Stock market securities 2
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Prospects of development of stock market
It is no secret that the local stock market is going through difficult times, but the use of a number of measures of the state can not only bring the market out of the present state, but also to ensure a qualitatively new stage of development of the financial system as a whole.
The main perspectives of the development of the stock market, in our view of market experts, are:
- Increasing government control and the level of organization of the markets;
- Global computerization of stock exchanges; the formation of a centralized financial capital distribution system; globalization of the market; securitization; innovation in the markets for instruments, trading systems and infrastructure; the formation of the relationship between financial markets.
Stock Market Trends
The formation of a centralized system of capital allocation in relation to the securities markets have the following characteristics. Firstly, the market appears more and more participants, for which the exchange activity is the main, and secondly, there is a clear process of the formation of large institutional players in the market due to both an increase in own capital (capital growth), and associations with larger financial entities (capital association).
As a consequence of these actions occur marketplaces, serving the largest volumes of transactions in the market and attracting more and more public capital.
Globalization as stock markets implies a shift of national capital abroad of their country, so that the emerging global financial market, in relation to which markets become secondary within states, as constitute the basis of its financial flows of TNCs (transnational corporations). Trading in this globalized market will be carried out continuously.
Next Perspective - the reliability of the stock market, which, as well as the degree of investor confidence in it, is associated with increased state control and the level of market organization. The government for its part must try to restore confidence in the financial system so that people keep their savings in securities and was confident that will not lose them as a result of any state manipulation. That's why the stock market participants are interested in the fact that the entire system was organized and tightly controlled by the state.
Perhaps the most important for the development of markets is their transition to computer operation, that is a consequence of the widespread introduction of computer technologies in all spheres of human life. Without this phenomenon modern stock system would never have acquired such a scale as now.
Computerization allowed to make revolutionary changes in market services, introducing modern technologies in the system of instant payments between participants and trade methods.
In addition to computerization, must change and markets instruments, in particular, the new tools being introduced should be, above all, various types of derivative securities, ie derivatives. You should also be new trading system that will be based on the use of computer systems and digital communications, providing a fully automated trading without personal contact with the seller by the buyer. Well, a new market infrastructure should be composed of modern information, settlement and clearing systems as well as automated systems depository services.
And finally, securitization, representing a shift of funds from its historical paper form in the form of securities, inevitably stimulates the transition of securities in a more accessible form for investors.
Stock market growth
It should be noted that the development and growth of the stock market does not entail the disappearance of other financial markets, on the contrary, there will be a process of interpenetration. Those. the stock market to accumulate capital, and then distributes them by means of securities to other markets, contributing to their further development.
Almost every day we hear on television news about the purchases and sales by certain entities shareholdings, bills of exchange or other securities. But if we think about the real mechanism of such transactions?
Indeed, I wonder how actually happening in the financial markets the execution of transactions on purchase / sale of securities? In this article we will try to reveal in detail the mechanism.
Outset that actually securities transactions will not physically move, since it is usually contained in special accounts in banks. To transfer from the bank sold the securities to the buyer of their owner simply writes out a special check on the papers.
However, after the rampant computerization of banks and stock markets to date, the need for such checks is completely eliminated as all transfers are now made electronically.
Term transactions with any securities are, in fact, common agreements on supplies, on the basis of which one party undertakes to pass a certain amount of stock values in a pre-specified date, and the other side - to accept and pay for them on the amount of exposed seller. This type of contract is concluded usually for a period of one to three months, at least six months and in accordance with the exchange of terminology are called futures and options.
Turning to the stock market quotation of the security is characterized, ie Associated certain price supply / demand at any given time. Current exchange system will automatically generate quotation of securities and every day put a weighted average quotation of the optimum, called the course of the day, for all instruments.
So, purchase / sale of securities transactions carried out in the following order:
- The signing of the transaction;
- Verification of parameters;
- Actual performance.
Next, let us consider in detail every item.
At this stage, the signing of a purchase / sale or exchange contract. The contract is signed, as a rule, investors themselves, but more often in the deal instead with the other hand and take part exchange intermediaries - brokers. All types of operations differ in the method and place of the commission, as well as the procedure of signing the contract, the signing of technology, in turn, depends on the type of market. As a result of the signing of the transaction, each of the participants themselves filled with their own internal records, which reflect the actual availability of the signed contract and the basic parameters of the deal.
