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Lecture notes, cheat sheets
Stocks and bods market. Cheat sheet: briefly, the most important
Directory / Lecture notes, cheat sheets Table of contents
1. ISSUE OF SECURITIES AS AN ALTERNATIVE SOURCE OF FINANCING THE ECONOMY Securities market is a tool to raise free funds. For the formation of capital, the enterprise has several sources: equity, retained earnings and depreciation, attracted sources (credit, emission). In the context of changing economic conditions, the balance between internal and attracted sources of companies is changing. And enterprises cannot do without issuing securities, where, as a rule, bonds prevail. The securities market is an additional source of financing for the economy. Market entities are private enterprises, the state and individuals whose activities form the price of securities, and its fluctuation depends on market conditions. The functioning of the securities market is realized through the movement of securities. The investor represents the loan capital received by him as a claim for income, which is ensured by the possibility of converting it into a form of money capital through the sale of securities. The circulation of capital ends with the transformation of fictitious capital into money through the stock market. In modern conditions, the role of the securities market in the accumulation of money capital and savings is increasing. There are 3 markets that participate in financing the economy: over-the-counter (an important element of the credit and financial superstructure, since it covers new issues of securities and mainly finances the reproduction process), the exchange market (is engaged in the circulation of old issues of securities, the redistribution of control over enterprises ) and street. RZB - a set of economic relations, its participants regarding the issue and circulation of securities. RZB is a part of the financial market where specific financial instruments, securities are traded. It consists of the money (currency) market and the capital market. The place of the RZB can be assessed from two positions: in terms of the volume of attracting funds from various sources and investing funds in any market. In developed countries, domestic sources account for 70-75%, in the Russian Federation it is lower. The securities market is one of the areas of capital investment. Distinguish between international RZB and other markets. 1. By the object of the market (the object of the market on the RZB is securities, in addition, the volume of transactions on the RZB is higher than on any other market). 2. According to the way the market is formed. 3. By the importance of the circulation process (the number of circulations of goods is limited, and securities exist only at the stage of circulation). 4. According to the subordination of the compared markets (the main purpose is the accumulation of temporarily free funds and their direction for the development of promising sectors in the economy). The main significance is determined by the tasks of the RZB. 1. The main ones are attracting temporarily free funds, servicing the public debt, directing investments in promising sectors of the economy, redistributing rights to the means of production. 2. Secondary - optimization of financing of the issuer's flows, protection of the issuer's interests, creation of a positive image of the issuer, creation of additional jobs, etc. 2. THE CONCEPT OF SECURITIES Before moving on to the actual securities, we should dwell on such a concept as fictitious capital, since it is the movement of fictitious capital that is the basis for the functioning of the stock market and the existence of securities as such. Fictitious capital is a social relation, the essence of which lies in its ability to capture a certain part of the surplus value. Historically, the basis for the emergence of fictitious capital was the isolation of loan capital from production capital and the formation of a credit system, and the technical separation of fictitious capital from real capital occurred on the basis of a loan of capital, as a result of which the title of ownership remains in the hands of the owner of loan capital, and a functioning entrepreneur actually manages this capital. Fictitious capital thus manifests itself in the form of a title of property, capable of entering into circulation and, moreover, capable of circulation relatively independently of the movement of real capital. In reality, fictitious capital mediates the processes of capital movement, distribution and redistribution of profits, as well as the redistribution of national income through the system of public finances. Security paper is a document that expresses the property and non-property rights associated with it, can independently circulate on the market and be the object of purchase and sale and other transactions, serves as a source of regular or one-time income. Thus, securities act as a kind of money capital, the movement of which mediates the subsequent distribution of material values. In the past, securities existed exclusively in a physically tangible, paper form and were printed by typographical methods on special paper forms. Securities, as a rule, are produced with a sufficiently high degree of security against possible counterfeiting. Recently, due to a significant increase in the turnover of securities, many of them began to be made out in the form of entries in accounting books, as well as on various information carriers, that is, they switched to a physically intangible (paperless) form. Therefore, in the securities market, both securities themselves and their substitutes are issued, circulated and redeemed. The objects of transactions in the securities market are also called securities market instruments, funds (meaning "cash funds") or stock values. In the event that securities do not exist in a physically tangible form or if their paper forms are placed in special vaults, the owner of the security is issued a document certifying his ownership of one or another fund value. This document is called a security certificate. Securities certificates bearer can be issued to replace several homogeneous securities (like banknotes of various denominations). In the latter case, the certificate does not have to contain information about the owner of the stock value. Securities are actually legal documents that testify to the right of their owner to the income or part of the property of the company. 3. HISTORY OF THE ORIGIN OF THE SECURITIES MARKET The emergence of securities and making various kinds of financial transactions with them has a long history. The prototype of stock transactions was the process of exchanging one currency for another between traders at fairs. In different cities of the world, merchants from all over the world carried on a lively trade in their goods. In order to harmonize the monetary units of different countries, there were exchange offices, the owners of which exchanged money at the current rate for an appropriate commission. Due to the growth of trade and the increase in the number of futures transactions, IOUs-bills gradually became the object of financial transactions. A bill of exchange is the first classic security that laid the foundation for the emergence and development of the stock market. Initially, transactions with securities were made on commodity exchanges and other wholesale markets. The Belgian city of Antwerp is officially considered the birthplace of the stock exchange. The first trading on this securities exchange took place in 1592. The beginning of the era of great geographical discoveries served as an impetus for the formation of organized trading in securities and the emergence of their new classical types. The equipment of sea expeditions and large trade caravans to the countries of the New World required significant investments. This entailed the association of merchants, shipowners, bankers and industrialists in a kind of partnership in order to create a common capital. The introduction of a share was formalized by a special document certifying the ownership of one's share in the total capital and the right to receive part of the profit in the event of a successful joint venture. This document is called "stock", and the partnership became known as a joint-stock company. The activation of the market of stock values and the rapid growth of exchange trade falls on the first third of the XNUMXth century. and subsequent years. It was then that stock exchanges were formed in France, Great Britain, Germany and the USA. The number of stock exchanges increased rapidly, and close relationships formed between them. At the end of the XNUMXth - beginning of the KIK centuries. the role of the stock exchange in the capitalist economy is growing considerably. There is a process of initial accumulation of capital. The first joint-stock banks and industrial corporations appear in the countries of Europe and America, although at that time operations with securities did not yet have a significant impact on the processes taking place in the economy. Stock Exchange gradually entered into a single system of financial and economic relations. This happened with the growth of industrial production, the development of trade, credit relations, the construction of railways, etc. The securities market in the United States has developed especially widely. If in continental Europe businessmen generally preferred to keep free cash in bank accounts, purchase insurance or real estate, then in America the majority of entrepreneurs invested capital in financial assets. Thus, the US national stock market has noticeably outstripped the European one in its development, it has developed a more advanced mechanism for financial transactions, and at present it is rightfully considered the most organized and democratic securities market. 4. SECURITIES MARKET: ITS FUNCTIONS, STRUCTURE The role and importance of the stock market in the system of market relations are determined by the following factors: - attraction of free funds in the form of investments for the development of production; - ensuring the flow of capital from declining industries to rapidly progressing industries; - raising funds to cover the deficit of the federal and local budgets; - the ability to assess the state of the economy based on stock market indicators; - impact on changes in inflation rates. The securities market, like any other market, is a complex organizational and legal system with a certain technology for conducting operations. The structure of the securities market are three main components: - subject of trade (i.e. securities and their derivatives); - professional participants; - market regulation system. In addition to professional participants in the securities market, a large number of institutional investors operate in this market, in particular: - banks; - non-state pension funds; - Insurance companies. These organizations have significant financial resources that enter the stock market and largely determine the situation on the market. The main purpose of the securities market is to attract investment in the economy. To achieve this goal, the following conditions must be present: - freedom of movement of capital; - ensuring the liquidity of securities, which is achieved through a large number of sellers and buyers; - information transparency of the market. Information must be accurate, correct and meaningful. Therefore, much attention in the stock market is paid to the disclosure of information from: - issuers about the financial condition of the enterprise, about upcoming issues of securities, major shareholders, etc. - professional participants of the stock market about their qualifications, conditions for providing various services to clients, their financial obligations; - trade organizers about trade rules, listing conditions, etc.; - regulatory authorities on changes in the regulatory framework, the system of control over activities in the financial market and compliance with the rules of work. Stock market is the most important mechanism that ensures the efficient functioning of the entire economy. It circulates a specific product - securities, which in themselves have no value. However, they are titles of ownership, behind them are real assets, which basically determine the value of specific securities. Given the special nature of activities in the stock market, all countries have introduced a strict system for allowing organizations to work in this market. In order to carry out professional activities in the securities market, an organization must obtain a license for the right to work with securities. To date, you can obtain a license for professional work in the securities market as: - intermediary (financial broker); - investment consultant; - investment company; - investment fund. At the same time, the activities of stock exchanges and stock departments of commodity exchanges are licensed. 5. TYPES OF SECURITIES AND THEIR CHARACTERISTICS Securities is a document certifying, in compliance with the established form and obligatory details, property rights, the exercise or transfer of which is possible only upon its presentation. To give a complete description of such a category as a security, it is necessary to consider main inherent properties: - the security testifies to the right of ownership to the capital (share); - the security reflects the loan relationship between the investor and the issuer (bond, promissory note); - a security gives the right to receive a certain income from the issuer; - securities in the form of shares give the right to participate in the management of a joint-stock company; - securities give the right to receive a share in the property of the issuing enterprise in the event of its liquidation. One of the essential properties of a security is its ability to serve as a subject of purchase and sale on the stock market. Securities can be classified according to various criteria. Issuable and non-issuable securities. Issued securities include stocks, bonds, investment shares. Their issue (as opposed to non-issue ones) must be registered with the financial authorities without fail. Another feature of them is that they are placed by issues; have equal terms and volumes of realization of rights within one issue. Depending on the form in which the investor provides capital to the issuer and how these funds are reflected in the property complex of the enterprise, equity and debt securities are distinguished. equity security establishes the owner's rights to a part of the enterprise's property during its liquidation, confirms the owner's participation in the formation of the authorized capital, gives the right to receive part of the profit and participate in the management of the enterprise. Equity securities include shares, share certificates, investment shares. debt security reflects the relationship of the loan between its owner and the issuer, who undertakes to redeem it on time and pay a certain percentage. Bonds are an example of debt securities. The classification of types of securities by major issuers is as follows: - government securities issued by the federal government; - municipal securities, which are issued by local authorities; - corporate securities issued by private businesses (mainly joint-stock companies). Depending on how the realization of the rights secured by the security is carried out, there are: - bearer securities - the rights under this paper belong to the person who provides it; - registered securities provide for unambiguous identification of the owner; - order securities - the rights on them may belong to the person named in the security, who himself exercises these rights or appoints another authorized person (promissory note and check) by his order. The rights under an order security are transferred by making a transfer signature - an endorsement - on this paper. A special type of securities is paper money (banknotes). These are original debt obligations of the Central Bank of the country. 