates the desired coupon rate at a previously known placement price; placement in this case is carried out in the “Placement: Addressed bids” mode).

3. Placement in the “Placement: Addressed orders” mode at the placement price or profitability predetermined by the issuer.

12.2. RTS

Trading sections on the RTS exchange:

• classical;
• stock exchange;
• FORTS section (RTS futures and options);
• Start section.

12.2.1. Classic market

The classic RTS market, the oldest organized securities market in Russia, began operating on July 5, 1995. Trading participants who owned RTS terminals could post quotes for Russian shares and negotiate over the phone to conclude and execute a transaction. Today, the basic principles of trading on the classical market are the absence of 100% preliminary deposit, the choice of date and payment method, and the possibility of settlements in foreign currency. There is no need for preliminary transfer of securities and funds for trading, which ensures high efficiency of operations. Transactions on the Classic Market are concluded using RTS Plaza trading terminals. A professional participant in the securities market can become a trading participant on the Classic RTS market.

Prices formed on the Classic RTS market are a generally accepted reference point for investors conducting transactions with Russian shares and depositary receipts for them both through the RTS and on the over-the-counter market and on other stock exchanges in Russia, stock exchanges in Europe and the USA. Information about trading on the RTS is broadcast to a huge number of consumers in Russia and abroad and is the basis for calculating the main indicator of the Russian stock market - the RTS Index.

The RTS Classic Market offers a wide range of securities - about 2,000 shares, bonds and investment shares. Securities included in Quotation Lists A1, A2 and B are the highest quality instruments, the issuers of which comply with the strict requirements of RTS OJSC for information disclosure and compliance with corporate conduct standards.

The trading session on the Classic stock market lasts from 10:30 to 18:00 Moscow time.

12.2.2. Exchange market

Trading on the RTS Exchange Market began in November 2004. The new platform was created to organize trading in a wide range of securities of Russian issuers: shares (highly liquid blue chips and second-tier shares), bonds, investment units (Instruments). One of the priority areas for the development of the Exchange market is the “second-tier” stock market: increasing the liquidity of this market segment, introducing new financial instruments to the market, expanding the range of liquid securities. The Institute of Market Makers operates on the market as one of the most effective mechanisms for developing the “second-tier” stock market.

Currently, from 30 to 50 percent of the total trading volume on the Exchange market falls on the “second-tier” stock market.
The RTS exchange market is aimed at both institutional and private investors.

Trading in securities on the RTS Exchange Market is carried out in anonymous trading mode using the principle of a continuous double auction of counter orders (Order-Driven Market), using the “delivery versus payment” technology with 100% preliminary deposit of assets:

• the use of a continuous double auction of counter orders allows you to connect Internet trading or Direct Market Access systems, as well as Automatic trading systems (Algorithmic Trading);
• delivery against payment eliminates credit risks when settling transactions;
• anonymity of orders allows the use of transaction prices to calculate the market price and recognized quotation;
• simplicity and technological effectiveness of transactions is ensured by the “Order driven market” principle, which is the basis of the trading mechanism.
  "Order driven market" is a market of competing orders, in which a deal is concluded automatically when conditions in counter anonymous orders intersect, using a continuous double auction of counter orders.
  Continuous auction of anonymous bids with 100% pre-escrow of assets. Settlements on "delivery versus payment" terms on the day the transaction is concluded.

Main characteristics of the RTS Exchange Market:

• tradable securities - more than 3,000 shares, bonds, investment shares;
• quotation currency - Russian rubles;
• settlement cycle T+0 (on the day the transaction is concluded);
• settlement currency - Russian rubles;
• lot size - from 1 to 100 pcs. in the lot;
• Duration of the trading session on the RTS Exchange Market from 10:30 to 18:00 Moscow time.

The Exchange Market provides for the following Trading Periods:

• Pre-trading period;
• Trading session.

Each of the listed Trading Periods corresponds to the types of applications established by the Trading Rules.

The following Transaction Modes are implemented on the Exchange Market:

• Mode of transactions concluded on the Order-Driven Market principle (Order-Driven Market mode);
• Negotiated transactions mode (RPS mode);
• Addressed transactions mode with deferred execution (T+ N mode);
• REPO transaction mode.

Trading participants can quickly transfer funds between RTS markets: the Exchange market and the FORTS derivatives market.
Intermediate clearing sessions implemented in the settlement system for transactions concluded on the RTS Exchange Market allow you to quickly deposit and withdraw funds and/or securities throughout the entire trading session.
The “Single Cash Position” technology implemented on the market allows you to carry out transactions with securities presented on the RTS Exchange Market and shares of OJSC Gazprom from one cash account, the organizer of trading for which is the NP “Stock Exchange “St. Petersburg”.

12.2.3. FORTS market

The futures and options market on the RTS (FORTS) is the leading Russian market for futures contracts.

The most important part of transactions concluded on the derivatives market is their execution on a certain date in the future on the terms agreed upon at the time of conclusion. Participants in trading on the RTS derivatives market are reliable, highly capitalized investment companies and banks.

Currently, the FORTS market trades futures and options, the underlying assets of which are shares of Russian issuers, the RTS index, bonds, foreign currency, the average rate of the ruble one-day loan (deposit) MosIBOR, Urals oil and gold.

12.2.4. RTS Start

RTS START is a segment of the stock exchange securities market of OJSC RTS, created specifically for companies of small and medium capitalization.

RTS START goals:

• increase the number of securities traded on the Russian market;
• provide an opportunity for small, dynamically developing companies to create and increase capitalization;
• provide the opportunity to attract capital to the real sector of the economy through the stock market.

Purpose of RTS START: placement and circulation of securities of issuers of small and medium capitalization.

12.3. IFAC

Non-profit partnership Moscow Stock Exchange was founded in March 1997.

IFAC services:

• Organization and conduct of the initial placement of securities.
• Organization and conduct of secondary trading in securities.
• Organization and conduct of auctions in the commodity market section.
• Organization and holding: competitions and auctions for State orders; sales of property during privatization; sales of property in bankruptcy; auctions in the interests of customers for the purchase/sale of various goods; auctions for the sale of property of Russian legal entities and individuals; auctions for the sale of property of non-residents; auctions for the sale of pledged property.
• Providing information on trading and securities.
• Providing information on competitions and auctions, assistance in filling out applications for participation in competitions, consultation.
• Assistance in placing orders for the supply of goods, performance of work, provision of services for state and municipal needs.
• Organization of training on the topic: "Organized financial market."

