Principal amount of bonds- nominal (nominal) price of a debt security, which its bearer undertakes to pay upon the maturity date of the asset (excluding interest).

Principal amount of bonds: essence and place in classification

One of the most popular debt instruments on the market is the bond. The peculiarity of the asset is that it gives the creditor (buyer) the right to demand from the borrower (issuer, seller of the security) payment of the principal amount. In this case, the holder of a debt security can have two types of income. The first is in the form of interest payments (variable or fixed rate), and the second is in the form of the bond's principal amount (face price). The latter is paid on the day of repayment of the debt paper.

In this case, the owner does not have to hold the paper until the day the principal payment is made. He can sell on the secondary market and fetch a higher (market) price. Moreover, at the time of issue of the bond, it can be either higher than the nominal price (an asset with a premium) or lower than the nominal price (a bond with a discount). It turns out that the premium is a payment for the opportunity to receive more on an asset, and - caused by a small potential income from a debt security.

When issuing a debt security, several basic parameters are determined:

- nominal (nominal) price of the asset. It is usually written on the “body” of the debt paper. It is (the principal amount of the bonds) that the issuing party must pay to the asset holder upon the maturity date. If this is stipulated in the agreement, then interest may be paid in addition to the face value;

- repayment day- the date when the issuing party undertakes to transfer the principal amount of the bond to its holder;

- interest rate (coupon)- the ratio of interest paid annually to the nominal price of a debt security. For example, if every year the holder of an asset receives 2 thousand rubles from an asset that has a nominal price of 20 thousand rubles, then the coupon rate is 10%;

The interest payment date is the days on which coupon payments are made.

When working with debt securities, it is worth knowing all forms of its value:

- current price, generally equal to the sum of the present value of the stream of coupon payments made at the end of each payment period and the face price paid on the maturity date of the debt security;

Calculated and set at the time of placement. The principal amount is paid based on this price. The coupon value is determined separately, which also depends on the denomination of the debt security. In practice, most debt securities on Russian stock exchanges have a price of 1,000 rubles;

- market price- an indicator of the cost at which an asset can be sold at a specific point in time. The market price of a debt security is a variable value. It decreases and increases depending on demand, interest rates and supply of debt securities on the market. Market value is determined during trading. Moreover, the greater the demand for an asset, the more expensive it will cost the buyer;

- dirty price- current debt security taking into account the accumulated coupon profit. When purchasing an asset, he pays the “dirty” price. The NKD to the previous holder is also added to the market price described above.

Principal amount of the bond: characteristic features, presentation features

Debt paper par value- the amount that the issuer of the asset borrows and undertakes to return upon completion of the loan term. These funds are called the principal amount of the bond, but do not include interest payments. Coupon payments can be accrued during the entire period the asset is held in hand or at the end of its term.

Often the nominal price of an asset has a high parameter, which distinguishes it favorably from another exchange asset - shares. As a rule, institutional or individual investors who have sufficient capital for such investments act as buyers of debt assets. Government agencies and commercial companies can act as issuers of bonds.

In Russia (as already mentioned) bonds are usually 1000 rubles, and in the USA - 100 or 1000 dollars. Of course, this does not mean that buying debt securities is only available to wealthy investors. Funds intended for the purchase of shares can also be invested in bonds, only indirectly, for example, through investment funds.

The current market price of a debt security is indicated in an unusual way. The base value is the nominal price of the bond. Thus, the par value of the bond is set as 100%. If the market value of a debt asset falls below the parameter set by the issuer, then the quotes will reflect a price less than 100%, for example, 98 or 99%. If the bond, on the contrary, rises in price, its market price will be greater than its face value (101%, 101.5%, and so on).

There are a number of other nuances in presenting the value of an asset. Thus, for most debt securities, interest payments (coupons) are provided. As a result, when purchasing an instrument, the investor must pay not only the market price, but also the accumulated coupons. In total, these parameters represent the “dirty price” discussed above. If the investor does not sell the debt security and holds it until the maturity date, then he receives the due interest and the total amount of the bond (its face value).

The process of trading debt securities is very convenient. A market participant sees a glass of trading orders in his terminal. By analogy with the stock book, there are ask and bid prices (the best offer of the seller’s and buyer’s value). These parameters are expressed as percentages.