6. STATE SECURITIES Government securities (GS) - this is a form of existence of the state internal debt; These are debt securities issued by the government. State debt - this is the total amount of the state's debt on outstanding loans and unpaid interest on them. Taking into account the scope of placement of loans, public debt is divided into internal and external. The state debt of the Russian Federation has the following forms: - loans received by the Government of the Russian Federation; - government loans, i.e., issuance of securities on behalf of the Government of the Russian Federation; - other debt obligations guaranteed by the Government of the Russian Federation. The government determines the conditions for the issuance and placement of government debt. Servicing of the public debt is carried out by the Central Bank and its institutions. It consists in operations for the placement of debt obligations, their repayment and the payment of income in the form of interest on them. The domestic debt is covered by the state budget, and the funds necessary for this are given in a separate line in the budget expenditures. The issue of government securities into circulation can be used to solve the following main tasks (GS as an instrument of monetary regulation): - financing the state budget deficit on a non-inflationary basis, i.e. without additional issuance of money into circulation; - financing of targeted state programs in the field of housing construction, infrastructure, social security, etc.; - regulation of economic activity: the money supply in circulation, the impact on prices and inflation, on spending and investment directions, economic growth, etc. Government securities have, as a rule, two very large advantages over any other. Firstly, this is the highest relative level of reliability for invested funds and, accordingly, the minimum risk of loss of fixed capital and income from it. Secondly, the most preferential taxation in comparison with other securities, there are often no taxes on transactions with them and on the income received. Major investors depending on the type of issued securities are: the population, pension and insurance companies and funds, banks, investment companies and funds. GS are placed in paper (blank) or paperless forms (in the form of records on accounts in authorized depositories) by various methods: auctions, open sale to everyone at set prices, closed distribution among a certain circle of investors, etc. Government securities differ in terms of maturity: - from 5 to 30 years (called long-term treasury notes or bonds); - from 1 to 5 years (medium-term treasury notes or notes); - from 1 month to 1 year (short-term treasury bills). Main types of Russian government securities: - government short-term bonds (GKO); - treasury bills (CO). The owners of a credit institution have the right to carry out the following operations with them: repay accounts payable, pay for goods and services without restrictions, sell them to resident individuals and legal entities, and perform mortgage transactions; - bonds of an internal currency loan (OVVZ); - federal loan bonds with a variable coupon rate (OFZ); - government savings loan (GSZ). 7. SHARES, THEIR TYPES. DIVIDENDS Promotion - issuance 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 the liquidation of the company. Depending on the stage of issuing shares into circulation and their payment, the following types of shares are distinguished: declared, placed, fully paid. Among the shares issued by a joint-stock company, the most common are ordinary and preferred shares. The owner of preferred shares has the right to priority income in comparison with persons holding ordinary shares. As a rule, holders of preferred shares do not have the right to vote at the shareholders' meeting. In most states, the maximum percentage of preferred shares in the total volume of equity securities issuance is stipulated. Thus, under Russian law it is prohibited to issue preferred shares for an amount exceeding 25% of the authorized capital at par value. Preference shares can be produced in various types, the main ones are: - cumulative - suggest that if, due to a difficult financial situation or other factors, dividends are not paid in the current year, then they accumulate. As a rule, the dividend accumulation period does not exceed 3 years; - non-cumulative - these are shares for which, in case of non-payment of dividends for the current year, their accumulation is not carried out; - with a fixed dividend - when issuing, the amount of the dividend (in percent) is set, which remains unchanged throughout the entire period; - preferred shares "with participation" - shares with the right to receive an additional dividend. First, the same amount is paid for both ordinary and preferred shares, and then, if there are still financial resources, they pay extra to the owners of preferred securities; - with an adjustable dividend rate; - with the auction rate of the dividend. Much more common ordinary shares. The holder of an ordinary share has: - the right to participate in the management of the JSC through voting at the shareholders' meeting; - the right to receive a dividend (after the payment of dividends on preferred shares); - the ability to quickly increase the invested capital, the increase of which is due to two factors: the accrual of dividends and the growth of the share price; - the ability to easily sell or buy additional shares; - the right to receive a part of the JSC's property in the event of its liquidation. There may be some varieties of ordinary shares with a limited set of rights: - non-voting shares do not give the holders the right to vote at the meeting; - subordinated shares carry voting rights to a lesser extent than ordinary shares of another type; - shares with limited voting rights give the holder the right to vote only if he has a certain number of shares. In Russia, the issuance of ordinary shares with limited voting rights is effectively prohibited, as the law provides that holders of ordinary shares have equal rights. 8. TYPES OF SHARES VALUE To make investment decisions in the process of analyzing the securities market, various stock valuations. In practice, the following types are distinguished: - nominal cost; - issuance value (placement price); - accounting (book, book) cost; - market (exchange) value. At the time of the establishment of a joint-stock company, the concept of "par value of shares" appears. Payment for shares upon founding a company is made by the founders at their nominal value. The authorized capital of the company is equal to the sum of the nominal values of the shares distributed among the founders. At the expense of the funds contributed to the authorized capital, the property of the enterprise is formed, which is used for the implementation of production activities. In the initial period of the functioning of the company, the value of its property is equal to the amount of the authorized capital. As a result of the economic activity of the enterprise, the value of its property changes under the influence of various factors, including: - by reinvesting profits; - due to the revaluation of fixed assets; - through the use of borrowed funds as a financial leverage; - by placing an additional issue of shares at prices higher than the nominal value. In the course of the operation of the enterprise, both an increase in the value of the property of the enterprise and its decrease as a result of inept management can occur, which leads to the “eating away” of the authorized capital. Thus, over time, the real value of the property of a joint-stock company will differ from the value of the authorized capital. In this regard, it becomes necessary to determine the accounting (book) value of shares, which is calculated according to the formula "the value of the company's net assets / the number of shares placed". Using this formula, we can determine what share of the property is actually behind each share. In the course of their development, companies periodically resort to the issue of shares in order to attract additional capital. By developing a prospectus, the company determines the price at which new shares will be offered to investors. The price at which shares of a new issue are sold is called the placement price (issue price). According to Russian legislation, the placement of shares must be carried out at a market price, which may differ from the nominal value. If in the process of circulation on the secondary market transactions for the purchase and sale of shares are allowed at a price higher or lower than their face value, then during the issue the placement price should not be lower than the face value. In order to encourage shareholders to take advantage of the pre-emptive right to acquire shares of a new issue, a joint-stock company can set a preferential price for them by offering them shares at a discount of up to 10% of the market value. In the overwhelming majority of cases, the placement price significantly exceeds the nominal value, which is due to the growth in the value of assets per share due to the development of the company. The excess of the offering price over the par value of a share is called issuance income. 9. METHODS OF STOCK VALUATION When deciding on the advisability of acquiring shares of a particular company, the investor must determine for himself an acceptable share price that he is willing to pay for the securities. In world practice, quite a lot of methods are used determination of the share price, the most common of which are: - method of evaluation by expected return; - method of evaluation based on the constant growth of dividends; - modified share valuation model. The most common is the expected return method. This method is based on an estimate of the future income that an investor will receive from owning a share. The income consists of two components: the dividend and the increase in the market value of the shares. The assessment of these components is made by the investor on the basis of an analysis of the dynamics of dividend payments in previous years, the dynamics of changes in the market value and forecast expectations for the development of the company. The investor must compare the expected return with the required return, that is, the return that he wants to receive on the invested capital. The required return is formed on the basis of the return on risk-free investments, taking into account the risk premium of investing in a joint-stock company, or on the basis of the return given by companies with a similar level of risk. In order to determine the degree of risk and the size of the premium, the investor must evaluate investment qualities purchased shares. Typically, investors resort to the services of information agencies that publish the rating of securities. The most famous American agency "SP" classifies ordinary shares of companies into the following levels, depending on the reliability and efficiency of their activities: - higher; - high; - good; - average; - below the average; - short; - very low. The shares of each group have their own level of profitability. The lower a stock is ranked, the higher its return. In some cases, investors resort to stock valuation using the model constant growth of dividends. When using this model, a number of assumptions are made, in particular: - dividend payments increase annually with the same growth rate; - the growth rate of dividends reflects the growth rate of the company and its assets; - the required yield is always higher than the growth rate of dividend payments. In this model, the share price is determined by the formula: [dX (1+ g/100) X 100] / (Kg), where d is the dividend paid by the company this year; K - the required level of profitability,%; g- annual growth rate of dividend payments, %. The disadvantage of this model is that the growth rate of dividend payments does not always reflect the growth rate of the company and the dynamics of changes in market prices. In order to eliminate this shortcoming, a modified model for valuing shares based on dividend payments has been developed, which takes into account that part of the profit is subject to reinvestment with a certain level of return. Reinvested profit ensures the development of the company and to a certain extent determines the growth rate of the company's assets. However, the company's growth rate will depend on the efficiency of the use of reinvested funds. The result of applying the method is more reliable. 10. THE ROLE OF SHARES IN MANAGING THE ENTERPRISE Promotion - this is a share security, certifying, in accordance with the requirements of the legislation, co-ownership relations (title of ownership), guaranteeing the investor participation in the management of the joint-stock company in one form or another, giving the opportunity to receive a dividend in one form or another and guaranteeing the investor the right to the property of the company upon liquidation the latter according to a certain procedure. Each owner of an ordinary share may participate in the general meeting of shareholders with the right to vote on all issues of his competence, may elect and be elected to the management bodies of the company, get acquainted with its documentation, etc. Shareholder right for participation in the management of a joint-stock company is realized: - the right to participate in the general meeting of shareholders - the supreme management body of the joint-stock company, which determines the main directions of its activities; - the right to elect and be elected to the management bodies of the company. At the same time, one ordinary share provides its owner with one vote in managing the affairs of the company, which the shareholder can use at general meetings of shareholders. The purposes of acquiring shares from different groups of persons do not coincide. Thus, different categories of shareholders have different interests. The preponderance of this or that interest among the shareholders of the company, which is ultimately determined by which group of shareholders owns a larger block of shares, largely determines the policy pursued by the joint-stock company. Controlling stake - this is the number of ordinary shares owned by a shareholder, which provides the possibility of almost sole adoption or blocking of decisions on issues of the company's activities at the general meeting of shareholders. Theoretically, the value of the controlling stake corresponds to 50% + 1 ordinary shares of the company. At the heart control systems joint-stock company is the following scheme: - the highest authority in a joint-stock company, representing the owner of the joint capital - the general meeting of shareholders of the company; - the supreme management body in the intervals between general meetings of shareholders, elected by shareholders at their meeting to supervise the activities of the company in the interests of the owner and responsible for managing the affairs of the company, - the board of directors of the company; - the head of the company, managing the current activities of the company, appointed by the owner, - the general director (president) of the company; - the body for managing operational activities, consisting of professionals (managers and managers) of the highest level - the board of the company. Its members are appointed by the board of directors; - the body exercising the functions of internal financial, economic and legal control over the activities of the company - the audit commission of the company, whose members are also elected by the owner (general meeting of shareholders). Thus, the principle of formation of the power structure in a joint-stock company is based on the delimitation of the competence of its bodies. 