12.4. Stock Exchange "St. Petersburg"

The non-profit partnership "St. Petersburg Stock Exchange" (St. Petersburg Stock Exchange) has been part of the RTS Group since April 2002.

On March 13, 2002, the Exchange Council of the St. Petersburg Stock Exchange approved a plan for reorganizing the exchange, according to which a division was introduced into members of the Non-Commercial Partnership of the St. Petersburg Stock Exchange and members of CJSC St. Petersburg Stock Exchange. Thus, the NP RTS Stock Exchange ", CJSC AB "Gazprombank" and CJSC "St. Petersburg Exchange" entered the Non-Commercial Partnership on a parity basis, and professional participants in the securities market trading on the exchange became members of CJSC "St. Petersburg Exchange".

The main joint projects of RTS and the St. Petersburg Stock Exchange, which were successfully implemented and were widely recognized by the stock and investment community, were trading in shares of OAO Gazprom through RTS terminals and the FORTS derivatives market. By joining forces, the exchanges have become the absolute leaders in these segments of the financial market.

13. Brokers and dealers

Dealer activity is the carrying out of transactions for the purchase and sale of securities on one's own behalf and at one's own expense by publicly announcing the purchase and/or sale prices of certain securities with the obligation to purchase and/or sell these securities at prices announced by the person carrying out such activities.

A professional participant in the securities market who carries out dealer activities is called a dealer. A dealer can only be a legal entity that is a commercial organization.

From the definition it is clear that a dealer is a specially registered and licensed organization that trades on the stock exchange with its own money, at its own discretion and at its own expense.

Brokerage activities are recognized as carrying out civil transactions with securities as an attorney or commission agent acting on the basis of an agency or commission agreement, as well as a power of attorney to carry out such transactions in the absence of indications of the powers of the attorney or commission agent in the agreement.

A professional participant in the securities market engaged in brokerage activities is called a broker.

Thus, we can conclude that a broker is a specially registered and licensed organization that trades clients’ money on the stock exchange and at their expense. That is, if we want to buy 10 shares of Sberbank on the stock exchange, then we contact the broker with a purchase order, after which the broker himself buys 10 shares of Sberbank and transfers them to us, for which he receives a commission. A broker is an intermediary.

In reality it looks something like this. We come to the broker and open a brokerage account with him, where we deposit our funds, for example 1,500 rubles. This procedure is similar to opening a bank account. After the money is credited to the account, we submit an order to the broker to purchase 10 shares of Sberbank at a price of 108 rubles per share. The broker, having executed this instruction, writes 10 shares to our depositary account. A depository account is opened together with a brokerage account and is used directly for storing shares. An important feature of this account is that it is not possible to receive the purchased 10 shares of Sberbank from it, since the shares do not exist in paper form, but you can only receive a statement indicating that we own these shares.

14. Insiders

Control over insiders and the use of insider information is most successfully carried out in the United States. In our country, the technology for controlling the dissemination of insider information is just beginning to be used, so we will consider this concept in accordance with American standards.

In accordance with American law, non-officials and directors of corporations whose shares are listed on central exchanges are required to report changes in the structure of the company's shareholding. This report, known as Form 4, must be completed within 10 days of the month in which the changes occurred. This requirement is also necessary for shareholders owning more than 10% of the company's shares. Such shareholders, as well as directors and high-ranking employees of the company, are called insiders. The information they provide about their transactions is then printed in the Official Summary of Insider Transactions published by the SEC. For example, a report on transactions in January that were reported in early February will be printed in early March. Thus, it may take 2 months before the transaction data becomes widely known.

The Securities Trading Act of 1934 prohibits insiders from short selling securities. In addition, they are required to return to the corporation all profits from short-term transactions with their own securities. The term “short-term” used in this case means that the purchase and sale were carried out within 6 months. As a result, few insiders make both purchases and sales of their own securities during this period. In order not to lose profit, they prefer to plan their transactions so that more than 6 months pass between purchase and sale.

In the United States, it is illegal for anyone to use inside (that is, not available to the general public) information about a corporation in a securities transaction that other parties to the transaction cannot use. This prohibition applies not only to the insiders themselves, but also to the persons to whom they transfer such classified information.
By law, there are two types of information that are not available to the general public: “private” (the transfer of which is legal) and “internal” (the transfer of which is illegal). Unfortunately, the boundaries between these types of information are quite blurred, which causes ongoing difficulties for analysts working in this area.

Insiders trade their shares for many reasons. For example, purchases can be made as a result of the exercise of any rights (options). Sales may occur due to cash needs. It is common to see some insiders buying shares and others selling in the same month. However, in accordance with internal information, the stock price on the market differs from the real value, so it is natural to expect the number of one type of insider market transactions to exceed another (i.e., either sales or purchases).

Hello! In this article we will talk about the stock market.

Today you will learn:

• What is the stock market;
• Who works in the stock market;
• How trading takes place on the stock market;
• How to start trading in the stock market yourself.

On the one hand, the stock market is an area for limitless earnings, raising funds, literacy and increasing capital. On the other hand, there is the possibility of losing everything in one impulsive and wrong decision. It will take a lot of time to learn all aspects of the stock market. Let's figure out if it's worth it.

What is the stock market

Stock market is a set of mechanisms that allow individuals to carry out transactions with securities.

Some people believe that the stock market is only responsible for securities, but this is far from true. Just look at what is traded on stock exchanges and everything will become clear. There are currencies, commodities, securities and derivatives that facilitate financial trading.
At the same time, with the English name everything is also not so clear. Collocation stock market previously also interpreted as the securities market. But now, with the development of modern technologies, we are coming to the understanding that it is impossible to divide the three components of one market into separate areas, therefore, the concept of the stock market defines the majority of “goods” for investment.

Now let's figure out what is traded on the stock market. When it comes to securities, the main commodities will be stocks and bonds. Bills of exchange and certificates are also traded on the market, but much less frequently. Let’s understand what a stock and a bond are, consider their main differences and the benefits of a particular security.

Promotion – an equity security that gives the owner the right to part of the organization’s property upon liquidation, as well as receiving dividends.