The asset representation described above allows you to accurately determine how profitable a bond is. If an asset with a par price of $1,000 is represented at 99%, then when the maturity date is reached, the investor can receive 1% of the price. That is, the total bond amount will be $100.

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A bond is a security that confirms the fact of providing a loan to the issuer and provides the owner with regular receipt of a fixed income, and upon repayment, the loan amount. As can be seen from the definition, the main distinguishing features of a bond are:
a) loan relationship;
b) final maturity date;
c) payment of fixed income.
Income on a bond can be paid either as a percentage of the face value or as a discount. In the latter case, the owner of the bond receives income due to the fact that the bond is sold at a price below par and is redeemed at par. Bonds have seniority over shares in the payment of income and in satisfying obligations in the event of liquidation of the enterprise or declaration of bankruptcy;
d) bonds do not provide the right to participate in the management of a joint stock company.
The bond market is very diverse. Depending on the issuers, there are government and municipal bonds, bonds of joint-stock companies and foreign borrowers. The least profitable on developed securities are government bonds, since they are the most reliable, i.e. bring income without much risk.
The main features of bond circulation include the following.
Firstly, the bond does not provide voting rights, therefore, does not allow its owner to participate in the development of management decisions. Therefore, ensuring the protection of its property interests can be achieved through the provision of security rights to the property of the JSC.
According to the degree of security with collateral, the Law on JSC distinguishes:
a) bonds secured by the pledge of certain property owned by the joint-stock company (real estate, securities, etc.);
b) bonds secured by property provided by third parties;
c) unsecured bonds.
Secondly, the legislation of a number of countries contains restrictions on the issuance of corporate bonds, the meaning of which boils down to limiting the possibility of forming the financial resources of an enterprise (firm) using borrowed funds. The following rules apply in Russia:
a) the issue of bonds is possible only after full payment of the authorized capital of the JSC;
b) bonds can be issued at par value in an amount not exceeding the authorized capital of the joint-stock company;
c) in the absence of collateral for bonds, their issue is permitted no earlier than the third year of the JSC’s existence.
All the advantages and disadvantages of financing a company’s activities through the issue of shares and bonds can be presented in the form of a table (Table 13.2).
Table 13.2
Advantages and disadvantages of stocks and bonds

End of table. 13.2

Way financing	Advantages	Flaws
Public offering of shares (IPO)	the funds raised constitute the company's equity capital; there is no need to return raised funds to investors; access to a wide range of investors through the stock market; source of long-term financing; the ability to determine the real market value of shares and realize part of the value of shareholder property; there is no need for mandatory annual dividend payments (on ordinary shares)	the share of share capital proposed for public offering will dilute share capital and may lead to a decrease in the level of control over the company by current shareholders; high time costs, including a long stage of analysis of financial statements and business activities of the company; compliance with a number of strict requirements of stock exchanges, including information disclosure; significant financial costs, including fees to consultants and underwriters, fees for listing on the exchange; the price of the placed securities depends on market conditions during the placement period; listed companies must further comply with a number of stringent requirements of securities laws and exchange rules

Stocks and bonds are widely traded on the securities market. However, in recent decades, secondary and derivative securities have become increasingly common.

For investors, the stock market is an excellent way to increase capital. Each instrument of this market is good in its own way and has its own characteristics, both positive and negative. The essence of preferred and ordinary shares does not differ in many features, but debt obligations are used in a completely different area and have other purposes.

The mechanism of the promotion

The difference between stocks and bonds lies mainly in the mechanism of their operation. The holder of preferred financial instruments has the right to claim a share of the company upon its liquidation. During operation, the shareholder receives dividends from the commercial operation of the enterprise.

Note!!! A person has the right to purchase bonds, in which case he will be considered a creditor of the company in whose name the documents were issued.

The issue of preferred and ordinary assets is carried out by associations that have a license of a joint stock company or are a reorganized form of it. The cost may vary, the price depends on the total assets of the company. When purchasing shares, the investor contributes a certain amount, which will be part of the organization's assets, this amount will be the final price. The interested party will receive profit from the company's activities in the form of dividends; the holder has the right to take part in meetings or refuse them.

Any investment activity carries a certain amount of risk, since the cost of documents can change frequently. It is impossible to predict what asset the company will have in three years, since market conditions are volatile. Such a process always carries a number of certain risks:

• instability of the economic situation;
• the impossibility of an objective assessment of the market for long-term prospects;
• isolation of some elements of the securities market.