Check settings. Here the participants have the opportunity to finally settle all differences in nature and subject of the signing operation. To this end, both parties of the transaction make out in advance certain documents reconciliation, which specifies and clarifies all the basic parameters of the operation, exchange them (most often this procedure carries herself Exchange and Clearing Company), and then have to check their registration documents with the reconciliation of that received from contractors . If there are no discrepancies, the reconciliation of recognized success. Most modern electronic trading systems from the likes of reconciliation procedures refused because there is no fact of the differences between the parties.
At this stage, it carried a certain list of procedures. First analyzes of verification documents and checked their originality and correctness of the design, then there is the calculus involved sums of money and the number of securities. After the process is the identification and execution of mutual claims and obligations of all parties to the transaction, and then executed settlement documents and transferred to the system, performing calculations and the supply of money in securities.
Performance. The final stage of ensuring timely execution financial payment and ensuring the transfer of the corresponding amount of securities. Both are made by those systems that are chosen by the participants in the transaction (if there is a choice).
Regarding the supply of securities, it can be performed in two ways. The first method is to pass from hand to hand from the former owner of the new securities certificates. The second way - by transferring these securities between custody accounts at the Depository from the former to the new owner.
All operations on the stock markets one way or another associated with the risk, and the market participants in transactions also take on a variety of risks, such as the decline of profitability, direct financial loss, lost benefits, etc., so each situation must be take into account the different types of financial risk and make the right decisions, because the market is the market.
With the development of the world economy its various industry became more and more complex structure and scale. Spontaneity and simplicity of law inherent in "trading activities" distant past, over time were replaced by new forms of commercial relations. Complicates the methods of interaction with trading partners, and the nature of the transactions acquired civilized agreements with long-term obligations of parties involved.
The decisive role in shaping the global economic machine played in the first place, the European businessmen and bankers. Although their work was already the result of previous social and political transformations that have put the economy on a solid track legal obligations, protected, in turn, legally. As soon as the trade has become to mean not only the exchange of goods, but also more complex forms of commercial relations began to emerge concepts such as markets, investments, stocks, and many others.
A serious impetus to further economic transformation was the emergence of the securities market. To efficiently redeploy capital, in particular investments in promising projects, as well as to be able to predict the whole further course of events on the stock markets, came into use such a thing as a stock index. The index is a symbol in the economy, which has statistical and analytical sense. In other words, the stock index - is the multicast conversion price index specific category of securities per unit time. The development of the index due to the specificity of the commercial sector, which is identified with the index.
Comparison of changes in the index makes it possible to navigate in the processes occurring in the market. Stock indexes may reflect trends in the movement of the securities market as a whole or in its individual sectors. For different companies do not apply the same methods of calculation of the indices. They may be calculated as an indicator of total revenue on already existing capital, which means that dividends are also being invested in securities. The most simple method of calculation is as follows: the total value of all assets of the index divided by the number of assets, without taking into account the weight of each of them.
A method of weighting in the calculation of indices, performed mainly in two main categories: the price and terms of capitalization. Stock indexes may be integral, in the case where they represent multiple marketplaces with securities value can be expressed in a variety of international currencies.
In 2005, there were approximately 2300 stock indexes.
After the name of a stock index may be a figure that shows the number of joint stock companies, which serve as the basis for calculation of the index, for example: the Nikkei 225, S & P 500, CAC 40, etc. The most famous and influential indices are still the NASDAQ and Dow Jones.
The desire to get the maximum return on investment - of course, for any participant of the stock market.
Regardless of the status of the investor and the magnitude of the actions taken, it is important to a differentiated approach to the conditions dictated by the market economy in a given period of time. One of the axioms is a historical pattern: the highest profit is identically equal to at least at high risk of damages, including the complete bankruptcy. At the risk capital investor, in fact, is aware that the further course of events may not be as fortunate as he would have liked. By diversifying in the stock market, the investor is no guarantee that the portfolio created by it will include only the action "win-win" issuers. At the same time, the "blue chips", as a rule, are not the most profitable instruments.
So, the most stable issuers represented shares expensive enough, time-tested, so the dividends received from them is relatively low. In contrast, the "doubtful", illiquid paper, being artificially low price, may soon bring a windfall to their owners. Understanding this potential often is the cause of adventurous steps taken by some investors. Yet some of the principles to be followed when making transactions in the stock market. For example, it is not necessary to risk a sum of money, the loss of which would be disastrous for the future activities in the market. Before you buy shares of certain issuers, it is necessary to ask about their current state, following the change in the indices.