11. BOND Bond (bond) - this is a debt security, certifying the deposit of funds by its owner and confirming the issuer's obligations to reimburse the investor for the cost of this security within a certain period of time with the payment of the percentage fixed in it of the nominal value of the bond and to receive other property rights. Fundamental properties of bonds are: - the loan relationship between the investor and the issuer. The person purchasing the bond does not become a co-owner of the enterprise, but is its creditor; - the existence of a deadline for the circulation of the bond, after which it is extinguished, i.e. redeemed by the issuer at face value. However, world practice knows the so-called "perpetual" bonds, which do not have a final maturity date. According to the bond, the rate of return is reviewed, as a rule, every 10 years in order to reduce the interest rate risk of the issuer. In addition, when issuing bonds, the possibility of their full or partial redemption after 10 years is stipulated. Sometimes, in the prospectus for perpetual bonds, the expiration date of the bonds is indicated by writing "until the liquidation of the company." It should be noted that the issue of perpetual bonds is an extremely rare event. This is more an exception to the rule than a general pattern; - The priority of bonds over stocks in generating income. The payment of interest on bonds is made on a priority basis in comparison with the payment of dividends on shares; - the bondholder has the right to priority satisfaction of his claims in comparison with the shareholder in the liquidation of the enterprise. Due to the fact that a bond is a debt obligation of the issuer, it is considered a higher security than a share. Therefore, investors focused on the acquisition of reliable securities prefer bonds to stocks. However, a bond, as a less risky security, usually has lower returns compared to stocks. Firms resort to bond issues, in order to obtain loan capital. Unlike a bank loan, bonded loans provide attraction of credit resources for longer periods. In industrialized countries, bonds are issued with a maturity, as a rule, of 10-15 years. It should also be borne in mind that by issuing bonds, the company does not increase its authorized capital. Investors who have purchased bonds are not shareholders and, therefore, do not participate in the management of the enterprise. In addition to corporate, there are also government bonds. This is the fundamental difference between this security and shares, since there are no state shares and, even if they are issued by an enterprise owned by the state, they are still not considered as such. Main types of Russian government bonds: - government short-term bonds (GKO); - treasury bills (CO); - bonds of an internal currency loan; - federal loan bonds; - bonds of the state savings loan. 12. TYPES AND CLASSIFICATION OF BONDS Firms issue various types of bonds. Depending on which classification feature is the basis of the grouping, several types of bonds: - mortgages and non-mortgages; - coupon and discount bonds; - Income bonds. Mortgages bonds are backed by the firm's physical assets or securities. Mortgage bonds are subdivided into first mortgages, general mortgages and bonds secured by securities. First mortgages bonds are issued against the first pledge of the company's property and are secured by real physical assets. The mortgage describes in detail the property to be pledged and evaluates it. The value of the pledged assets must exceed the value of the bond issue so that the pledgee has a certain reserve to ensure the security of the bondholders. If the firm fails to fulfill its obligations to creditors, the pledgee enters into possession of this property, sells it and redeems the bonds with the proceeds. First mortgage bonds are called senior securities. From the investor's point of view, these are the best and most reliable securities, since claims for them are satisfied as a matter of priority. The same assets can serve as collateral for several bond issues. If the property has already been pledged and is used a second time as collateral for the issue of the following bonds, then these bonds are called common mortgages. These bonds are in second place after first mortgages. Claims on them are satisfied after settlements with the holders of first mortgages, but before satisfaction of the claims of other creditors. Bonds secured by securities are secured not by property, but by shares and other securities. In case of non-payment of the debt, these securities are transferred to the owners of the said bonds. Unmortgageable (unsecured) bonds are direct debt obligations of a firm that are not secured by any collateral. The actual security of such bonds is the general solvency of the company. As a rule, large and well-known companies with a good credit history resort to the issuance of such bonds. Although these bonds are not secured by collateral, investors are protected to some extent by the terms of the bonds. Usually, as one of the conditions, a provision on "negative collateral" is provided, that is, a ban on the transfer of the company's property as collateral to other creditors. Rarely, unsecured bonds are issued by young, fast-growing firms that do not have real physical assets to serve as collateral. Unsecured bonds of a lower status are debt obligations of a company that are inferior in their rights to other debt obligations, i.e., the requirements for them are satisfied last compared to other creditors, but before the rights of owners of preferred and ordinary shares are satisfied. As a result, these bonds must have a higher yield relative to other debt instruments in order to be attractive to investors and offset the risk of investing in these bonds. 13. OTHER TYPES OF BONDS Depending on the method of obtaining income, coupon and discount bonds are distinguished. Historically, when bonds were issued, coupons were attached to them indicating the yield percentage and the date of payment of income. Discount bonds sometimes referred to as zero-coupon bonds, i.e., no interest is accrued on them, and the owner of the bond receives income due to the fact that the bond is sold at a discount at a price below par. The firm redeems the bonds at face value, as a result of which the bondholder receives the corresponding income. Currently, discount bonds are widely used on the Russian stock market. coupon bonds can be issued with a fixed interest rate, the income on which is paid continuously throughout the entire life of the bond. Establishment fixed interest rate possible in a stable economy, when fluctuations in prices and interest rates are very small. In the context of high and rapidly changing interest rates, the establishment of a fixed nominal yield is fraught with great risk for the issuer. When interest rates are lowered, the issuer will have to 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. When such bonds are issued, an interest rate is set, as a rule, for the first 3 months, and then every 3 months the rate is adjusted depending on the official interest rate or the yield on treasury bills. In some cases, bonds are issued with coupons that show a fixed percentage of yield in relation to face value, and, in addition, the bond is sold at a discount. In this case, the owner receives a regular income in the form of coupon payments, and also derives income from the redemption of bonds at a nominal price. A special variety is income bonds. The firm is obligated to pay interest on these bonds to holders only if it makes a profit. If there is no profit, then the income is not paid. Income bonds can be simple and cumulative. For ordinary bonds, the unpaid income for previous years, the company is not obliged to reimburse in subsequent periods, even if there is a sufficiently large profit. For cumulative bonds unpaid due to lack of profit interest income accumulated and paid out in subsequent years. As a rule, the period of accumulation of unpaid income is no more than 3 years. The terms of the issuance of cumulative income bonds should provide that until the interest income is paid, dividends on preferred ordinary shares are not paid. Income bonds have a higher status in liquidation than lower status stocks and bonds. Bondsand may be bearer и nominal. For bearer bonds, a special record of all owners is not kept, and the payment of interest on them is formalized as coupon redemption (cutting off the coupon from the bond form). For registered bonds, its details must contain the name of the owner. 14. Promissory note Bill - a written promissory note issued by the borrower of money (the drawer) to his creditor (the drawer) and certifying the right of the latter to demand, after a certain period of time, the payment by the drawer of the sum of money indicated in the bill. Bill represents a monetary obligation; only national money or foreign currency can act as a debt. The bill has strictly prescribed by law form: issued on a special form and contains certain set of props. Non-compliance with the established form deprives the bill of legal force. The following types of transactions with bills. 1. Accounting for bills consists in the fact that the holder of the bill sells the bills to the bank by endorsement before the maturity date and receives the bill amount for this minus the early receipt of a certain percentage of this amount. This percentage is called accounting. 2. Bill and credit operations in a bank, in whatever form they are carried out, they begin with the receipt by the client of a bill of exchange loan, which can be bearer and bill-giver. 3. Loans on a special loan account, backed by bills. Banks can open special loan accounts for customers on the basis of a concluded loan agreement and issue loans on them, accepting bills of exchange as security for them. К bills accepted as collateral the same requirements apply as for those considered. Bills of exchange are accepted as security for a special loan account not for their full value: usually 60-90% of their amount, depending on the amount established by a particular bank, as well as depending on the creditworthiness of the client and the quality of the bills presented to him. 4. Collection of bills. Banks often fulfill the instructions of bill holders to receive payments on bills on time. Banks assume responsibility for presenting bills of exchange on time to the payer and receiving payments due on them. If payment is received, the bill will be returned to the debtor. If payment is not received, the bill is returned to the creditor, but with a protest in non-payment. Therefore, the bank is liable for the consequences resulting from the failure to protest. 5. Domiciliation of bills. Banks may, on behalf of drawers, make payments on time. The bank, in contrast to the collection of bills of exchange, is not the payee, but the payer. The appointment of a third party as a payer on a bill of exchange is called domiciliation, and such bills - domiciled. Acting as domicile, the bank bears no risk, since he pays the bill only if the payer paid him the bill of exchange earlier or if the client has a sufficient amount on his settlement (current) account and authorizes the bank to write off from his account the amount necessary to pay the bill. Otherwise, the bank refuses to pay. For payment of a bill as a special payer, a small commission is usually charged, and the paid bills are sent to the client. 15. CHECK check a security is recognized that contains an unconditional order of the drawer of the check to the bank - to make a payment in the amount of the amount indicated in it to the holder of the check. Only a bank where the drawer has funds that he has the right to dispose of by issuing checks can be indicated as a payer on a check. It is not allowed to withdraw a check before the expiration of the term for presenting it. The issuance of a check does not extinguish the monetary obligation for which it was issued. The procedure and conditions for the use of checks in the payment turnover are regulated by the Civil Code of the Russian Federation, and in the part not regulated by it, by other laws and banking rules established in accordance with them. Using check form of payment has a number of features, in particular: 1) a check, in accordance with the current legislation, is a security by its legal nature, i.e. a document certifying (subject to the established form, as well as mandatory details) property rights, the exercise or transfer of which is possible only upon its presentation; 2) the ability to be a real payer on a check is vested only in credit organizations that have a license to engage in banking activities; 3) the check is paid by the payer at the expense of the drawer's funds. Currently, the scope of circulation of checks is somewhat limited. Checks issued by credit institutions may be used for non-cash payments, but they are not used for settlements through subdivisions of the settlement network of the Central Bank of the Russian Federation. Checks issued by credit institutions may be used in interbank settlements on the basis of agreements concluded with customers and interbank agreements on settlements by checks in accordance with the intrabank rules for conducting settlement transactions. Interbank agreement on settlements by checks may provide for: - conditions for the circulation of checks when making settlements; - the procedure for opening and maintaining accounts on which operations with checks are recorded; - composition, methods and terms of transfer of information related to the circulation of checks; - the procedure for backing up the accounts of credit institutions participating in settlements; - obligations and liability of credit institutions - participants in settlements. The internal bank rules for conducting transactions with checks, which determine the procedure and conditions for their use, should provide for: - the form of the check, the list of its details and the procedure for filling out the check; - list of participants in settlements by checks; - deadline for presenting checks for payment; - terms of payment for checks; - conducting and composition of operations on check circulation; - accounting registration of operations with checks; - order of archiving checks. A check is convenient for settlements in cases where the payer does not want to give money before receiving the goods, and the supplier does not want to transfer the goods before receiving payment guarantees. In addition, when paying by checks, the supplier can fully protect himself from doubts about the timing of settlement with the buyer and the acceleration of payment. A check is also convenient for settlements in all cases where the seller is not initially known. 