How the bond works

The essence of ordinary debt obligations is to improve the financial provisions of the enterprise that produces them. Such documents are issued when an organization experiences an acute lack of financial resources. The issue of ordinary financial instruments makes it possible to become creditors, and the company to receive additional capital for further development. Both a legal entity and an individual can become the owner of preferred and ordinary bonds, who will subsequently receive a percentage of the company’s profits. Any debt obligation has the following characteristics:

• a certain cost;
• term of use;
• rules and requirements for use.

Note!!! Upon expiration of the debt obligation, its full nominal value is returned to the organization.

Comparison of securities

The holder of privileged documents is always confident in the level of risks, unlike a legal entity or individual who has debt obligations. These two types of financial instruments are always compared based on a number of characteristics:

There are always difficulties that prevent you from starting to engage in investment activities. Firstly, this is solvency. An investor must have not only one capital, he must have a whole system of funds so that, if necessary, he can cover losses on time. Secondly, these are barriers that prevent you from entering the retail space; often, competitors become the basis of such barriers.

FEDERAL AGENCY FOR EDUCATION

Baikal State University of Economics and Law

Department of Banking and Securities

Specialty 060400 (080105.65) “Finance and Credit”

Specialization "Banking and Securities"

COURSE WORK

in the discipline "Securities Market"

on the topic “Bonds: concept, classification”

Supervisor: ______________________________ ________________________

Executor:

Irkutsk, 2010

INTRODUCTION

1. CONCEPT AND DISTINGUISHING FEATURES OF BONDS 5

2. CLASSIFICATION OF BONDS 10

3. MAIN CHARACTERISTICS OF BONDS

CONCLUSION

BIBLIOGRAPHY

INTRODUCTION

In international practice, you can find a variety of types of debt obligations: bonds, treasury bills, bank loans, consoles and the like. The most common of them are bonds and loans.

Bonds currently occupy a significant place in the Russian securities market. Therefore, this topic is very relevant. Today, bonds are one of the most competitive investment instruments with the potential to provide attractive returns in the form of interest and/or a positive exchange rate difference between the sale (redemption) price and the purchase price of the bond.

The investor must know what he is going to invest money in or under what conditions he is providing a loan (credit), what income he can receive from providing this loan (credit). Before deciding to issue bonds, the issuer must take into account all the advantages and disadvantages of bonds over shares and a bank loan. Therefore, the purpose of writing this course work is to disclose the characteristics and distinctive features of bonds, as well as their classification.

In the course work, Chapter One gives the concept of a bond and its distinctive features. Let's compare bonds with shares and a bank loan, and find out the advantages and disadvantages of bonds. The second chapter discusses the classification of bonds and their essence. The third chapter discusses the main characteristics of bonds.

When writing a term paper, the civil code of the Russian Federation is used, as well as Russian legislation on securities, including regulatory legal acts of the federal executive body for the securities market. When considering issues related to corporate bonds, we will refer to the federal laws “On Joint Stock Companies” and “On Limited Liability Companies”. And textbooks by such authors as Galanov V. A. Edronova V. N. Ivasenko A. G. Alekseeva I. A. Krinichansky K. V. Lyalin V. A Selevanova T. S. are studied.

1. CONCEPT AND DISTINGUISHING FEATURES OF BONDS

One of the important objects of trading in the securities market are bonds.

Bonds appeared at the end of the Middle Ages, during the formation of capitalism. The term “bond” comes from the Latin “oblige”, which means “to oblige”. If we try to give a brief definition of a bond, we can note that a bond is a security that certifies the loan relationship between the investor and the issuer. Investors who purchase bonds are creditors. Issuers are enterprises, banks, government agencies that issue bonds and are borrowers.

Bonds currently occupy a significant place in the Russian securities market.

The definition of a bond as a security is given in the Federal Law “On the Securities Market” and the Civil Code of the Russian Federation.

A bond is an issue-grade security that secures the right of its owner to receive from the issuer of the bond its nominal value or other property equivalent within the period specified in it. A bond may also provide for the right of its owner to receive a fixed percentage of the nominal value of the bond or other property rights. The yield on a bond is interest and/or discount.

The Civil Code of the Russian Federation states that the issue and sale of bonds is one of the ways to conclude a loan agreement.

