Banking. Secondary securities: features of issue and circulation (the most important)

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Banking. Secondary securities: features of issue and circulation (the most important)

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Topic 64. Secondary securities: features of issue and circulation

Secondary c.b. - is a security that represents a property right to another security. and the income from it. Secondary c.b. are based primarily on stocks, bonds, and mortgages. They can be produced in two forms:

1) in the form of the same securities, for example bonds based on a pool of mortgages, they are called transitional. Transfer of rights from owners of certain types of securities. to owners of other types of securities. 2) in a form different from the main securities:

a) in the form of independently tradable acquisition rights, usually shares. To such c.b. include: - stock warrants, - subscription rights, - premium options. b) in the form of depository certificates (certificates and receipts). For example, American Deposit Receipts ADR for shares. There are no secondary types of securities in Russian legislation.

The main types of secondary pulp., representing the rights to purchase basic securities, are stock warrants and subscription rights.

Stock warrants is a security that gives its owner the right to purchase a certain number of shares or bonds of a company within a specified period of time at a fixed price. The life of a stock warrant is 10-20 years or unlimited. The price fixed in a warrant usually exceeds the current market price of the share by 15%.

Subscription rights is a security that entitles the company's shareholders to subscribe for a certain number of newly issued shares or bonds of this company at a set price within a set period. Shareholders have a privileged right to subscribe to newly issued securities. The subscription period lasts for several weeks. The main differences between a stock warrant and a subscription: - the first ones are received by buyers of new preferred securities. and the second - the company's shareholders, - stock warrants are issued for a long period, and the second - for a short one. - the price of a stock warrant is higher than the market value, and the subscription price is lower. A depositary receipt is a security that testifies to the ownership of a certain number of shares of a foreign company deposited in the country of location of this company, the circulation of which is carried out in another country. American Depository Receipt - ADR. The attractive qualities of ADRs for investors are: 1. Purchase of securities. with a higher level of return than the shares of national companies 2. Opportunities to enter the market of another country in the absence of knowledge about foreign stock markets. 3. No need to convert received dividends, etc.

Authors: Shevchuk D.A., Shevchuk V.A.

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