Shares can be non-preferred and preferred. Their main difference is that the income of the former fluctuates depending on the financial result, while the income of the latter is stable, but their owner does not have the right to vote on the board of directors. Non-preferred shares are more common.

Bond - a debt security that guarantees the owner the right to receive from the issuer the nominal price of this security.

A more conservative financial instrument that allows you to make a profit with a greater chance.

Derivatives – futures and options.

Stock market participants

Stock market participants can be divided into several categories:

• Issuers – persons who issue securities;
• Investors are persons who buy securities.

In addition to these two categories, there are those who are responsible for the operation of the exchange: depositories, the register manager, the clearing house, etc. These bodies are responsible for the functioning of the entire system. Thanks to them, communication is established between all participants, sales occur every second. They take a small commission for their work.

There are also two more special categories of participants:

Broker – a person carrying out transactions for the purchase/sale of securities on behalf and at the expense of the client.

These can be either credit organizations or special companies that carry out brokerage activities. Now their competence also includes trust management (using the client’s funds to generate his profit), consultations, training, etc.

Dealer – a person who carries out transactions of purchase/sale of securities on his own behalf and at his own expense by publicly announcing the purchase/sale price.

These are professional market participants who require a license to carry out their operations. The conditions for obtaining such licenses are regulated by the bank. At the initial stage, with minimal turnover on a trading account, you can use only basic instruments, which does not allow you to accelerate to good money in a short time.

Functions of the stock market

Now let's talk about the global function of the stock market. It will allow you to understand the essence of this phenomenon, which will bring you one step closer to making a profit.

So, the main function of the stock market is the redistribution of funds. Everything is the same as in the term “investing”. People who have excess funds give their money to those who have a lack of funds.

It often happens like this: a company needs free funds for development -> issues shares -> attracts funds -> develops -> pays dividends (profit).

In America and the West, the economic importance of the stock market is difficult to overestimate. For example, in America, the unorganized securities market is so developed that shares of companies that have just been created could be bought literally in a garage.

This was used both by stockbrokers (who sold worthless securities to unknowing investors) and by traders who hoped to benefit from these securities if they suddenly went up. Now things are a little different.

In the West, banks are very actively involved in the task of redistribution. They attract financial resources from the population, increasing their monetary capabilities to the maximum, and redirect them to the stock market.

By buying shares or bonds of companies or even states, they provide the cash that borrowers need. And after that, they make a profit both from loans and from transactions with securities, and again redirect the funds to purchase securities.

A vicious circle, thanks to which you can successfully stimulate the development of the economy, business of any scale and, most importantly, reduce the gap between classes.

What about the stock market in Russia now? The answer to this question is not so clear-cut. On the one hand, we have a weak development of an investment culture among the ordinary population, and on the other, the Central Bank is talking about the transition to an investment model of the economy. With such statements, you can safely expect that in 10-15 years, the culture of buying securities in Russia will grow significantly, and knowledge of the stock market, as well as the mechanisms of its operation, will be extremely valuable.

Another function follows from this function – state budget management. You can increase the state the budget at the expense of the population - by issuing federal loan bonds. In this way, free funds of the population are attracted and with their help the main holes in the budget are paid off.

The activities of the stock market in Russia are regulated by the Central Bank.

How does trading work in the stock market?

Independent trading on the stock market is simply unrealistic for a private investor, especially in the realities of the modern Russian economy.

In order to directly buy shares on the exchange, you will need:

• Get a license;
• Pay the entry fee. On MICEX – 3 million rubles;
• Buy special software that costs from 100 thousand rubles.

That is why the entire trading mechanism for beginners and traders who do not have huge capital depends on brokers. As mentioned earlier, these are legal entities that carry out transactions on behalf of clients. They receive a commission for their services, thus earning money.

If you do not plan to trade on the stock exchange yourself, or you do not have large free funds, it is recommended to use the services of a broker. But if it is possible to independently obtain a stock exchange player’s license, then it is strongly recommended to do so, because the broker charges a commission, which significantly reduces the profit on each transaction.

How to start trading in the stock market

That is why, in order to start trading on the stock market, you need to carry out the following operations:

Step 1. Choosing a broker. This is one of the most important stages, thanks to which you can either start making a profit (at first play at a loss or zero) or go bankrupt at one point. In order to choose a good broker, the first thing you need to look at is the stability of payments. It doesn't matter how much you earn, what matters is how much you can take back.

One of the famous poker players said:

Back then, winning money in poker was not a problem. The main problem was to leave with the winnings.

Of course, there are fewer dishonest brokers now, but they still exist. After this - the cost of services, commissions, software and other application parameters.

Step 2. Installing the software on the user's computer and its basic configuration. One of the easiest stages, because most brokers have their own support service that can help with all technical issues.

It is much more difficult to learn about all the functions of the terminal. They are often quite difficult to learn, and it can take several days to understand what each button does. After this, we can say that the terminal has been mastered, and now you can safely start trading.

Step 3. Open a demo account. At this stage we are not learning or even testing the strategy. Just checking the functionality of the trading terminal. Playing on a demo account and on a real one is sometimes very different, primarily due to psychology and the pressure of real money.

For beginners, such accounts are dangerous because they can give a false impression that they can do something and can immediately become a profit. Just test the terminal's capabilities, trade a little, understand when to apply your strategy and now open a real account.

Step 4. Open a real account and make your first deposit. From this moment begins a long journey of becoming from a novice trader to a seasoned wolf in the stock market. This path often takes more than one or two years, but it begins with this step.

Step 5. Start playing on the stock exchange using an already developed strategy. From this moment on, the trader receives profits, losses, closes profitable positions, or loses all his money in the account. It all depends on the trader.

Step 6. Gathering information, preliminary analysis, gaining knowledge and preparing a strategy. This will be stage zero, which everyone must go through before moving on to the first step - choosing a broker.

How to make money on the stock market

There are two main ways to make money on the stock exchange – investment activity and speculative activity. Their main difference is that investments are medium- and long-term with the aim of receiving profit from sales, dividends, and redemption of securities. Speculative activity involves the purchase and sale of securities for the purpose of resale and making money on price fluctuations.

A more profitable method is speculative. More reliable - investment.