A bond is a security that certifies the right of its holder to receive from the person who issued the bond, within the period specified by it, the nominal value of the bond or other property equivalent. The bond also provides its holder with the right to receive a fixed percentage of the nominal value of the bond or other property rights.

Bonds have the following properties:

1. A bond is an issue-grade security, that is, it secures a set of property and non-property rights that are subject to certification, assignment and unconditional implementation in accordance with the current procedure; posted in releases; has equal volumes and terms of exercising rights within one issue, regardless of the time of acquisition of the security;

2. A bond is a loan certificate, a debt security, where two persons participate: the issuer (borrower, debtor) and the investor (creditor);

3. A bond is a redeemable, that is, a fixed-term security that has a circulation period, at the end of which it is redeemed by the issuer, as a rule, at par value. In extremely rare cases, bonds can be perpetual, but in Russian practice such bonds are not observed;

4. Bonds are the most susceptible to innovation. Thanks to constantly introduced innovations, bonds are becoming more diverse and convenient financial instruments. In general, the entire development of the bond market in the post-war period can be characterized as the acquisition of flexibility by bonds, and maneuverability increases for both issuers and investors.

5. Bondholders, as creditors, have priority in receiving income. When issuing bonds, the issuer determines the amount and frequency of income payments. The yield is set as a percentage of the bond's face value and shows the annual yield. On bonds, the issuer is obliged to pay income even in the absence of profit. Payments on bonds are the responsibility of the issuer, which he assumed by issuing bonds into circulation. Interest payments on bonds are mandatory.

Thus, a bond is a certificate of debt, which certainly includes two main elements:

The obligation of the issuer to return to the bondholder after the agreed period the amount indicated on the title (front side) of the bond;

The issuer's obligation to pay the bondholder a fixed income in the form of a percentage of the face value or other property equivalent.

The presence and guarantee of fulfillment of obligations under bonds determine their main differences from shares. Shareholders cannot demand that the joint stock company redeem shares and return their funds. A shareholder can only demand that the company buy back its shares at market value, however, such a right arises only in certain cases, which are provided for by the federal law “On Joint Stock Companies,” but they have the opportunity to claim dividends on shares if there is net profit.

Bonds have a number of advantages over stocks, both for the issuer and the investor. The issue of bonds contains an attractive condition for the issuer: through their placement, the organization can mobilize additional resources without the threat of interference from their holders-creditors in the management of the financial and economic activities of the borrower, that is, the investor becomes a creditor, and when purchasing shares, the investor becomes one of the owners of the company that issued it. It should be noted that the right to issue bonds can only be granted to companies that meet the creditworthiness requirement.

The issuer's obligations make the principles of bond circulation similar to the principles of a loan: repayment, urgency, payment. But a bond loan for the issuer also has advantages over a bank loan. As already mentioned, the creditor of the bond issuer is the investor. If the issuer receives a loan from a bank, the latter lends it with funds initially accumulated from other sources, for the use of which it in turn pays cash. The loan is more expensive than a bond loan. You can usually get a loan with collateral, but a bond loan can be issued unsecured. Bonds may have a long maturity. And when receiving a medium-term or long-term bank loan, the bank risks losing liquidity, diverting monetary resources from circulation for a long time. Therefore, it is difficult to get a loan for a longer period. Also, the main advantage of bonded loans from the issuer’s perspective is the ability to maneuver when determining the characteristics of the loan, since all parameters of the bonded loan - volume, terms, interest rate, terms of issue, circulation and repayment, and so on - are determined by the issuer independently.

Despite the advantages of a bond issue over a loan, enterprises rarely consider it as the main source of investment financing. The disadvantage of issuing bonds is the need to go through the state registration procedure for each bond issue, which lasts up to several months, while a bank loan can be obtained after submitting an application in an average of 3 weeks.

The bond is also interesting for investors. As a loan instrument, it is a higher quality, safer, less risky security than a stock. The owner of the bond is freed from the risks of violation of shareholder rights that investors often face. In addition, the bond provides its holder with a preferential right over the shareholder when distributing profits: interest on bonds will be paid first, and only after that dividends on shares. Property is distributed in the same order in the event of liquidation of the company: first, debts to creditors, which include bondholders, are repaid, and only then to shareholders. Thus, shareholders can count on the part of the property that will remain after paying off all debts.