16. DEPOSIT AND SAVINGS CERTIFICATES Savings (deposit) certificate - a security certifying the amount of the deposit made to the bank and the right of the depositor (certificate holder) to receive the deposit amount and the interest stipulated in the certificate at the bank that issued the certificate or at any branch of this bank after the expiration of the established period. The current legislation imposes on certificates certain requirements, in particular: - certificates can be registered and bearer; can be issued both in a single order and in series; - are issued in the currency of the Russian Federation; at the same time, both residents and non-residents can be certificate holders; - cannot serve as a settlement or means of payment for goods sold or services rendered; - unilateral change by a credit institution of the interest rate stipulated in the certificate is not allowed; - the transfer of rights certified by a bearer certificate to another person is carried out by handing the certificate to this person; rights certified by a personal certificate are transferred in the manner certified for the assignment of claims (cessions); - the assignment of the claim under the certificate can be made during the period of circulation of this certificate. The certificate must contain a number of mandatory details, non-observance of which entails its invalidity, in particular: - name "savings (or deposit) certificate"; - number and series of the certificate; - the date of making the contribution or deposit; - the amount of the deposit or deposit, issued by the certificate (in words and figures); - an unconditional obligation of a credit institution to return the amount deposited or deposited and to pay the interest due; - date of claiming the amount under the certificate; - interest rate for the use of a deposit or contribution; - the amount of interest due; - interest rate upon early presentation of the certificate for payment; - name, location and correspondent account of the credit institution opened with the Bank of Russia; - signatures of two persons authorized by the credit institution to sign such obligations, affixed with the seal of the credit institution. savings certificate can only be issued to a citizen of the Russian Federation or another state that uses the ruble as the official currency. The right to issue a savings certificate provided to banks under the following conditions: - carrying out banking activities for at least 2 years; - publication of annual reports (balance sheet and income statement), confirmed by an audit firm; - compliance with banking legislation and regulations of the Bank of Russia; - fulfillment of mandatory economic standards; - availability of a reserve fund in the amount of at least 15% of the actually paid authorized capital. Certificate of deposit holder is a legal entity registered on the territory of the Russian Federation or on the territory of a state that uses the ruble as the official currency. Generally, certificates are urgent (the term of circulation of savings certificates is 3 years, and deposit certificates - one year (from the date of issue to the date the owner receives the right to demand a deposit or a deposit under the certificate). 17. FUTURES The appearance on the market of such a tool as financial futures, is one of the biggest innovations in the international financial market. Rapid growth in the late 80s number of concluded futures contracts is a vivid example of the fact that this instrument is able to meet the needs of a large number of financial market participants. Futures Markets are, in fact, a continuation, development of the long-term derivatives markets that have existed for a long time. In the futures market, there are There are two main types of futures contracts: - commodity futures. They are based on the sale and purchase of various goods produced in the national economy (as a rule, products of agriculture, metallurgy, and extractive industries); - financial futures. The base is certain financial instruments (deposits, bonds, currencies, indices, etc.). central idea any futures transactions (including futures) is course insurance (respectively, prices) at the present moment of time on a certain date in the future. Development of the futures market includes: - facilitation of trade by standardizing transactions, i.e. contracts; - centralized markets (exchanges) for trading contracts; - the use of a "clearing organization" as an intermediary between the seller and the buyer at the conclusion of each transaction and, thus, ample opportunities to equalize existing positions. financial futures - a contractual obligation to buy, respectively, to sell on a standardized contract execution date a certain, standardized number of financial instruments at a price predetermined (agreed) in a free exchange auction. Futures or futures contract - this is a standard contract for the supply of goods in the future at a price determined by the parties during the transaction. Financial instruments traded on futures exchanges can be divided into: - financial futures with a specific base. - financial futures with an abstract base. Financial futures with a specific base based on real objects of trade. At the same time, the actual delivery of the underlying financial instrument is, as a rule, possible. К financial futures with a specific base relate: - currency futures; - Interest rate futures. К financial futures with an abstract base, the execution of which in the physical sense (delivery / acceptance), as a rule, is impossible, include index futures. Trades with indices is a new, rapidly progressing area of financial transactions based on futures as well as options. Index futures - a contractual obligation to sell/buy a standardized value of one of the indices at a pre-bargained rate on a standardized due date. Index futures obviously do not involve any supply of securities, the transaction is closed only through payment of the difference formed from the movement of the index up or down. Deal result is expressed by the margin positions of the parties by the end of the contract, i.e. the actual closing occurs with the help of the so-called "market mark". 18. OPTION AND ITS FEATURES In the world of investing option (option) A contract is a contract between two parties whereby one person grants the other the right to buy a specified asset at a specified price within a specified period of time, or grants the right to sell a specified asset at a specified price within a specified period of time. The person who received the option and thus made the decision is called the option buyer, who must pay for that right. The person who sells the option and responds to the buyer's decision is called the option seller. There is a wide variety of contracts that have the features of options. Many varieties can be found even among the widely used financial instruments. Traditionally, however, the term "options" is used only in relation to certain instruments. Other instruments, although of a similar nature, are named differently. The two main types of options are options. "call" и "put". Currently, such contracts are listed on many exchanges in the world. In addition, many of these contracts are created on a case-by-case basis (i.e. "over the counter" or "over the counter") and typically involve financial institutions or investment banks and their clients. Exist two option styles: European и American. European style means that the option can only be exercised on a fixed date; American style - at any time during the term of the option. Call Options The most well-known option contract is the call option on stocks. It gives the buyer the right to buy ("call") a certain number of shares of a certain company from the seller of the option at a certain price at any time up to and including a certain date. Four points that are stipulated in the contract: - a company whose shares can be bought; - number of purchased shares; - the purchase price of shares, called the exercise price (exercise price), or the "strike" price; - the date when the right to buy is lost, called the expiration date. Put options The second type of option contract is the put option. It gives the buyer the right to sell a certain number of shares of a certain company to the seller of the option at a certain price at any time up to and including a certain date. This contract contains the same terms as the call option contract: - a company whose shares can be sold; - number of shares sold; - the sale price of shares, referred to as the exercise price (or "strike" price); - the date when the buyer of the option loses the right to sell, called the expiration date. Allocate more two other types of options: American и European. American is performed on the specified date or any day before it. The European option is exercised strictly on the specified date. The intrinsic value of a call option is equal to the difference between the stock price and the strike price of the option, provided that this difference is positive. Otherwise, the intrinsic value of the option is zero. The intrinsic value of a put option is equal to the difference between the strike price and the stock price, if the difference is positive. Otherwise, the intrinsic value of the option is zero. 19. TYPES OF OPTIONS In addition to the common division of options into American and European types, there are also a lot of so-called "exotic" types of options. Options based on price history. This group of exotic options is characterized by the fact that at least one of the terms of the contract takes into account the historical values of various parameters or imposes restrictions on them. Options with an average price. This type of option takes into account the average prices of the underlying asset throughout the entire period until the option is exercised. The term "average" in this context means either a simple arithmetic average or a weighted average. There are two main varieties: middle price option и medium strike option. In the first case, the price of the underlying asset for the period (settlement price) is averaged, in the second case, the strike price. barrier options. A barrier option is an option whose payoff depends on whether the price of the underlying asset has reached a certain level over a certain period of time or not. The corresponding price level can be seen as a barrier that either "turns on" the option or "turns it off". The first case corresponds to the class of barrier options knock-in second - knockout. Option difference knockoutfrom a simple option is that when the price of the underlying asset reaches a certain barrier, the option ceases to exist. In the case of an option knock-out call the barrier lies below the strike price. If the option ceases to exist, then the owner, depending on the terms of the contract, either does not receive anything, or receives a fixed amount of money, called compensation. The opposite is true for knock-in options. barrier options widely used in hedging. Their use provides not only greater freedom of action compared to standard options, but lower hedging costs due to the low premium for barrier options. Ladder and step options. The ladder option allows the buyer to fix the already "earned" option profit at moments that are not fixed in advance, but when the price breaks through a certain level. When the price of the barrier is reached, the option owner fixes the profit (if any) and names a new barrier. Thus, a ladder option has even less risk than a barrier option and, accordingly, trades at a lower premium. Step options, on the contrary, make it possible to “average out” a loss-making option position, i.e. if the price of the underlying asset falls to a certain level, the “Down” step option fixes a new, lower strike price. Binary options. Binary options either pay a certain amount or pay nothing. Binary option gives its holder the right to receive a fixed amount if the current price of the asset on the exercise date is higher (binary call option) or lower (binary put option) than the strike price. Compound options are options on options. A compound option gives its holder the right to purchase another (underlying) option in the future. 20. SPECULATIVE OPERATIONS IN THE DERIVATIVES MARKET This section is the most complex and interesting for derivatives market participants, since the profitability of speculative transactions is much higher, even when compared with the profitability of speculative transactions in the spot market, since the "leverage effect" is applied here. And we are faced with an increase in yield of about ten times (if we talk about option contracts, here the yield is even higher). Speculative transactions are associated with a very high risk, respectively, the preparation for this type of operation should have a very thorough ground. To make an appropriate decision to buy or sell, the speculator must rely on fundamental and technical analysis. Let's take as the subject of speculative operations futures contracts for the shares of Lukoil and RAO UES of Russia on the Russian Exchange (until a certain moment it was the most high-turnover and highly liquid). And here is an example of what fundamental factors we monitor to make a decision: - current values of the main indicators of change that may cause a reaction in our market (SP, oil prices on world markets - spot, futures values for Brent and Light); - changes in Russian and foreign indices that have an impact on world markets (such as in the USA - PPI, CPI, GDP, Non-Farm Payrolls, NAPM; in Japan - TANKAN); - evaluation of the leading rating agencies of Russia and other countries (s P, Moody's); - the dynamics of the dollar against the ruble and world currencies, the ratio of the dollar to US government bonds; - rates LIBOR, MIBOR; - the economic condition of the largest energy, oil, metallurgical companies (reporting on their activities: balance sheet - receivables and payables, actions taken to pay them off; payment of dividends, change in the cost of tariffs for a particular asset, which is the basis for this structure; prerequisites to change them, valuation of fixed assets - depreciation coefficients for them, total profit for the enterprise for the period, credit history, calendar of shareholders' meetings, ADR'S release calendar); - technical analysis (trend lines, support, resistance levels and other technical analysis tools), the expected trend. Let's take one of the speculative strategies as an example. A prerequisite for this kind of speculative trading is the fact that the futures and spot markets move in the same direction with a certain price spread. The spread is from 30 to 60% per annum in US dollars. The liquidity of the markets today makes it possible to carry out these operations in the amount of 1 to 3 million US dollars. It should be noted that there is a low risk of loss of invested funds, due to the technology of the operation and the presence of a price spread. Further, the technologies of such operations, which differ in the degree of aggressiveness (profitability and risk), will be outlined. If such operations are successfully carried out, their profitability can be quite high, since between 1 and 5 days can pass between entering and exiting the market. 