If all of the above can be attributed to natural factors in the conditions of the stock market, there are other types of financial risk, although less common. For example, the risk of losses associated with changes in the political situation in the region, within which are invested objects economy. The coup, the nationalization of enterprises and anarchy in the country and other negative changes in external conditions, depriving investors as a dividend, and generally invested in venture funds. Also, one can not exclude force majeure, if the investor incurred losses caused by the disaster, when the property rights of the owner of shares in principle can not be protected by anything.
As for the risks associated with market conditions worsening, a lot depends on the scale of such changes.
The least loss-making will fall in the share price of a separate issuer; The situation becomes more complicated when the industry downturn, but the most insurmountable difficulty is the global economic degradation. When working in the options market, the consequences for the investor can be very unpredictable: from the fabulous "instant" dressing up as utter ruin "overnight."
It is no secret that the globalization of the economy and the creation of international economic alliances, along with unprecedented opportunities to increase capital by individual corporations, and has a "side effects." In other words, "vpryagshis markups economic yoke", investors can receive not only dividends but also losses due to their less fortunate companions.
So, the stock market risk - the theme is enough bulk. If the background of the "first wave" of the market may be the most uncivilized of abuse, including fraud and failure to fulfill obligations, the scale of international agreements, in view of the extremely difficult economic infrastructure requires experienced experts the whole staff, not to lose clarity on what is happening.
In contrast to the special kind of activity, for example, in industries such as medicine, education, scientific research, or show business, the ability to earn a the stock market accessible to all who have at least a minimum capital. Of such kind work is the ability to properly navigate in the current economy. Securities traded on the stock market may be illiquid and liquid, therefore, the amount of dividends from investments in those or other economic objects directly depends on the profitability of the latter.
The functioning of the stock market
The very functioning of the stock market due to the redistribution of capital in its sector, according to the demand of issuers represented here. In the role of investors can act as a large consulting corporations, and individuals. When trading stocks, investors may receive dividends, three times higher than those which have investors bank on the deposit.
To properly navigate the market conditions of the securities, should consult a specialist, ie brokers. Broker - is a guide to help potential investors make the right choice. So choose a reliable assistant, especially with a view to long-term cooperation, it turns out, is much more important than to make a single successful "raid" at random.
Forming a portfolio, it is best to purchase shares of companies most promising sectors of the economy. In the case of depreciation of securities of one category, it remains a chance to compensate for losses due to liquid, profitable shares. The chances of successful start on the market is much higher for those whose initial investment fund is not less than 25-30 thousand dollars. According to the trader's golden rule, buying stocks most suitable in reducing their rate, and sales - in the opposite situation. But where is the guarantee that the recession has already reached its lowest point, and rise - the climax? On the other hand, the depreciation of securities - it's just another phase of repetitive cycle, or the beginning of an irreversible process of economic degradation? (Of course, the term "irreversible" - is conditional, however, long duration of the decline itself negates the investment, which amounts to bankruptcy in the stock market). By the way, to limit the extent of losses the investor may use stop losses.
Trading members in having a special license. With regard to cooperation with brokers, you should not neglect the periodic monitoring. Specialist that investors entrusted funds, and he represents has the stock market, is obliged to report on progress, including the transfer of dividends from securities owned by the investor.
Of course, the stock market performance can not be spontaneous. Securities trading has its own laws, not only the legal nature - it involves many factors, including psychological. For example, not all successful investors - the most cautious and prudent, just and bankruptcy are not only adventurers. The stock market requires serious analysis, forecasting and experience, generating over time, professional intuition. In addition, participation in the life market requires synchronicity in relation to its overall dynamics. Trading securities involves a rapid response to constantly updated information about courses (liquidity) of a particular type of shares and the actual condition of the issuers.
The activity in the stock market its regulation
Stock market regulatory system in most countries is based on the concept of two-tier system of control and supervision bodies. Moreover, in each country, this system has its own characteristics and nuances, taking into account the work rules, models and features of construction of the stock markets. Overall, however, the principle of control over the activities of the stock market is the same for the whole world.
Thus, the first level control system is based, as a rule, state control and controls the stock markets to which individual ministries and agencies may apply, and federal commissions and central banks. The second level includes large non-state associations, unions, leagues formed by professional participants of the stock processes, as well as the stock exchanges and OTC structure. Hierarchy in such a variety of regulatory authorities, in each case, is caused by local legislation, the level of development of the financial system as a whole, as well as cultural and historical traditions of each country.