2. CLASSIFICATION OF BONDS

There are a wide variety of types of bonds around the world. To describe different types of bonds, we classify them according to a number of criteria.

The following classification can be proposed:

1. Depending on the issuer, bonds are distinguished:

 government;

 municipal

 corporate;

 foreign.

If a bond is issued by the state represented by a federal executive body or an executive body of a constituent entity of the Russian Federation, then such a bond is called a state bond. Federal government bonds include government short-term bonds (GKOs), bonds of federal deputies (OFZ), bonds of the state savings loan of the Russian Federation (OGSZ RF), bonds of internal currency loans (OVVZ), bonds of external bonded loans (OVOZ), government savings bonds (GSO) . If the issuer of bonds is the executive bodies of local government, then the bonds are called municipal bonds. Legal entities also issue bonds: enterprises and organizations of any form of ownership and organizational and legal status issue corporate bonds. Individuals do not issue bonds.

The global commodity sphere consists of two categories: the first is the provision of its own services, the second is money. Finance can be presented in the form of money and capital. Cash is unique in that it is with the help of money that new funds are accumulated. In commodity circulation, there is a constant movement of money in the form of its transfer from one consumer to a new one. Thanks to this scheme, a complex chain of monetary relations is formed within the organized money market. Over the course of thousands of years, the world market has developed several methods of transferring funds - issuing credit loans and directly the circulation in which all types of securities are circulated.

The importance of securities lies in the fact that theoretically they can be safely equated in function to money, but in addition they also provide their owner with specific rights. A person who has money with him can exchange the goods he has for any security, making sure that the value of the latter is greater than or equal to money.

Characteristic features of securities and their role in the world market

When characterizing securities, you need to take into account that this is a specific commodity item. It can only rotate within its own special market. But in comparison with money, it knows neither consumer price nor generally accepted material value. Therefore, such a market does not belong to the category of services. The documents described above, which circulate within the special stock market, are called financial instruments. This name was not given to them in vain, because with their help you can make money by putting such a unique product up for auction.

Securities are documentation where all rights are reflected in property and non-property terms. Within the market, they can either circulate freely or have specific tasks. That is to be:

1. object for transactions;
2. instrument of purchase and sale;
3. a source that allows you to receive regular or one-time profit.

Based on the above, we can conclude that the described financial instruments are types of capital, in the movement of which material assets are distributed.

The Code of the Russian Federation characterizes these papers as documentation that requires a certain form, containing details confirming that property rights belong to a specific person. The official transfer of the latter is provided only when an official document is presented.

The contents of each and every security are subject to the conditions of the country's legislative framework. And the value of this document appears only if its form meets all the requirements with the mandatory content of details. All details may have technical parameters and clear economic content. Technical parameters (details) include addresses, different numbers, signatures of document owners, as well as stamps affixed to forms. The concept of economic details implies a form of drawing up a document that states:

• validity;
• belonging to a person who is assigned certain responsibilities;
• clear denomination;
• availability of rights.

A security has its own distinctive features. Namely:

1. This is an official document that only an authorized person can draw up. It always has unique details and has a number of rights.
2. The document displays private rights. The latter are expressed in two forms: presented as the title of the owner or displayed in the form of a relationship between the legal entity that received the document and the person who issued it.
3. The rights that a certain document provides can be exercised only after its presentation.
4. For civil agreements, the document must be negotiable.
5. The person mentioned in the security has the right to make demands on its owner as specified in the document.
6. This is an official document confirming the fact of investments, therefore, the money pledged and reflected in it acquires the characteristics of a material object.

Standard classification of securities: detailed description!

The classification of securities means their division into types according to unique criteria. In parallel with this, the main types of securities are sorted into subtypes, and those further down. Therefore, it becomes clear that the lower division is included in the higher classification. For example, a share is considered one of the types of securities. And it can be both ordinary and privileged. It may or may not have a face value.