Now about how you can make money by investing:

• Buy shares. The riskiest type of securities. It allows you to receive annual dividends, which depend on the financial performance of the enterprise. It is recommended to buy shares of fairly reliable issuers - Google, Apple, Samsung, etc.
• Buy bonds. A more reliable way to invest money. Interest on some bonds is comparable to bank deposits, but nevertheless they are quite a profitable instrument if you know how to combine profitability and risks. After all, everyone knows that the higher the yield of a security, the higher the risk of non-payment for it - the issuing company. At the same time, developing companies, on the contrary, set prices below the market average in order to thus compensate for the risks of investors and attract attention to them.
• Buy certificates. One of the most controversial methods. A certificate is one of the financial instruments, a kind of analogue of a bank deposit. With several differences - the certificate can be placed at absolutely any amount, the certificate can be transferred, sold without loss of interest, etc.

Speculators have a narrower range of ways to earn money:

• Resale of shares. One of the most important ways to earn money. It can bring returns of up to 20-30% per day, but the losses can also be huge. A very risky method that requires good knowledge from the trader;
• Using Futures and Options. They allow you to transfer your purchase to a future period at current prices.

Depending on the method of earning, the profit, risks and financial instruments used to obtain profitability vary. Each trader must choose for himself in what volumes he is going to trade, with what and what profit he expects, and from this he should choose a financial instrument.

What are blue chips

Blue chips are recognized as the most stable companies that are guaranteed to pay their investors money, have enormous stability and, as a result, low risks and low returns. Blue chips are the basis for conservative investing.

In Russia, the blue chips are raw materials companies, Sberbank, VTB, Moscow Exchange and other large companies. They have been more stable over the past few years, are guaranteed to bring money to investors and annually attract additional funds through additional issuance of shares and bonds.

And now five real tips that can help investors get guaranteed profits:

1. Constantly study the stock market. The securities market is almost the same as IT technology. He is constantly evolving, constantly on the move. It is changeable, fluid and thanks to this there is no certain way to win and get rich. Carefully study trends, changes, view news, new strategies, look for ways to improve your skills. All this will be useful and all this will make the game a plus.
2. Remember that you are not only playing against other traders, but also the broker. Many people forget this fact and often end up in the red over the long haul, despite the fact that they seemed to be winning. Those few percent that are retained by the broker and the entire exchange apparatus hit the pocket of an ordinary trader very hard.
3. Have a clear strategy. Everyone must choose and adapt a trading strategy for themselves. The combination of the style of playing on the stock exchange with character traits, risk appetite, profit requirements and many psychological factors allows you to achieve high results simply by following one “playing style”. But at the same time, the strategy must be flexible enough to adapt to market changes.
4. Emotional control. This does not mean a complete rejection of impulsive transactions “by intuition”. This means analyzing all trades and finding the optimal method. Even if the trader makes most of the profitable trades that he opened thanks to his intuition, he must continue to do so. But if emotional decisions only brought losses, then it is recommended to reconsider your approach to opening transactions. Analysis and only analysis.
5. Keeping a trade diary. Probably one of the most important tips. The transaction diary is a place where all the information is recorded: when the transaction was opened, the essence of the operation, what the strategy was, what was expected, what happened, profit or loss, why the transaction was opened. And after each day, an analysis is carried out, which allows us to identify what turned out to be profitable and what was unprofitable. Over time, such a diary grows into a full-fledged analytical notebook for a trader, thanks to which he can track his progress, and also gets the opportunity to analyze which approach brings him more income.

These simple tips can really help you trade on the stock market even more successfully than before.

The main mistakes of novice investors

Now about the five main mistakes of novice investors:

• Taking profit too early. Beginners try to take profits as soon as they appear. This is a very wrong approach. Ideally, you should take profits either at the time of the price peak or at the time of the decline, but this situation is achieved very rarely. It’s better to wait it out and immediately sell or buy at the first signs of an opposite trend;
• Emotional game. As mentioned earlier, lack of emotional control can lead to unwanted transactions. It’s better to control your emotions once again. After all, you can’t tell from the face of an experienced trader whether he has just lost $2,000 or won;
• Lack of diary. As mentioned above: a diary is one of the most important elements for self-analysis;
• Constant change of strategies. Finding the optimal strategy is one of the features of the stock market as a whole, but constantly changing strategies cannot lead to anything good. After all, you cannot quickly understand all the pitfalls of a particular strategy without playing with it in practice. That is why you need to spend some time studying the strategy, learn how to play it, and only then change it if it is not suitable for the stock market.
• Lack of a mechanism for recording losses. This is one of the most important mistakes, which, when trading with a broker’s leverage, can lead to a complete loss of your bank account. Stop loss– This is an option in which losses are recorded. It is usually placed below the current price if you are buying and above the current price if you are selling. Such a tool is available in every trading terminal, and it allows you to minimize risks. Its proper use will protect you from unnecessary losses.

The essence of the stock market can be succinctly expressed in one phrase - I win only when others lose. And this is the most effective definition of playing on the stock exchange.

Indeed, when one player makes a wrong decision, the other one wins. This is what is good about the stock market. It allows you to play against the same traders, ordinary people.

The stock market is an important tool for both the state and ordinary people. It allows you to more effectively redistribute monetary resources both between sectors of the economy and between individual legal entities and individuals.

The stock market is a place where you cannot stop developing. You can only move forward in pursuit of new skills, trends, changes and profits. Without this, it is impossible to achieve outstanding results.

There are several books that are required reading for anyone who wants to become somewhat familiar with the techniques of stock trading and stock investing:

• Alexander Elder – Fundamentals of stock trading. A theoretically outdated reference book in terms of trading strategies, which allows you to understand the psychology of playing on the stock exchange and understand what influences prices. To put it very roughly - a reference book of applied stock psychology;
• Benjamin Graham - The Intelligent Investor. A book that is needed primarily for those who want to make high-quality passive income using securities. You need to look for the latest edition, as it contains truly practical advice based on current stock exchange situations. Suitable for both beginners and professionals.

These two books are the foundation for understanding stock trading and investing. With their help, you can create a certain base from which you can build upon when studying additional materials.

An integral part of the financial market, the purpose is to transform savings into investments; This is a stock market that provides long-term needs for financial resources through the circulation of stocks, bonds, certificates of deposit, treasury bills and other similar documents.

A security is a financial document certifying the right of ownership or loan relationship, defining the relationship between the person who issued this document and its owner and providing for the payment of income in the form of interest or dividends, as well as the possibility of transferring monetary and other rights arising from this document, to other persons. Securities are issued by firms, banks, and the state, called issuers. The procedure for issuing securities is regulated by law.