21. WARRANT By their mechanism of action and by their economic content, warrants are very close to rights. Warrant is a security that gives its owner the right to purchase, within a specified period of time, a certain number of ordinary shares at a predetermined price. The difference between a warrant and a right is the period of validity. If the right is a short-term security that operates on the market for 3-4 weeks, then the warrant is valid for 3-5 or more years. As a rule, warrants are issued together with bonds and shares in order to make securities more attractive to investors. A warrant is issued as an independent security and can be sold and bought separately from the stock or bond to which it is attached. A warrant usually gives the right to purchase additional shares. However, in some cases, a warrant allows you to get other values: bonds at a reduced price, gold, etc. Due to the fact that the warrant provides an opportunity to purchase additional values at a cost below the market price, it has its own price. The price of a warrant consists of two components: the implicit price and the time price. Hidden price is the difference between the market price of an ordinary share and the exercise price at which these shares can be purchased on the basis of a warrant. A warrant has no hidden price if its exercise price is higher than the market price of the underlying common stock or other assets. Temporary price - is the difference between the future market price of a share, which may increase due to the successful development of this company, and its current market price. Warrant price is defined as the sum of hidden and temporary prices. Ultimately, the actual price of a warrant fluctuates around its theoretical price depending on supply and demand and other factors. It should be noted that a warrant may not have a hidden price when the market price of a share is below the exercise price. However, it will have a temporary price due to the fact that the market price of the shares has an upward trend. Temporary warrant price decreases as the end of its validity period approaches, as speculative expectations of the growth in the market value of shares decrease. Upon expiration, the warrant loses all value. Warrant compared with share has great speculative potential, which attracts the attention of stock market participants. The price of a warrant changes simultaneously with the change in the share price. In this case, the increase in the price of a warrant is usually equal to the sum of the change in the price of shares. As a result, the profitability of operations with warrants is much higher than with shares. Operations with warrants are highly profitable, but at the same time risky. In the opposite situation, when there is a fall in the market value of shares, the price of the warrant, respectively, decreases. With the same absolute price decline, the percentage loss on warrants will be much larger than on shares. High profitability (loss) of operations with warrants is the main property of a warrant, which is called "lever effect". 22. WAREHOUSE REGISTER The second part of the Civil Code of the Russian Federation introduces a new type of security - warehouse receipt. Legally introduced not one, but whole four new securities: - a simple warehouse certificate (hereinafter referred to as PSS); - a double warehouse receipt (hereinafter DSS), which, in turn, consists of two parts, each of which, in case of separation of the DSS, will also be a security: warehouse certificate и pledge certificate (or "warrant"). Each of the parts of the LTA can circulate separately from the other and, in turn, is a security. All these securities can come into being when the goods are transferred for storage to a special commercial organization - a warehouse. According to their "social origin" these papers go back to warehouse receipts or receipts for the receipt of things for storage. Simple warehouse receipt is a bearer's security and certifies the ownership of the goods. Double Warehouse Certificate also certifies the ownership of the goods. At the same time, the Civil Code is silent about the nature of this security: it is not clearly indicated whether it is nominal or order. It is not possible to consider it bearer, since among its mandatory details there is a "Name of the bailor". In addition, it is indicated that a double warehouse certificate (as well as each of its parts) can be transferred by means of an endorsement. As you know, the Civil Code of the Russian Federation provides two types of "endorsements": cession (applies to registered securities) and endorsement (applies to orders). It's time to talk about each of the two parts of the double warehouse receipt. The first part, the actual warehouse certificate, certifies the ownership of the goods. At first glance it may seem that this paper is almost identical to a simple warehouse receipt. But that's not the case at all. In addition to the fact that a simple warehouse certificate is bearer paper, and a warehouse certificate as part of a double warehouse certificate is registered paper, there is another fundamental difference. The PSS holder does not need any additional documents in order to exercise his rights as the owner of the goods. А warehouse receipt holder (the first part of the LTA), in order to receive the goods, that is, to exercise the rights of the owner, must present not only a warehouse receipt, but also a pledge certificate or any document replacing it. A pledge certificate (the Civil Code gives another version of the name of this security - "warrant") certifies that its owner has the right to pledge the goods, the ownership of which is certified by a warehouse receipt. In other words, the separation of the pledge certificate from the warehouse certificate means that the goods in the warehouse have been pledged. At the same time, the nature of the obligation secured by the pledge does not matter at all. And since the disposal of the pledged property without the consent of the pledgee is not lawful, then the full exercise of the right of ownership by the holder of only the warehouse receipt is impossible until both the pledge and the warehouse certificate fall into the hands of one person. 23. FORWARD CONTRACTS AND TRANSACTIONS WITH THEM forward contract is an agreement between a specific seller and a buyer for the sale and purchase of a specific product within a predetermined period. forward contract - this is a firm deal, i.e. a deal that is obligatory for execution. The subject of the agreement can be various assets, such as commodities, stocks, bonds, currencies, etc. A person who undertakes to deliver the corresponding asset under the contract opens a short position, i.e., sells a forward contract. The person who purchases the asset opens a long position, i.e. buys a contract. The conclusion of the contract does not require any costs from counterparties (here we do not take into account possible overhead costs associated with the execution of the transaction, and commissions if it is concluded with the help of an intermediary). Forward contracts are concluded, as a rule, for the actual sale or purchase of the relevant assets, including for the purpose of insuring the supplier or buyer against possible adverse price changes. However, this type of contract immediately showed its shortcomings, the main of which are, firstly, the difficulty of transferring the obligations undertaken to a third party due to the fact that it is difficult to find any person whose interests would exactly correspond to the terms of the contract, originally concluded on the basis of from the needs of the first two persons. Thus, one of the parties can liquidate its position only with the consent of the other. Secondly, the probability of default by one of the counterparties in the event of a sharp fluctuation in the prices of goods or in the event of a change in the financial position of the counterparty in the period before the execution of the contract, or in the event of fraud by one of the counterparties. At the same time, this agreement has advantages when working with any non-standard goods and a contract or with a counterparty that you fully trust. Forward contracts are used mainly for currency risk insurance, and also from changes in interest rates. Forward currency contracts are the most popular hedging method. However, there are a number of points to consider before undertaking a hedging using forward foreign exchange contracts. Forward prices are closely linked to interest rates for both currencies in question. Their change may affect the forward rate. One of the common problems with foreign exchange forward transactions is that the company may not know the exact maturity date of the debt, and therefore the exact period required to cover the forward transaction. To solve this problem, several variants of forward foreign exchange contracts have been developed. It is possible to forward sell the income expected in a particular settlement period and then adjust the contract when the money is received. If the receipt of money occurred earlier than expected, then the delivery under the forward contract can be made earlier than the settlement day. If the receipt of money is late, then the contract can be extended. It is possible to obtain forward contracts for which a series of expiration dates are agreed on the day of the transaction. 24. DIFFERENCE FROM FORWARDS AND FUTURES forward contract - a contract binding on all parties involved in the transaction, under which the buyer undertakes to buy in the future, and the seller - to sell a certain quantity of goods of the agreed quality at a price determined on the date of the conclusion of the contract, but with delivery on a certain date in the future. Unlike a futures contract, a forward contract does not have standardized parameters for the volume, quality of goods and delivery date. An important difference between a forward contract and a futures contract or option is that the former is usually concluded directly between the seller and the buyer, often not on some organized trading floor, but directly, while a futures or option contract is concluded through a clearing organization on some organized marketplace. Futures markets represent the most efficient and liquid trading mechanisms. However, these mechanisms are implemented on the condition that: - the size of delivery on futures is standardized; - standardized delivery time; - the quality of goods is standardized; - the price of the goods is determined in the process of open auction; - the execution of a futures contract ends, as a rule, with the closing of a position, and not with the delivery of the object of the transaction; - there is a guarantor of the transaction. Futures contractt is a standardized exchange contract for the supply of goods within a specified period at a price determined by the parties during the transaction. Important features of futures contracts, unlike forwards, are as follows. 1. The objects of a futures contract can be any commodity, securities, currency, while forward contracts are concluded only for commodity transactions. 2. Futures contracts, as a rule, are concluded on the exchange, and forward contracts - on the over-the-counter market. 3. The size of the delivery, the quality of the goods, the delivery time in the futures contract is standardized. In a forward contract, the above parameters are determined by agreement of the parties. 4. The price at which a futures contract is concluded is determined on the basis of free competition among trading participants in the trading floor of the exchange. Moreover, the prices of futures contracts are interconnected with prices in the markets of real goods that make up the objects of futures contracts. In a forward contract, the price is agreed between two parties - the seller and the buyer. 5. Anonymity of the futures contract, i.e. the parties to it are not the seller and the buyer, but the seller and the clearing house of the exchange or the buyer and the clearing house. This circumstance allows the seller and the buyer to act independently of each other. 6. If in a forward contract the execution of the contract ends with the delivery of a cash commodity, then trading in futures contracts, as a rule, provides for the liquidation of obligations under the contract by means of a reverse transaction by the buyer and seller with the clearing house of the exchange. 7. The clearing house acts as a guarantor of the transaction for futures contracts, while there are no transaction guarantees for forward contracts. 8. Unlike a forward contract, a futures contract provides for the mandatory publication of information on transactions. 25. INTERNATIONAL SECURITIES International Securities - securities that are in circulation simultaneously in different countries. Basic Methods entry of Russian enterprises into the international capital market are long used in international practice and have received worldwide recognition depository receipts and Eurobonds. Eurobonds - these are bonds issued on the international stock market and denominated in eurocurrencies - currencies that are foreign in relation to the issuing country. One of the innovations of the international capital market was the securitization of Eurocurrency loans. Since they originally took the form of Eurobonds, they are still issued primarily in the form of short-term securities, such as Europolis, with a maturity of up to 1 year, but they can also be turned into a long-term loan. Eurocommercial papers - another form of short-term securities issued by rapidly growing companies. Euroshares - new issues (primary issues) of ordinary and preferred shares and other equity securities distributed on the international stock market. Other shares include secondary issues placed by closed subscription and with the help of closed-end investment funds. Issues of euroshares are also very popular. Bonds placed outside the issuing country are called international. They are divided into Eurobonds and foreign bonds. The main share (80-90%) is Eurobonds. Other varieties of international bonds are also known, occupying a smaller share. If bonds are placed simultaneously on the European market and on the national market (one or more), they are called global. Bonds of the same issue, offered for sale simultaneously in several states in their national currencies, are called parallel. International bonds can be considered in the broad and narrow sense of the word. Often the term "international bonds" is used to refer to all major debt instruments distributed abroad. These include long-term debt instruments - bonds (bonds) и medium-term debt instruments (notes). International bonds differ from national ones) by the taxation regime, the method of placement, the amount of information available, the circle of potential buyers. In the narrow sense of the word, the term "international bonds" corresponds to debt instruments. Bonds and notes very often they do not differ in terms, the main difference is in the method of paying income. Most often, notes are issued with a floating coupon rate, and bonds - with a fixed one. About 70% of issues are placed by banks and non-financial companies, and the rest - by the state and international organizations. Eurobonds - securities issued in Eurocurrencies, placed among foreign investors with the help of an international syndicate of underwriters. Eurobonds are used for long-term lending. They are very similar to bonds issued by the state and companies on the domestic market, but they mobilize funds from the europool, as they are characterized by low interest rates and maintaining unchanged shares. 