Securities
What is a security?
Valuable paper - a document indicating certain property rights of its owner upon presentation. A security must be executed in accordance with its type and the general criteria for such documents.
There are three most common definitions of securities:
- A security is a document, the presentation of which is necessary to exercise the right expressed in it.
- A security is a business document of established form, monetary or proprietary content, which has legal force.
- Securities are a special form of existence of capital; they can be transferred instead of capital itself, circulate on the market as a commodity and bring profit. Their essence is that there is no capital itself, but there are all the rights to it, fixed by a security.
What types of securities are there?
On the basis of their economic nature, securities are divided into equity securities, debt securities and derivative financial instruments.
- Mutual securities
Fix relations of co-ownership or share participation in the formation of share capital and profit distribution (shares).
- Debt securities
Are instruments of credit (bonds, bills, savings and deposit certificates) - written statements of the bank on the deposit (deposit) of money, which certify the right of the depositor to receive at the end of a specified period of deposit and interest on it. Certificates can be term and on demand, name and bearer.
- Derivative financial instruments (options, futures, warrants, etc.)
They certify the right to buy or sell securities (most often shares).
Depending on the purpose of securities are divided into stock and commercial.
- Stock securities (shares, bonds)
They are instruments of capital investment, rotated on the stock market, they are usually open-ended or valid for more than one year.
- Commercial paper (bill of exchange, letter of credit, etc.)
They are credit instruments, mediate trade transactions and circulate in the money market. These securities are predominantly short-term and only partially used for investing capital.
Also, securities are divided into marketable securities, which can be resold, and non-marketable securities, which can only be sold once.
The most common securities are stocks (ordinary, privileged), promissory notes, bonds, options, checks, traveler's checks, and mortgages. Each of them has certain rules of execution and purpose.
Where do securities come from?
Securities are created by issuance. The issue of securities means their issuance and placement among holders. Securities are issued:
- to raise the initial capital of the joint stock company or to increase its capital;
- for the reorganization of an enterprise into a joint stock company;
- to change the scope of the rights of existing security holders;
- to attract additional investment (own or borrowed).
Securities can be issued by the state, government agencies, legal entities and individuals.
What is the securities market?
The securities market, or, in other words, the stock market is a set of transactions in the sphere of circulation and issue of various securities - shares, bonds, certificates, mortgages, etc. Its infrastructure is extremely widely developed and covers almost all sectors of economy. Functioning of the securities market makes it possible to streamline and increase the efficiency of many economic processes, especially investment processes.
Stocks, bonds and options are the most common in stock trading.