The main features of securities are:

Profitability;

Reliability is the property of securities to avoid the possibility of losses.

Bonds are the most reliable, while ordinary shares are the least reliable. negotiability Securities perform functions: regulatory, control, information, the function of a mechanism connecting various spheres and sectors of the national economy, including the real economy and finance.

The securities market is divided into primary and secondary.

In the primary market, new securities are issued and securities are placed by the issuer at a nominal price, i.e., the price indicated on the security.

In the secondary market, previously issued securities are resold. Here their exchange rate (market) price is determined. This market consists of the stock exchange and the over-the-counter market.

Market structure

The stock market consists of the following components:

Market subjects;

Market (exchange and over-the-counter stock markets);

State regulatory and supervisory authorities (Federal Service for Financial Markets (FSFM), central bank, ministry of finance, etc.);

Self-regulatory organizations (associations of professional participants in the securities market that perform certain regulatory functions, for example, NASD (USA), etc.).

Market infrastructure

Legal;

Information (financial press, stock indicator systems, etc.);

Depository and settlement and clearing networks (there are often separate depository and clearing systems for government and private securities);

Registration network.

There are 3 models of the stock market depending on the banking or non-banking nature of financial intermediaries:

Non-bank model (USA) - non-bank securities companies act as intermediaries.

Banking model (Germany) - banks act as intermediaries.

Mixed model (Japan) - intermediaries are both banks and non-banking companies.

Economic role of the securities market:

1) with their help, there is a process of centralization of temporarily available funds and savings of owners to finance production and construction, their technical re-equipment, for the development of trade, transport, and the service sector.

2) Securities, acting as investment vehicles, are used not only to eliminate the shortage of capital investments and economically stimulate the activities of enterprises, but also to create financial conditions for the functioning of market infrastructure facilities: banks, exchanges, insurance companies, trading houses, etc.

With the help of securities issued by the state, the current budget deficit is covered, its cash execution is ensured, and unevenness in the receipt of tax payments is smoothed out. One of the functions of the Central Bank market is the flow of capital, which allows for the rapid inter-industry and inter-regional movement of capital with the aim of concentrating them in technically or economically advanced sectors of production.

The information function allows investors, through the situation on the securities market, to see and feel the state of the economic situation in the country, in accordance with it, orient and take prompt measures for the rational use of their capital.

The activity of the securities market can reduce the inflationary state of the economy by transferring part of consumer income to investment purposes, and thereby reducing their excess pressure on the consumer market; in general reproduction terms, it contributes to the normalization of the proportions of consumption and accumulation.

To receive part of the JSC’s property upon its liquidation;

To receive information about the production and financial condition of the joint-stock company;

For preferential acquisition of new issues of shares.

The value of shares, as a rule, is not redeemed by the joint-stock company and can only be converted into money again through sale. The share circulates as long as the joint stock company exists; types of shares are ordinary and preferred shares. The dividend on ordinary shares fluctuates depending on the financial results of the JSC. Preferred shares give the right to receive a fixed percentage. First, the dividend is paid on preferred shares, and the remaining amount is distributed among other types of shares. The share can be bearer or registered. When transferring a registered share to another person, it is required to put a special transfer signature on it, which is done with the knowledge of the meeting of shareholders.

The joint stock form of ownership makes it possible not to withdraw funds from the enterprise if any shareholder-co-owner suddenly wishes to return the money. In this case, its shares will be sold on the secondary market, and the real capital of the enterprise will not be affected, and the production process itself will not be disrupted.

A share gives the right to participate in the management of the joint-stock company; such a right is actually concentrated in the hands of only those investors who own a controlling stake. Only they receive ownership of real assets. For the remaining shareholders who own a small number of shares, their acquisition represents only a simple loan transaction; their share of shares in practice does not give them the opportunity to effectively influence decisions made in the joint-stock company. Such shareholders can grant their voting rights to shares by proxy, for example, to the board of directors of the joint-stock company.

Bonds give their owner the right to receive a fixed income annually, but do not provide voting rights when making management decisions. A bond is issued (issued) for a limited period of time, for example 3.6 and 12 months. Its cost is fully repaid after this period. Bonds can be issued by the state, cities, enterprises, various funds, etc. Bond yields are commonly referred to as "coupon" payments because the bondholder, at set intervals, cuts the coupon off the bond and mails it to the entity that issued the bond to receive the interest due.

Bonds are issued registered and to bearer. Convertible bonds are also issued. Such securities give the right to exchange them for shares of the same company. A classic bond is a security with a fixed interest rate. However, in practice, more flexible varieties of this paper have appeared. Bonds with “floating” interest appeared. Income on them fluctuates depending on the situation on the loan capital market.

There are zero coupon bonds. No interest is paid on them. The investor receives income due to the fact that the bonds are sold at a price below par upon issue, and when the maturity date arrives, they are repaid at par.

A certificate of deposit is a financial document issued by lending institutions. It is the institution's certificate of deposit of funds, certifying the depositor's right to receive the deposit. There are different certificates of deposit on demand and time ones, which indicate the period for withdrawal of the deposit and the amount of interest due. Certificates of deposit are widely accepted by investors, various companies and institutions.

A savings certificate is a written obligation to deposit funds by an individual in a credit institution, certifying the depositor's right to receive the deposit and interest on it. There are savings certificates, registered and bearer.

A check is a monetary document of an established form containing an unconditional order from the drawer to a credit institution to pay its holder the amount specified in the check. As a rule, the payer of a check is a bank or other credit institution that has such right. A promissory note is an unsecured promise by a debtor corporation to pay a debt and interest on it when due. This type of securities is in last place among the company's debt obligations. Government securities are government debt obligations. They differ in issue dates, repayment periods, and interest rates.

Currently, in most countries there are several types of government securities in circulation. The first is treasury bills. Their repayment period is usually 91 days. The second is treasury bonds with a maturity of up to 10 years. The third is Treasury bonds with maturities ranging from 10 to 30 years. These types of securities are issued to finance government debt: short-, medium- and long-term. Accordingly, interest payments on them also differ.

The securities market is a system of economic relations between those who issue and sell securities and those who buy them. This is a set of mechanisms and actions aimed at trading securities. The concepts of the stock market and the securities market coincide.