26. SECURITIES MARKET (WESTERN MODEL) At present, in developed Western countries, there are two models of stock markets : American and European. The American model is considered to be more effective and deeply thought out, and most of the countries that are just forming their stock markets are striving to create it. The American model differs from the European one primarily in the deep state intervention in the regulation of the securities market. The beginning of state regulation of the securities market in the United States refers to the period of the "Great Depression" of 1929-1933. and for more than 60 years has been the subject of close attention of the government administration. The federal securities laws are six major pieces of legislation enacted between 1933 and 1940. and systematically supplemented in subsequent years. In 1, a number of laws were added to them, including the Law on the Protection of the Interests of Investors in the Securities Market. In the United States, there is a standard form of registration document. It contains information about the issuer: his name, company name, type of business, information about his property and conditions for issuing securities. Financial statements must be submitted: the issuer's balance sheet, drawn up no earlier than 3 months before the proposed issue of securities, and the same kind of summary report for the past five years. Special auditors are engaged in checking the veracity of this information. They control the preparation of registration documents, conduct a comparative analysis of the performance of various firms both for the current and previous years. It occupies a special place Law of 1970 on the protection of the interests of investors in the securities market. On the basis of this law, the "Corporation for the Protection of Investors" was created. It can supervise the liquidation of joint-stock companies experiencing financial difficulties and provide payments for the claims of the owners of the securities of these firms. The interests of brokers, dealers and other persons serving the stock exchanges are placed under the protection of the law. In the US, there are other types of regulation of the securities market. Their arsenal is replenished and is under constant supervision by the state. Stock exchanges differ in the size of the operations. Along with national stock exchanges such as New York, there are many smaller exchanges. These are regional exchanges that carry out transactions with shares of small and medium-sized companies. In the United States, among the regional exchanges, the Midwest, Philadelphia, Pacific, Boston and others are especially distinguished. A number of commodity exchanges, such as the Chicago one, deal with securities transactions. The Russian securities market is built mainly on the American model. So, in particular, the legislative requirements in both countries are similar in terms of mandatory state registration of the issue of securities, participants in the securities market, and a number of others. However, it would be wrong to talk about the complete correspondence and identity of the two systems. There are differences in the legal regulation of the securities market between our countries, and sometimes they are quite significant. First of all, this concerns the question of what kind of relations are subject to the laws governing the securities market. 27. UNIT INVESTMENT FUND Mutual investment fund represents property transferred by investors (individuals and legal entities) to trust management of a licensed management company in order to increase this property. Mutual investment fund - an institution of collective investment, a tool for accumulating assets of many investors. A mutual fund is a kind of "money bag" through which operations are carried out in the financial and stock markets. An investor who has invested money in a mutual fund becomes the owner of the investment share (shareholder). The property constituting the mutual investment fund belongs to the shareholders on the basis of the right of common shared ownership. fund management performs Management Company, licensed by the Federal Securities Commission. The management company can simultaneously manage several investment funds. The fund is considered established from the moment of registration with the FCSM of the prospectus for the issue of investment shares. The basis of functioning mutual investment fund pledged trust mechanism. The legislation establishes a list of assets that may constitute the property of the fund: - cash, including in foreign currency; - funds placed on a bank deposit (deposit); - government securities of the Russian Federation; - government securities of subjects of the Russian Federation; - municipal securities; - shares and bonds of Russian joint-stock companies; - securities of foreign states; - shares of foreign joint-stock companies and bonds of foreign commercial organizations; - other securities provided for by regulatory legal acts of the Federal Securities Commission of the Russian Federation. Investment share - a registered security, certifying the share of its owner in the ownership of the property constituting the fund. For acquisition of shares mutual investment fund, you must submit an application for acquisition and transfer the invested amount to the fund's account. In order to redeem the investment units of the fund, it is necessary to submit an application for the redemption of investment units. The amount of payment upon redemption of units is determined by multiplying the number of units presented for redemption by the redemption price of one investment unit. Funds are paid out within 15 days from the date of submission of the application for redemption and transferred to the account specified in the application for redemption. Investment shares, like other securities, can be gifted or inherited. To do this, you need to re-register the ownership of the new owner in the management company. According to the laws of the Russian Federation, investment shares are not taxed if the party accepting the inheritance or gift is the spouse. In this case, the transferred shares are tax-free and the new owner can immediately sell them. In all other cases, investment shares are taxed according to the scale established for these cases. In Russia today there are almost 60 mutual funds managed by 27 management companies; new funds and management companies are constantly appearing. Management companies of many mutual funds are created by the largest investment companies in Russia. 28. METHODS OF SECURITIES PLACEMENT Basic Methods placement of securities on an international scale are: - private accommodation; - placement "according to the rule 144 A"; - open placement; - placement in the form of depositary receipts; - issue of Eurobonds. We give a brief description of each of these methods. 1. Private placement of bonds is carried out among qualified investors without special audit reports. The placement mechanism is based on direct contacts between a professional intermediary and a client. With this method, the issue is placed among a small group of investors. Typically, this type of placement involves one loan manager and one investor. Such bonds do not go through the listing procedure on the stock exchange. In this way, it is possible to attract 15-20% of the required capital from foreign financial companies. 2. "Rule 144 A" came into force on August 1, 1990. It does not require the registration of financial instruments intended for qualified investors, which include insurance and investment companies with an investment in securities of unaffiliated persons of at least 100 million dollars. This type of placement allows you to raise 20-35% of the required capital. 3. An open offering requires checking the audit balance sheet and the prospectus in accordance with the standards of the Securities and Exchange Commission of the United States of America or in accordance with the Common European Standard, while allowing you to raise up to 100% of the required capital. Tender method placement of commercial paper - a procedure for the placement of commercial paper, in which the borrower announces its intention to issue commercial paper and invites dealers to place orders. Another method (a specific sales technique) is the technical raising of capital in stocks, bonds, depositary receipts, convertible securities, or a combination of these methods. The choice of one or another option depends on whether the issuer wants to attract short-term or long-term capital. Basic Methods entry of Russian enterprises into the international capital market are long used in international practice and have received worldwide recognition depository receipts and Eurobonds. A public subscription or public offering of securities occurs when a corporation decides to transform from a private company into a public company with a large number of shareholders. The difference is not just in the number of shares issued: we are talking about control over the enterprise, which under these conditions can pass from the founders to the owners of a controlling stake. A public offer of a large number of replicated shares gives the issuer huge funds that open up opportunities for expansion, modernization, diversification of activities, makes the company famous, it moves to a new, higher level of prestige. An example of the largest American public joint stock company is AT T (American Telephone and Telegraph Company). 29. PRIMARY SECURITIES MARKET Legislatively primary securities market is defined as the relationship that develops when issuing (for investment securities) or when concluding civil law transactions between persons incurring obligations for other securities and the first investors, professional participants in the securities market, as well as their representatives. In this way, primary market - this is the market for the first and repeated issues of securities, where their initial placement among investors is carried out. The most important feature of the primary market is the full disclosure of information to investors, allowing them to make an informed choice of a security for investing money. All activities in the primary market serve to disclose information: - preparation of the issue prospectus, its registration and control by state bodies from the point of view of the completeness of the data presented; - publication of the prospectus and subscription results, etc. A feature of domestic practice is that the primary securities market still prevails. This trend is explained by such processes as privatization, the creation of new joint-stock companies, the financing of public debt through the issuance of securities, the re-registration of the state's foreign currency debt through the stock market, etc. Exist two forms of the primary securities market: - private accommodation; - public offer. A private placement is characterized by the sale (exchange) of securities to a limited number of investors without a public offering or sale. Public offer - this is the placement of securities during their initial issue by public announcement and sale to an unlimited number of investors. The relationship between a public offering and a private offering is constantly changing and depends on the type of financing that enterprises in a given economy choose, on the structural changes that the government is implementing, and other factors. In the market that sells, sells newly issued securities by their issuer, issuing organization, initial sale of securities It is made by subscription or in the form of direct sale to primary buyers. A set of institutions through which newly issued shares are distributed for sale to investors. Two routes can usually be used to distribute newly issued shares. The first is through direct sales to the investor. The corporation finds one or more investors who buy all the shares of the corporation at once. This type of distribution is called private placement and is typically used for distribution of bonds. The second way is through an investment banker. An investment banker may purchase the entire package of newly issued securities himself or form a syndicate with other bankers. This type of sale is called subscription. In this case, having subscribed to the entire block of shares, the investment banker then sold them to investors. Currently, financial intermediaries are prohibited by law from buying up the entire package of newly issued shares. 30. SECONDARY MARKET Under secondary stock market refers to the relations that develop during the circulation of previously issued securities in the primary market. The basis of the secondary market is made up of transactions formalizing the redistribution of spheres of influence of foreign investors' investments, as well as individual speculative transactions. The most important feature of the secondary market - this is its liquidity, i.e. the possibility of successful and extensive trading, the ability to absorb significant volumes of securities in a short time, with small fluctuations in rates and at low implementation costs. The secondary securities market is divided into: - organized (exchange) market; - unorganized (over-the-counter or "street") market. Organized or exchange market is exhausted by the concept of the stock exchange as a special, institutionally organized market in which securities of the highest quality are circulated and operations in which are carried out by professional participants in the securities market. Stock Exchange is an organized market for trading in standard financial instruments, created by professional stock market participants for mutual wholesale transactions. Features of a classic stock exchange: 1) it is a centralized market with a fixed place of trade, i.e. the presence of a trading platform; 2) in this market there is a procedure for selecting the best goods (securities) that meet certain requirements (financial stability and large size of the issuer, the mass character of the security as a homogeneous and standard commodity, the mass character of demand, clearly defined price fluctuations, etc.); 3) the existence of a procedure for selecting the best market operators as members of the exchange; 4) availability of temporary regulations for trading in securities and standard trading procedures; 5) centralization of registration of transactions and settlements on them; 6) establishment of official (exchange) quotations; 7) supervision of members of the exchange (in terms of their financial stability, safe business conduct and compliance with the ethics of the stock market). Secondary securities market is a set of institutions through which investors can buy and sell securities issued in the past. The secondary market consists of stock exchanges and the unregistered securities market. In the US, stock exchanges are represented by the New York Stock Exchange, the American Stock Exchange, and the regional and stock exchanges. In the secondary securities market, organizations cannot obtain the funds they need, here securities that have already been bought once are sold and bought. The difference between the secondary securities market and the primary is not only that the primary market precedes the secondary and securities cannot appear on the secondary market, bypassing the primary. In the primary and secondary markets, there are processes that are different in nature. In the primary market, the capital of investors through the purchase and sale of securities fall into the hands of the issuer. In the secondary market, there is a transfer of securities from one investor to another, and the money for the sold securities goes to the former owners of the securities. That is, transactions in the secondary market occur without the participation of the issuer and do not have a direct impact on the state of affairs of the issuer. 