So, valuable documents are also distinguished by unique characteristics:

1. According to “life expectancy”: urgent, and those that are not limited by deadlines;
2. According to actual existence: documentary expression, non-documentary expression.
3. By ownership: to an unspecified person (that is, a person who, under certain circumstances, can become the bearer of the document), as well as registered ones (those in which the name of their owner is written). If bearer shares are aimed at any person who may one day become a bearer, then registered shares initially contain the full name of their owner, and they must always be officially registered. All important information about such shares is entered into the register of official shareholders.
4. According to the principles of circulation: documents the transfer of which occurs through delivery or through assignment; or order (that is, their transfer occurs after the actual order of their owner).
5. Based on the actual release form: can be emissive or non-emissive.
6. By registration parameter: registered (state agencies and the Central Bank of the Russian Federation can register, according to legal norms), as well as documents that are not registered anywhere.
7. According to the parameter of belonging to a specific state The financial market instrument described above can be foreign or Russian.
8. Depending on the type of issuer The financial instrument described above can be: state or corporate. The issue of government securities is carried out by state offices that have the appropriate competence, and the issue of corporate documents is carried out by private companies.
9. If we consider securities according to the sphere of their circulation, then two categories can be distinguished - market and non-market (the latter category implies the return of securities strictly to the issuing organization, in addition, such securities are subject to a strict ban on resale).
10. By nature of use: investment (the owners of such documents pursue a single goal - to receive additional income), non-investment (the purpose of which is to service turnover within the goods market).
11. By risk level parameter, the type of documents described above can be risky or risk-free. If everything is clear with documents that do not imply any risk, then risky documents can be discussed for a long time, since they are divided into low-risk, high-risk and medium-risk.
12. According to the accrued income parameter: those that do not imply an income part, and income (these are divided into: interest, dividend, discount).
13. According to the features of raising funds: equity (they clearly reflect the percentage owned by the owner in the context of 100% of the authorized capital of the enterprise) and debt (that is, they illustrate the option of a loan).

Types of securities

The main types of securities are underlying financial instruments and derivatives.

Basic- these are those documents, the content of which initially already contains specific rights (property) to a certain fairly valuable asset. An interesting fact is his versatile expression. It can be presented either as capital or as money. But it can also act as property, as well as another resource. Whenever we talk about basic securities, we mean the following types:

1. stock;
2. bonds;
3. bills.

But this also includes bank certificates, checks, and also - warrants, bills of lading, mortgages, units of mutual funds.

Since underlying securities are common financial instruments today, it is advisable to pay a lot of attention to them. So, they are divided into the following types:

1. Primary(often based on assets. But the interesting fact is that they themselves are not included in them in any way. This is where the widespread concept of “asset-backed securities” arose). The primary ones are usually stocks and bonds; in addition, this category includes bills and mortgages.
2. Secondary- these are official documents of high importance that are created for a certain type of securities. Warrants are most often used today, but depositary receipts can also be encountered occasionally.

Types of primary securities: detailed information about each type and unique differences!

Promotion is a common security today. Only the joint stock company has the official right to issue such documents. The document described above secures the rights of its owner (who, after purchasing shares, can safely be called a shareholder) to legally receive a certain percentage of the profit of the joint-stock company. The shareholder will receive profit on the shares systematically; it will be transferred to his account in the form of dividends. The share is valuable because it allows you to manage the property of a particular joint stock company under the conditions of its official liquidation. In circulation today there are both ordinary and preferred shares.

Bond called a security that acts as a debt obligation. Its owner thus promises to return the pledged amount of money after a certain period of time with the payment of some income (or without its payment). If the issue of bonds is entrusted to the shoulders of the state apparatus, then such paper will be called state-owned. If local government organizations are engaged in issuing bonds, then the bond issued by them will be called municipal. By the way, not everyone knows that bank offices can issue the above-mentioned document. Therefore, such bonds are called bank bonds. If other companies are engaged in issuing these securities, then another new concept appears - corporate bonds.

By bill of exchange It is generally accepted to consider a document that acts as a kind of debt guarantee. Such a document is always drawn up in writing, it is subject to a specific form established by law. If we are talking about a promissory note, then it implies obligations that are not supported by anything in fact. But there is also such a thing as a first-born bill, which implies an offer to a specific payer (this person is always indicated in the bill).

Such debt securities oblige the payer to pay the amount specified in the document before a specific date.

The securities described above are not a complete list of them. There is one more species that is worth mentioning. This - bank certificate, which implies a freely negotiable certificate that a specific monetary deposit exists, and it was opened in a certain place, on a certain day by a specific person. In order not to get confused in the types of bank certificates, you should clearly distinguish between them. So, if a legal entity opened a deposit in a bank, such a bank certificate will be called a deposit certificate, if an individual was the opener of the deposit, such a document can be called a savings document. The bank that issued this security to a specific person undertakes to return this deposit and interest on it after a certain period.