The securities market (stock market) is an integral part of the financial market. It differs from other sectors of the financial market (money, foreign exchange, bank loans and deposits market) primarily in its object, but it is very similar to them both in the method of formation and in the significance of the circulation process.

The stock market is the sphere of formation of demand and supply of securities. Demand is created by enterprises, as well as the state, which do not have enough of their own income to finance investment. Net creditors are individuals, institutions and the state.

The stock market allows for and accelerates the transition of capital from monetary to productive form. It creates a market mechanism for the free, albeit regulated, flow of capital into the most efficient sectors of the economy. In the securities market, there is a redistribution of capital between industries and spheres of the economy, between territories and countries, between different segments of the population.

The securities market develops and moves according to its own laws, determined by the specifics of the so-called fictitious capital, but is closely linked to the capital market. The weakness of the stock market is its acute susceptibility not only to economic but also to political shocks. Suspension of the securities market in some cases can have quite tragic economic and political consequences for the country.

The stock market, being one of the components of a market economy, has the ability, through its mechanisms, to mobilize investment resources for the purposes of economic growth, the development of scientific and technological progress, innovation, and the development of new industries.

The form of organized functioning of the securities market is stock exchanges. A stock exchange is an organization that aims to bring together buyers and sellers in a specially provided place. The exchange rate of securities is formed on them.

In recent years, there has been a trend in the world towards a reduction in banking operations and an expansion of the sphere of influence of securities in financial markets. This global process is called “securitization.”

CLASSIFICATION OF SECURITIES MARKETS

The securities market is a complex structure, so it can be classified according to a large number of characteristics, each of which characterizes it from one side or another, or from the point of view of different relations that take place in it.

Classification according to the nature of the movement of securities

The movement of securities means their purchase and sale, as well as other actions provided for by law, leading to a change in their owner. Securities are traded on the primary and secondary stock markets.

The primary stock market is the market for the first and repeated issues of securities, where their initial placement among investors is carried out. Its most important function is full disclosure of information about the issuer, allowing the investor to make an informed choice of the type of securities for investment. Direct investors in the primary securities market are usually investment and commercial banks, investment funds, companies, and institutional investors who purchase stocks and bonds directly or with the help of stock exchange firms and investment banks.

There are two forms of the primary securities market: private placement and public offering.
A private placement is characterized by the sale (exchange) of securities to a limited number of known investors without a public offering or sale.
A public offering is the placement of securities during their initial issue through public announcement and sale to an unlimited number of investors.

The secondary stock market is the market on which previously issued securities are traded. This is a set of any operations with these securities, as a result of which the permanent transfer of ownership rights to them from one owner to another takes place. Its most important feature is liquidity, i.e. the possibility of successful and extensive trading with small fluctuations in rates and low sales costs.

The secondary securities market is divided into: the organized (exchange) market and the unorganized (over-the-counter or “street”) market.

Classification of stock markets by place of circulation

Depending on the degree of concentration (concentration) of relations between issuers and investors in terms of place, time, processes, etc. The securities market is divided into exchange and over-the-counter.

The stock market is exhausted by the concept of a stock exchange as a special institutional organized market on which securities of the highest quality are traded and transactions on which are carried out by professional stock market participants.

The distinctive features of the exchange market are:
- specific time and place of trading;
- a certain circle of participants (stock market professionals);
- certain rules of bidding and the subordination of participants to these rules;
- the organizer of the auction is a certain institution (an organization that has the appropriate license).

The over-the-counter market includes companies whose size does not reach exchange standards (primarily in terms of the number of shares issued and the degree of their reliability). This market is characterized by the chaotic process of concluding purchase and sale transactions of securities in time and space, and in organizational and legal terms, the over-the-counter market is dispersed throughout the country and among its participants.

The backbone of the over-the-counter market is a computerized communications network that transmits information about billions of listed shares. Information about daily prices and volumes of transactions is regularly published along with exchange turnover data.

Classification according to the presence of trading rules

From the point of view of having firmly established trading rules, fixed until they were approved by the state, the securities market has historically been divided into organized and unorganized.

An organized market operates according to rules that are binding on all its participants. The concept of an organized market now automatically includes its regulation by the state, since these rules must be approved by it.

An unorganized market operates without rules and without government regulation. For the modern highly developed securities market, the division into organized and unorganized is actually outdated and has ceased to be relevant. Currently, the securities market in all its aspects is a more or less organized market, which is simply unthinkable without the appropriate rules for working on it.

Classification by type of securities

Based on the type of securities, the stock market is divided into relatively independent markets for each individual security: markets for shares, bonds, bills, etc. The security market is any relationship associated with a security, and not just trading in it. The circulation of a security in the form of its purchase and sale may be absent for one reason or another.

The market for an individual security can be divided into the market for this security itself and the markets for instruments dependent on it: the market for secondary securities and the market for derivative financial instruments based on futures contracts for securities.

The derivatives market is based on other securities. An example of secondary securities in Russian conditions, in particular, are issuer options.

The market for derivative financial instruments for securities is a market for futures contracts for the purchase and sale of securities, concluded not for the purpose of actually buying or selling them, but only for the purpose of obtaining a difference in their market prices over time. Examples of such instruments are futures and other derivatives contracts.

Classification by issuer

Depending on the type of issuer, the securities market is divided into markets for government and corporate (non-government) securities.

The government securities market is a market for securities the issuer of which is the state represented by the relevant state executive authorities.

The corporate securities market is a market for securities issued by commercial organizations (corporations). In Russian practice, there are no securities whose issuers are individuals.

Classification of stock markets by types of transactions

Depending on the type of transactions concluded, the securities market is divided into cash and futures, investment and speculative, cash and debt (margin), etc.

The cash market is a market for the immediate execution of concluded transactions, while purely technically, their execution can take up to one to three days if delivery of the security itself in physical form is required. As a rule, traditional securities (stocks, bonds) are traded on it.

The forward securities market is a market with delayed execution of a transaction, usually for several months. As a rule, derivative contracts are traded on it.

Classification by types of trade technologies used

Depending on the trading technologies used, the following securities markets can be distinguished:
1. Markets without rules are spontaneous.
2. Markets in which only buyers compete: simple auction market, Dutch auction market.
3. Markets in which only sellers compete: dealer market.
4. Markets in which both sellers and buyers compete with each other: a double auction market, which is divided into on-call and continuous auctions.