31. ORGANIZATIONAL STRUCTURE OF THE STOCK EXCHANGE Stock Exchange is a market organized in a certain way, in which the owners of securities make purchase and sale transactions through members of the exchange acting as intermediaries. The contingent of members of the exchange consists of individual securities traders and financial institutions. General leadership The activities of the stock exchange are carried out by the board of directors. In his activities, he is guided by the charter of the exchange, which determines the procedure for managing the exchange, the composition of its members, the conditions for their admission, the procedure for the formation and functions of exchange bodies. For everyday management of the exchange and its administrative apparatus the council appoints the president and vice president. In addition, oversight of all aspects of the exchange's activities is carried out by committees formed by its members, for example, audit, budget, systems, stock indices, options. Committee on the admission of members considers applications for admission to the members of the exchange. The Arbitration Committee hears, investigates and settles disputes between members of the exchange, as well as members and their clients. Number and composition of committees vary from exchange to exchange, but a number of them are required. This is a listing committee or commission that considers applications for inclusion of shares in the exchange list; trading floor procedures committee, which, together with the administration, determines the mode of trading (trading sessions) and monitors compliance with instructions for activities on the trading floor, as well as in other cases. clearing house solves two main tasks: reconciliation of information submitted by members of the exchange on transactions concluded by them during the day; closure of the initial and final links in the chains through which the same shares passed from hand to hand during the exchange day. The Exchange Committee or Board of Governors allows securities to be sold after their verification and determines the rules for trading them. To be included in the number of companies whose securities are admitted to exchange trading, the company must satisfy the requirements developed by the members of the exchange regarding sales volumes, profit margins, the number of shareholders, the market value of shares, the frequency and nature of reporting, etc. Members of the exchange or the state body that controls their activities, establishes rules for conducting exchange operations; the regime governing the admission to the quotation. Together with the procedure for conducting transactions, they form the core of the exchange as a mechanism that serves the movement of securities. The stock exchange in the capitalist countries is organized in the form of private joint-stock companies or public law institutions. According to their legal status, stock exchanges may be associations, joint-stock companies or government bodies subordinate to the Ministry of Finance. Exchange - These are, as a rule, non-profit structures, i.e., they are non-profit and therefore exempt from paying corporate income tax. To cover the costs of organizing exchange trading, the exchange collects a number of taxes and payments from the participants in this trade. This is a tax on a transaction concluded on the trading floor; payment of companies for the inclusion of their shares in the exchange list; annual contributions of new members, etc. These contributions constitute the main sources of income of the stock exchange. 32. LISTING. DELISTING Listing - a set of procedures for the admission of securities to circulation on the stock exchange in the manner approved by the organizers of trade. Delisting - exclusion by the stock exchange of securities from the quotation list. Delisting is done if: - the shares no longer exist (they were withdrawn by the company or exchanged for new ones); - the company was left without assets or went bankrupt; - public offering of shares is unacceptably small; - the company violates the listing agreement. What gives issuers the inclusion of their securities in the listing of any stock exchange? 1. Listing procedure makes securities more liquid. A continuous listing on the stock exchange increases the attractiveness of shares in the eyes of external investors compared to securities traded on the over-the-counter market. 2. Companies that have passed the listing procedure and list their securities on the stock exchange gain greater fame and authority among companies operating on the securities market. 3. As a rule, it is easier for companies whose securities are listed on stock exchanges to gain the trust and favor of banks and financial institutions in case they need loans and credits, and it is also easier for them to place new issues of securities. 4. The admission of shares of industrial companies to the exchange quotation becomes a kind of advertising for their trademark and products. Listing is not just a formal legal procedure that the issuer of a security must go through. The listing serves as a kind of indicator that speaks about the reliability, financial stability of the company and the low risk of investments for investors. In Russia (on the International Interbank Currency Exchange) there is a two-level listing system: securities that have passed the listing procedure are included in the quotation lists of the first or second level. Different requirements apply to securities included in quotation lists of different levels. The requirements for corporate issuers to list their shares on the first level quotation lists (especially in terms of net assets) are very strict, since only highly liquid securities of first-class issuers with a high level of capitalization of the share market should fall into this level of listing. The listing process includes: - prelisting; - examination of securities; - making a decision on the inclusion of a security in the quotation lists of the stock exchange; - signing of the listing agreement; - inclusion of a security in the quotation lists of the stock exchange; - start of trading in securities. At the stage of prelisting, the fundamental possibility of listing a security of a given issuer is determined. The fact of prelisting is not disclosed, information about the fact of filing an application and the result of its consideration is not subject to distribution. To initiate the prelisting, the issuer or its official representative submits to the stock exchange an application for the listing of the security. The application shall be accompanied by a prospectus for the issue of securities. Within 10 days, the exchange considers the application and either agrees to consider the issue of listing securities, or refuses the issuer. 33. PROFESSIONAL EXCHANGE PARTICIPANTS All RZB participants can be divided into two groups. The first group includes professional RZB participants, represented mainly by organizations that provide intermediary and advisory services on the RZB, and also act as active players in the stock market. These organizations form the infrastructure of the stock market. The second group includes participants entering the stock market in order to temporarily allocate free financial resources. The peculiarity of the activity of professional participants is that it requires licensing from the state. Licenses are issued by the Federal Commission for the Securities Market (FCSM) or organizations authorized by it. Exist three types of licenses: professional participant, to carry out activities for maintaining the register, stock exchange. Individuals working in organizations - professional participants of the securities market, associated with the implementation of transactions with securities, must have a certificate of the Federal Commission for the Securities Market, giving them the right to engage in this type of activity. The main actor in the market is an intermediary, called in the stock market broker. A broker is a person acting on behalf of a client on the basis of commission or commission agreements. A brokerage company usually acts as a broker. An individual can also perform brokerage functions if he registers as an entrepreneur. For the services rendered, the broker receives a commission. The broker's responsibilities include conscientious execution of the client's instructions, which should be given preference over the transactions of the broker himself, if he also has the right to act as a dealer. The next professional participant of RZB is a dealer. Dealer is a person who makes transactions for the purchase and sale of securities on his own behalf and at his own expense on the basis of a public announcement of their quotations. Only a legal entity can act as a dealer. The dealer makes a profit from two sources. First, he constantly announces quotes at which he is ready to buy and sell securities. Secondly, the dealer earns at the expense of a possible increase in the market value of the securities he has acquired. The dealer is a large organization. Therefore, it usually combines two activities: the dealer itself and the broker. The organization may provide services for the storage of securities certificates and / or accounting and transfer of rights to securities. A professional RZB participant who carries out this activity is called depository. Only a legal entity can act as a depositary. An investor who has concluded an agreement with a depository for the safekeeping of securities and/or accounting for rights to them is called depositor. In order to record securities, a depositor opens an account with a depository, called "depo account". Elements of the stock market infrastructure are clearing organizations whose duties include determining and offsetting mutual obligations of investors for deliveries and settlements for securities. They collect, reconcile, correct information on transactions with securities and prepare accounting documents on them. The clearing organization is obliged to form special funds to reduce the risk of non-execution of transactions with securities. 34. MAIN OPERATIONS ON THE EXCHANGE The following are the main possible operations on the stock exchange: - making investments in securities on the basis of purchase on behalf of, on behalf of and at the expense of the portfolio owner (on the basis of a commission agreement or an agency agreement); - sale by order (on the basis of a commission agreement or an agency agreement); - investment in securities at own expense; - sale of own securities; - information, methodological, legal, analytical and consulting services, services to support transactions with securities (registration of their issue, organization of admission to the stock exchange, etc.); - mediation in organizing the issue and initial placement of securities; - implementation of settlements on securities on behalf of (both monetary and related to the movement of the securities themselves in material and non-cash form); - re-registration of securities to a nominal holder, in this case a professional participant - a third party - will be registered by the issuer as the owner of the security, respectively, all relations related to the life cycle of the security will be maintained between the issuer and the nominal holder; - storage, protection, transportation and transfer of securities on behalf of; - return (partial or full) of callable bonds or preferred shares in case of their recall by the issuer before maturity (in the interests of the investor); - redemption of securities at maturity; - gratuitous delivery of securities to the client's account (gratuitous transfer of securities from the client's account), for example, in cases of donation, opening (closing) of an account, transfer of securities by inheritance, their transfer between client accounts, making a payment with securities when depositing funds into statutory funds, satisfaction of creditors' claims, etc.); - payment of dividends by shares (as a percentage of the number of shares); - split of shares (splitting, increase in the number of shares without changing the amount of share capital), reverse split (consolidation of the number of shares without changing the size of share capital); - conversion into common shares of convertible preferred shares and bonds; - use of purchase rights and warrants (derivative securities that give shareholders a preferential right to purchase company shares); - replacement of securities in case of their damage, theft, loss, etc. (including legal, documentary and organizational procedures related to the replacement); - the exchange of securities upon division of the company (for example, shares of the old company by choice for shares of any of several new companies formed from it); - exchange of securities between joint-stock companies (shares), exchange for shares of investment funds in the process of privatization; - "spin-off" (separation of a structural subdivision from the company and creation of a new joint-stock company on its basis); - transfer of voting powers to an authorized person during the annual survey of shareholders based on distribution of powers of attorney by joint-stock companies; implementation of these powers. 