A bearer bank passbook can be safely called a type of bank certificate (together with the above-described certificates of deposit and savings certificates).

Bill of lading- This is another type of securities. He is little known to the general public and the average person. A bill of lading is a document, the characteristic feature of which is a clear standard form, which is strictly prohibited from being adjusted or changed. Such securities usually circulate within a broad international arena. The bill of lading specifies the terms of the contract for the carriage of goods by sea. This document certifies the actual loading of the cargo, its transportation and gives the right to receive the cargo. This document is divided into four types:

• charter,
• linear,
• onboard,
• coastal.

By check It is customary to call a security, which is a written confirmation of the order of the drawer of the check to the bank to pay the holder of the check a specific amount (clearly stated in the document) during the validity period of this document. The drawer of the check is usually a legal entity that has funds in a bank office. The drawer officially has the right to dispose of bank funds by issuing checks. The holder of the check is usually the person (usually a legal entity) for whom the drawer issued the check. This document has its own type of classification: checks can be registered, bearer and order.

An interesting type of security is warrant. It has a double meaning and can mean two different concepts. In trade practice, a warrant means a document issued by a warehouse. In warehouse practice, a warrant confirms the right to ownership of a specific product stored within the warehouse.

Among shareholders, the concept of warrant means a security that gives its owner the right to buy from a given issuer a number of its shares (or bonds) at the value stated by it over a certain time interval.

Mortgage- this is always a registered security that serves as evidence of the right of its owner, according to a mortgage agreement (mortgage of housing), to receive money or the property specified in this document.

Investment share- another type of securities that serves as a certificate of its owner’s share of the actual right to own property owned by a specific mutual investment fund (abbreviation - UIF).

So, depositary receipt- this is a document confirming the ownership of a certain number of shares of the issuing organization, which is located outside the country. This document is issued in the investor's state. The concept of a depositary receipt in our country is understood as an indirect purchase of shares of a foreign issuing organization.

Types of secondary securities and their specifics

When studying the topic of securities, it is important to study the properties of derivatives. First of all, we note that this is a paperless form of guarantees that arise due to fluctuations in the value embedded in the document of a given exchange asset. Derivatives include futures contracts (which also have their own types, divided into currency, commodity, index, interest rate), swaps and options, which are always in free circulation.

So, futures contracts- these are guarantees that a product will be bought or sold at a certain time in the near future (the boundaries of the period are usually clearly defined) at the price that was established at the time of signing this security. Many newcomers to the business world mistakenly believe that signing futures contracts can be equated to an act of purchase and sale. In fact, this is far from the case. By signing such a contract, the seller does not transfer his goods into the hands of the buyer, just as the buyer does not transfer money to the seller for such goods. Signing a futures contract only means that the seller guarantees to deliver the goods at a specific pre-agreed price (it is always specified in such a contract) on a certain date; and the buyer, in turn, undertakes to pay a specific amount of money for the goods. An intermediary (a futures company that conducts futures trading) acts as a guarantor of such obligations. This is how the futures turns into an important document and can be rebought several times throughout its “life period”.

Option- another type of securities. An option usually means a contract. By signing the latter, the buyer receives the full legal right to buy (or sell) a specific asset at a specific, clearly agreed price. An option specifies a certain time frame within which the purchase or sale of an asset must take place. But during the validity period of the option, its owner can also voice his refusal to complete the transaction. By signing such a contract, the obligation is given not only by the buyer, but also by the seller, guaranteeing for a certain amount of money to ensure the exercise of the right to purchase. Often in practice, confusion occurs in the definition of the concepts of futures and options. To prevent this from happening, it should be clearly understood that the key difference between an option and a future is that an option gives the acquirer of something a right, but not an obligation. Options can only be exercised if they are accompanied by a specific payoff at the time of exercise.

Swaps also complement the types of securities existing today. Swaps are agreements in which two parties specify the conditions for the future exchange of assets or payments for such assets according to the conditions specified in the contract. The following types of swaps are known today: currency, interest rate, index, and commodity.

Swaps have always been and will be an attractive type of securities for individuals who have an impressive amount of money. Investors find this financial instrument attractive because it allows them to significantly reduce currency and interest rate risks, as well as have a good profit on the interest difference.