A spontaneous market - the rules for concluding transactions, requirements for securities, for participants, etc. are not established, trading is carried out arbitrarily, in private contact between the seller and the buyer. There is no system for disseminating information about completed transactions.

A simple auction market is characterized by the fact that only buyers compete on it; there is no direct competition between sellers (typical of undeveloped exchange and over-the-counter stock markets). Before the auction, a preliminary collection of applications for sale takes place, and a consolidated quotation sheet is drawn up. The auction takes place through a sequential public announcement of a list of proposals, for each of which there is a public competition (according to a certain scheme) of buyers by setting new prices. The seller's price is taken as the starting price.

During a Dutch auction, there is a preliminary accumulation of buyer applications, which are considered in absentia by the issuer or an intermediary working in his interests. A single price is established, which is equal to the lowest price in purchase orders that allows the entire issue to be sold. All purchase requests submitted at prices higher than the official ones are satisfied at the official price.

Dealer markets. In these markets, sellers publicly announce bid prices and access to places to purchase securities. Those buyers who agree with the price offers and other investment conditions declare their intentions and purchase securities. Sellers are obligated to transact with any person at the prices they advertise. There is no direct open competition between sellers or between buyers.

Dealer markets are used when:
a) initial placement of securities;
b) in tender offers (a public offer by a large investor to purchase securities).

Before the start of trading on the call market, purchase orders and offers to sell are accumulated, which are then ranked by price offers, sequence of receipt and quantity. In this order they are satisfied. According to certain rules, an official rate is established at which the largest number of applications and proposals can be satisfied. After they are satisfied, the remaining positions form a list of unrealized requests and proposals. Then the continuous auction market comes into play.

During the bidding period on a continuous auction market, a constant flow of applications for purchase and offers for sale arises, which are registered by specially authorized persons who bring together all orders from sellers and buyers. If the order cannot be fulfilled, then the applicant either changes the conditions or is placed in the queue of unfulfilled orders. A continuous auction market is possible only with significant volumes of daily supply of securities (more than 10,000 lots daily).

Classification of stock markets depending on the type of trading

There are traditional and computerized securities markets.

In a traditional stock market, sellers and buyers (usually represented by stock intermediaries) meet directly in a certain place and public, transparent trading takes place (as in the case of stock trading) or closed trading, negotiations are conducted that for some reason are not subject to wide publicity.

The computerized stock market is a variety of forms of securities trading based on the use of computer networks and modern communications.

The securities market is also divided into money and capital. Short-term securities (up to 1 year) are traded on the money market. Perpetual securities or securities with more than 1 year remaining until maturity are traded on the capital market.

An industry stock market is a market for all types of securities that are issued by commercial entities in a given industry. For example, the securities market for metallurgical or oil companies.

According to the territorial principle, stock markets are divided into: international, national and regional.

By terms, stock markets are divided into: markets for short-term, medium-term, long-term and perpetual securities.

STRUCTURE OF SECURITIES MARKETS

The stock market is a complex financial and economic system, but its structure can be roughly represented as follows:
1. The market itself (exchange, over-the-counter).
2. Market participants (investors, issuers, intermediaries).
3. State regulatory bodies.
4. Self-regulatory organizations.
5. Market infrastructure: legal, information, depository and settlement and clearing network, registration network.

Securities market participants

The objects of the stock market are various types of securities. The subjects (participants) of the stock market are: the state, issuers, investors, intermediaries.

Issuers are legal entities that issue securities into circulation and bear, on their own behalf, obligations to the owners of securities to exercise the rights assigned to them.

Investors are individuals and legal entities who invest their own, borrowed or raised funds in the form of investments in securities with the aim of generating profit and other positive economic results.

Financial intermediaries of the securities market are dealers, brokers, stockbrokers, etc., who assist in the circulation of securities and the performance of various stock transactions.

Government regulatory bodies

State regulation of the securities market is carried out in order to ensure the public interests of society and the private interests of entities operating in the market, protect their rights and legitimate interests, and create uniform rules for the functioning of this type of market.

The main body of state executive power of the Russian Federation that regulates the securities market is the Federal Commission for the Securities Market (FCSM). It is the FCSM:
1. Conducts state policy in the field of the securities market.
2. Exercises control over the activities of professional participants in the securities market.
3. Ensures the protection of the rights of investors, shareholders and depositors in the securities market.

An important condition for the development of the securities market is to ensure free competition and limit monopolistic activities in this area. A special role in this is given to the Ministry of the Russian Federation for Antimonopoly Policy.

The government body in the area of ​​the securities market is also the Ministry of Finance of the Russian Federation. Its competence includes a number of issues related to the establishment of accounting rules for transactions with securities and the implementation of state policy in the field of issuing government securities.

The Central Bank of the Russian Federation, although not a government body, has the right, on the basis of law, to regulate the activities of credit institutions in the securities market. It registers issues of securities of these organizations and monitors their compliance with legal requirements.

Self-regulatory organizations

Self-regulatory organizations of the securities market are voluntary associations of professional participants. According to Russian legal norms, they can take the form of associations, trade unions and professional public organizations, with the state transferring some of its functions to them.

Functions of self-regulatory organizations:
- self-regulation of the activities of participants in the securities market;
- maintaining high professional standards and training of personnel;
- development of stock market infrastructure;
- carrying out joint scientific developments;
- collective entrepreneurship in its own interests and protection of the interests of investors.

All income of self-regulatory organizations is used by it exclusively to carry out its statutory tasks and is not distributed among its members.

Control over the creation and activities of self-regulatory organizations is exercised by the Federal Commission for the Securities Market.

There are several types of self-regulatory organizations: international, national and regional.

Stock market infrastructure

From the point of view of internal organization, the stock market is a harmonious combination of the following elements of its infrastructure:
- legal (regulatory and legislative acts);
- information (financial press, stock indicators, stock indicators, specialized databases on securities, about issuers, news agencies, the Internet);
- analytical (companies specializing in analytical processing of information about the stock market, rating agencies, companies specializing in assessing the value of securities and other assets);
- depository and settlement clearing network (for public and private securities there are often separate depositary clearing systems);
- registration network.

FUNCTIONS OF SECURITIES MARKETS

The stock market is an integral part of the financial market, therefore it performs both general market and specific functions:
1. Commercial - making a profit.
2. Evaluative (value, measurement). A security receives its own market price.
3. Informational.
4. Regulatory. The stock market operates according to the rules it develops.
5. The stock market is a mechanism for attracting investments, primarily through the purchase of corporate securities.
6. Financial intermediary. Redistribution of monetary resources, transfer of capital to the most efficient areas of economic activity, industries, enterprises. The stock market is a mechanism of natural selection in the economy.
7. Centralization of capital - the combination of two or more capitals into one common capital. This function is primarily performed by the stock market.
8. Increasing the degree of concentration of capital and production - increasing capital through accumulation, i.e. capitalization of net profit.
9. The stock market serves as a mechanism for attracting money to the state budget (mainly through government securities).

The securities market objectively competes with other areas of capital investment, and therefore everything depends on how attractive it is from the point of view of market participants.

And further cooperation between companies and them.

1. What is the stock market in simple words

Stock market(from the English "stock market") is an open securities market where anyone can sell and buy assets (sometimes it is also called the financial market or stock exchange). Abbreviated as FR.

Initially, the purpose of the stock exchange was to attract capital to developing companies. A long time ago, many began to be called joint-stock companies. Through the sale of part of their company, they formed the authorized capital.

Online trading allows you to quickly find out the current assessment of the real value of a business. Over time, for many it became just speculation, for some a means to distribute assets, and for others a quick way to become a co-owner of a company (shareholder).

In the stock market, large investors reallocate their assets. This can be called a convenient tool that allows you to quickly and with minimal commissions manage your capital and assets. For example, today we keep money in dollars, tomorrow we transferred it to blue chips, and at the end of the month we purchased bonds. All these actions are done by clicking the buy/sell buttons on one brokerage account.

• bonds
• goods
• bills

However, most often ordinary investors use two main categories: stocks and bonds, as the most liquid and accessible instrument for trading and investment.

The stock market is a direct reflection of the current situation of the country's economy, shows its investment climate, and gives a forecast of future income. Steadily growing securities prices indicate favorable economic development in the country. Of course, this is not an axiom, but the relationship between the economy and market prices is almost linear.

Note 1

6.1. Choosing a broker

Individuals can only trade in the securities market through brokerage companies. This does not mean that he will manage your money. You just work through it (it is an intermediate link between the MICEX exchange and you).

There are many brokerage companies in the market. If someone thinks that a broker is a person who wants to take your money, then he is deeply mistaken. The only thing a broker earns from is commissions from the turnover of its clients. Therefore, it is beneficial for him that clients make many transactions rather than lose their money.

I have been working in the market since 2011. During this time I have already worked with several companies. I can recommend the following brokers for work:

In my opinion, these companies are the best in all respects. They provide services to more than half of all traders in Russia. The commission of these brokers is extremely small: 0.0373% of turnover (up to 1 million rubles). If the turnover is higher, then the commission will be even lower: 0.0295%, 0.0236%, 0.0177%, etc. Through these companies you can buy American stocks, currencies, bonds, commodities, etc. There are services for following the strategies of professionals and more.

Other brokers are less reliable and do not provide such professional support. Also, their commissions for trading turnover will be much higher. For example, a Sberbank broker charges 0.06% for trading turnover, which is 2 times higher than Finam! However, you do not receive any benefits by paying such a high commission. I would say that on the contrary, you get worse service for more money.

The broker registration form looks something like this:

To register, prepare a scan of your passport, INN, SNILS.

6.2. Opening an exchange account

After registering with a broker, you will be able to open an exchange account. To do this, in your broker’s personal account, click on the link “Open a new agreement”

Choose a brokerage account type

I recommend opening an IIS so that you can later receive a tax deduction. However, to obtain it, the IIS must be open for at least three years. You can top it up later, only the opening date is important. In any case, I recommend opening it for the future (it's free).

6.3. Top up your account

You can top up your brokerage account without commission. To do this, it is enough to make an interbank transfer using the relevant account details or bring cash to the bank.

I personally prefer to use a wire transfer via a Tinkoff debit card (card review"). You can top it up without commission from any other bank card, as well as make interbank transfers without commission. Very convenient.

I would also like to note that after opening an IIS, it is not necessary to replenish it. You don't have to pay any commissions for it. Now many people open these accounts for the future for their relatives (wives, children, parents).

6.4. Execution of trading operations

The broker will provide you with access to trading terminals (these are programs for trading). For example, this is what the interface looks like when purchasing Sberbank shares (SBER) through the Finam Trade application (broker Finam)

The application also has a convenient opportunity to view the current trading schedule

You decide for yourself when and what to buy. For example, today you decide to buy bonds. After a couple of weeks, the stock exchange collapsed, in this case you can sell bonds (all or part) and buy shares. After some time, sell and buy currency. And all these operations can be performed remotely with minimal commissions.

7. Types of transactions in the stock market

There are two types of transactions on the stock exchange:

1. Long or "long position" (trading upward, "long"). The most popular type of deal. Allows you to buy securities for the long term without paying any commissions.
2. Short or "short position" (trading down, "short"). To do this, you need to sell securities that you do not have. The broker can lend them out. For debt you have to pay a small commission every day, so holding such a position for a long time is not profitable (of course, this is provided that the market does not collapse). For trading during the day, you can take shorts for free. The main thing is that we return the same number of securities that we borrowed.

There are the following types of orders in the stock market:

1. Limited order(buy limit, sell limit). This is a buy/sell order with a specific volume and price. As soon as the market price reaches it, the order is executed. This is the most profitable and predictable type of orders for a trader.
2. Market order(market order). Purchase at the current market price. In an illiquid market, it is fraught with a strong overpayment for the spread. In liquid markets, you can use it at the moment of breakouts of levels in order to have time to enter the movement.
3. Stop order(stop loss, take profit). You can specify a level upon reaching which shares will be automatically sold at the market price. If you specify a stop price of 100.00, then most likely the price will be lower: 99.92, etc. Because at the time of sudden movements in the market there will not be enough applications to satisfy all sales. This situation is called slippage. You can read about this type of orders: stop loss and take profit
4. Stop limited(stop buy, stop sell). Indication of the price after which the asset will be automatically purchased at the market price. For example, if the market is growing and breaks through an important level, then you can automatically buy at the breakout price.