All types of securities of this format are free, over-the-counter contracts. Therefore, they cannot be recorded on the exchange. Their liquidity is directly related to special intermediaries, i.e. bank offices and dealers. These types of securities have an important feature - their turnover is regulated by the state apparatus, the main place in the swap market is given to banking offices, which act as participants in such transactions.

Properties of securities

All types of securities have the same properties. Properties are the point that unites them all. So, the properties of securities include:

1. negotiability (this property implies the ability of all types of securities to be bought and sold within a special market; this property allows them to act as an autonomous instrument for fast payments).
2. accessibility for civil transactions (this factor is extremely important for the public, since it implies the ability of a security to become the object of other transactions in a civil format).
3. serial characteristics and standardization (that is, when released, they are subject to the standard forms according to which they are issued);
4. marketability (that is, all securities belong to the corresponding market in which they circulate);
5. liquidity (all types of securities have the ability to be quickly sold, thus turning into money);
6. risk (all types of securities have this property, it indicates the possibility of losses that an investor in securities may experience);
7. obligation to be fulfilled;
8. a certain degree of profitability.

Features that all types of securities have

If we consider the functions as a whole, then all types of securities, regardless of their type, perform five most important functions for society:

1. carry informational function, reflecting the actual state of economic processes in the country. If stock prices are stable or have increased, it means the economy is normal. If all types of securities began to show a decline in prices, it means that the country’s economy is in a difficult situation.
2. Execute redistributive function, that is, they are responsible for the flow of capital between various spheres of the economy.
3. Used as mobilization a tool for temporarily freeing up citizens' money.
4. Execute regulating function in monetary circulation processes.
5. For banks and enterprises, all types of securities described above are a convenient and, in their own way, universal credit and settlement instrument.

Issue of securities

The issue of securities is a complex set of procedures established by law that create conditions for the distribution of securities among several investors. With its help, the issuer attracts additional finance to develop its activities in the form of loans. These are bonds. If it is necessary to increase the authorized capital, the issuer issues shares. Both options are carried out under state control, by persons authorized to regulate the securities market.

Professionals (underwriters) from the stock market are involved in the issue. By concluding an agreement with the issuer, they assume obligations related to the issuance and placement of documents.

The issue of securities, in relation to the order, can be primary and secondary. A primary issue is when securities are issued by a commercial entity for the first time. Secondary - involves their subsequent placement.

The issue has several ways of placing documents:

• by distribution;
• through subscription;
• conversion method.

Conversion of securities

Conversion is a method of placing documents while simultaneously exchanging them for another type of paper under certain conditions. Only holders of securities become participants in the conversion.

Conversion types:

• conversion between shares of higher or lower nominal value;
• conversion between shares with different rights;
• conversion between bonds;
• exchange of bonds into shares;
• conversion related to the reorganization of commercial structures.

The legislation of the Russian Federation prohibits the conversion of common shares into preferred shares with certain rights and restrictions. There is also a ban on converting shares into bonds.

Features of the securities market

The economic relations between persons issuing and purchasing the financial instruments described above are called the securities market.

This market involves investment institutions, investors, as well as significant issuers. Organizations that issue and sell such financial instruments are called issuers.

In accordance with the definition, the role of a commodity in such a market is played by all types of securities, and the number of its participants, their activities, location and other factors depend on them.

The securities market in the economy of any country is the main apparatus that redistributes money capital to certain types of capital. Thanks to the stock market, conditions are created for the free redistribution of capital in more efficient areas.

Why is government regulation necessary and what are its principles in modern reality?

The need for government intervention in the securities market is determined by a number of reasons:

1. the need to ensure the principle of unity regarding the activities of all disparate elements of this system;
2. ensuring control so that market participants are aware of the responsibility of their activities and understand what measures can be aimed at those individuals who violate the principles of the system;
3. the need to create fair conditions of equality between all persons who are participants in the special market described above.
4. the need to monitor compliance with the principle of transparency and encourage the participation of professionals in the development of the regulatory framework for a specific securities market;
5. the need to stimulate competition by prohibiting the introduction of preferences or all kinds of benefits for certain market participants.

The policy of the special securities market is regulated by the Civil Code of the Russian Federation, as well as several other laws. The legislative framework as a whole covers all aspects of such trading activities and complies with generally accepted international standards.