35. EXCHANGE INFORMATION (EXCHANGE INDICES) The stock market, where the securities of numerous issuers are traded, reacts very sensitively to any changes that occur both within each company and in the country's economy as a whole. This is reflected in the dynamics of changes in prices for shares and bonds. The dynamics of the stock market can assess the state and development trends of the real sector of the economy. For this purpose, stock exchanges calculate various stock indicators and stock indices, which are used to analyze the dynamics of changes in the market value of shares in the market as a whole. Stock indicators and indices are used for the same analytical purposes, but the principles of their calculation are different. stock indicator is calculated as the average value of the stock prices of a representative group of companies at the moment. By itself, the indicator does not say anything. For analysis, it is necessary to compare the calculated value of the indicator with its value in the previous period. Stock (stock) index is defined as the average value of share prices on a specific date for a representative group of enterprises in relation to their base value calculated for an earlier date. The base value of the index is calculated on a certain date or for a certain period in the past. The current value of the index characterizes the direction of the market. Using stock indicators and indices in dynamics, investors can determine trends in the price of shares. If indicators and indices are growing, then this indicates an increase in stock prices, and the market is called bull market. If they go down, then bear market. In world practice, a large number of indices are calculated, for the determination of which various samples of companies and calculation methods are used. Indices used in practice can be classified into the following types. 1. Industry, which are calculated for a particular sector of the economy (energy, metallurgy, oil and gas complex, etc.) The calculation is based on stock quotes of leading enterprises in a particular industry. 2. Consolidated (composite) indices that are calculated based on the prices of shares of companies in various industries. When selecting enterprises, they are guided by two main approaches. The first is based on the fact that the companies included in the calculation of the index should reflect the structure of the sectors of the national economy. The second approach is based on the inclusion in the calculation of the shares of the largest companies in any industry. All indices are calculated as an average of the stock prices of the companies included in the sample. Index developers use one of the following methods to calculate the average: - simple arithmetic mean method; - geometric mean method; - weighted arithmetic mean method. The world's leading analytical agencies calculate daily stock indices, which fairly accurately reflect the situation on the stock market as a whole. The number of published indices is very large, and all of the above methods are used in their calculation. The largest number of indices are calculated by US exchanges. The most famous of them is dow jones index, There are currently four types: general, industrial, transport and municipal. 36. ETHICS IN THE STOCK EXCHANGE Usually exchange ethics is no different from business ethics, but each exchange may have its own characteristics, which are established by internal regulations and for the violation of which certain sanctions may follow. Each exchange operates arbitration board, which is authorized to resolve all controversial issues, including those related to violation of business etiquette on the stock exchange. The Arbitration Commission, as a permanent arbitral tribunal, is guided by the relevant regulations approved by the exchange council, considers disagreements (disputes) that arise between trading participants in the course of their exchange activities. Execution of decisions of a permanent arbitration court is carried out in accordance with the Arbitration Procedure Code of the Russian Federation and the rules of the arbitration commission. For violation of ethics the staff of the exchange bears the responsibility stipulated by the contract between the exchange and a specific official. If a representative of a trading participant does not appear on the podium of the operating room at the moment of showing interest in the goods put up by the broker of this brokerage office in the "Sale", "Purchase" sections of the exchange newsletter, information about the product is output from the exchange information channel. At the same time, the brokerage office is obliged to pay to the exchange, by decision of the arbitration commission, a fine in the amount of the current exchange fee from the amount of the declared goods. The absence of the broker due to force majeure must be confirmed by the provision of relevant documents. For refusal, evasion of execution of a contract or its registration in the department for accepting applications and processing contracts of the exchange after oral consent to an exchange transaction, publicly recorded by a broker during trading, the arbitration commission imposes a fine on the guilty party in the amount of 3% of the transaction amount. Of this amount, the guilty party transfers to the settlement account of the exchange an amount in the amount of the full exchange fee, and the remaining part - to the injured party. In cases where both parties to an exchange transaction refuse or evade execution or registration of a contract or supply agreement on the exchange, the arbitration commission imposes fines on them in the amount of the current exchange fee on each side of the transaction amount. The following is prohibited on the exchange: - dissemination in any form of information that may lead to a change in the situation and negative results of exchange trading; - artificially inflating or understating prices, spreading false rumors in order to influence prices; - conspiracy, deception in the conclusion of transactions and execution of contracts. The investigation of such facts is carried out by the arbitration commission. For non-payment of the exchange fee, fines imposed by the arbitration commission within 15 days from the date of the emergence of the right to claim, representatives of the guilty brokerage house (independent broker) are not allowed to enter the trading floor without presenting a document confirming the transfer of money to pay off these types of penalties. The Directorate of the Exchange has the right, at the request of a trading participant, to grant a deferral of payment of fines and compensations for 15 days after the expiration of the right to claim. The postponement does not deprive the bidder of the right to attend the auction. 37. Crashes stock market crash - a precipitous drop in stock prices on the stock exchanges. Along with various economic factors, panic is also the cause of stock market crashes. Stock market crashes often end speculative "economic bubbles". The most famous stock market crash began on October 24, 1929, Black Thursday. The Dow Jones Industrial Average lost 50% during this crash. This was the beginning of the Great Depression. On October 19, 1987, another well-known crash occurred - Black Monday. That day, the Dow Jones fell 22%, ending a 5-year period of rising stock prices. The Stock Market Crash of 1929 was a massive drop in stock prices that began on Black Thursday and reached catastrophic proportions on Black Monday and Black Tuesday that followed. This stock market crash, also known as the Wall Street Crash, was the start of the Great Depression. The crash was preceded by a speculative boom in the mid-20s, during which millions of Americans invested in stocks. The growing demand for shares drove up their prices, which attracted more and more investors who wanted to enrich themselves by investing in shares. This vicious circle led to the formation of an "economic bubble". At the same time, many investors bought shares on credit, borrowing the necessary funds from banks. On Thursday, October 29, 1929, with the Dow Jones Industrial Average at 381,17, the "bubble burst" and stocks panicked. Trying to get rid of their shares before they completely depreciate, investors sold more than 13 million shares that day. In the days that followed, about 30 million more shares were sold, and prices collapsed, ruining millions of investors. Banks that previously financed the purchase of shares with their loans were unable to repay their debts and declared bankruptcy. While millions of people have lost all their livelihoods on the stock exchange, businesses have been stripped of credit lines and closed, causing unemployment to rise. The stock market crash of 1929 had a dramatic effect on the already bad economic situation and was the most significant cause of the Great Depression. The crash of 1929 was a good lesson for the financial world, and since then many stock exchanges have practiced suspending trading if the market falls too quickly. Thanks to this practice, the effects of the 1987 stock market crash were much lighter than those of 1929. Black Monday - Monday October 19, 1987 - the day on which there was the largest drop in the Dow Jones index in its history - 22,6%. This event affected not only the United States, but quickly spread throughout the world. Thus, the stock exchanges of Australia lost by the end of October 41,8%, Canada - 22,5%, Hong Kong - 45,8%, Great Britain - 26,4%. The catastrophe was not preceded by any important news or events, there were no visible reasons for the collapse. For some time after the crash, trading in the world's stock markets was limited, as the computers of the time could not cope with the huge number of incoming orders. This trade restriction allowed the Federal Reserve and other central banks to take action to contain the spread of the global financial crisis. 38. "STREET" SECURITIES MARKET AND CHARACTERISTICS OF ITS ACTIVITIES "Street" market - a market that covers transactions with securities performed outside the stock exchange. This market is due to: - absence of restrictions on acceptance of securities; - high percentage of commission; - monopolization of membership on the stock exchange. Spin-off of the OTC market means the creation of a new channel for financing medium and small companies through the securities market. For such companies, the street market serves as a kind of life-saving tool as a source of funding. Moreover, it also serves additional source of funds for large companies that, having failed to resell securities on the stock exchange, dump them on the street market. The "street" market is both organized and unorganized. In an organized market, there are self-regulatory bodies that organize the market. These include: investment banks, dealer (broker) companies. In 1971, the National Association of Securities Dealers (NASDAQ) was formed in the United States. The main task - servicing the circulation of securities (mainly shares) that did not enter the first and second markets or the stock exchange. In the organized over-the-counter market, trading is carried out on a wholesale basis through electronic terminals, where the turnover rate is higher than in the exchange market. At the same time, the commission is lower than on the stock exchange, since the turnover is higher. The most developed organized "street market" in the United States of America, Japan, Singapore. In the United States of America, in some cases, the turnover of the street market exceeds the turnover of the New York Stock Exchange. In the organized over-the-counter market, sales aimed at small investors play a significant role. Depending on the degree of organization of the securities market, one should distinguish between organized and unorganized ("street") securities market. An organized market is formed by relations in the course of carrying out activities with securities on stock exchanges (in the stock departments of commodity and currency exchanges) and with the participation of other organizers of trade in the securities market. Organizer of trading in the securities market is a professional participant in the securities market, carrying out the organization of trading in the securities market, i.e. activities for the provision of services that directly facilitate the conclusion of civil law transactions with securities between participants in the securities market. Relations that arise without the participation of organizers of securities trading form the so-called "unorganized" securities market, which is not spontaneous. The fact is that in addition to the issuer and the investor in the securities market, along with professional organizers of securities trading, there are other "professional" participants in the securities market (registrers, depositories and clearing organizations, brokers, dealers and trustees), and measures are being taken to its direct state regulation. 39. INVESTMENT QUALITY OF BONDS When purchasing bonds, especially corporate (non-government) ones, an investor must evaluate them investment qualities and weigh the risk and return on those securities. Assessment of investment qualities of bonds is carried out in the following areas. First, the reliability of the company for the implementation of interest payments is determined. For this purpose, the income received by the company during the year is compared with the amount of interest payments on all types of loans. The amount of income should be 2-3 times higher than the amount of interest payments, which indicates a stable financial condition of the corporation. It is expedient to carry out the analysis in dynamics for a number of years. If the trend is upward, then the firm is increasing its ability to cover interest payments. If the trend is down, then this indicates the instability of the company's activities and over time it will not be able to fully provide interest payments. Secondly, the ability of the company to repay the existing debt for all reasons is assessed. The investor should take into account that in addition to bond debt, the company may have other debt obligations. Therefore, the analysis compares the cash flow to the company with the total amount of debt. An acceptable level is considered to be the amount of income in relation to the amount of debt of at least 30%. Thirdly, the financial independence of the company is assessed. To this end, the total amount of debt is compared with the equity of the firm. A company is generally considered to be in good financial condition and not dependent on external sources of financing if the amount of debt does not exceed 50% of its equity. In addition to the listed indicators, an assessment is made of the company's solvency, asset liquidity, operating profitability and other qualitative parameters of the company's activities. It is almost impossible for an ordinary investor to conduct a qualitative analysis of bonds. Large investment companies have analysis services in their staff, whose recommendations ensure informed decision making. In Western countries, there are special analytical agencies that evaluate the company's debt obligations and assign them certain categories of reliability. The leading agencies are "Moody's" and "SP", which are rated by the largest operators of the securities market around the world. A company that intends to carry out a public offering of bonds applies to the agency in order to assess the financial condition of the company and include the bonds in its rating. Information about the investment qualities of bonds is published in the press, which allows investors to make informed decisions about the purchase and sale of bonds. For the evaluation of bonds and the publication of information, analytical agencies charge a certain fee from the issuer. The rating of bonds is very closely related to the level of yield. Statistical data convincingly confirms the existence of a relationship between risk and return. The lower the bond rating, the higher the risk and, consequently, the higher the yield. 40. TYPES OF BECKS All issued bills are divided into two large groups: simple and transferable. Promissory note (solo bill) - this is an unconditional promissory note of the drawer (debtor) to pay the creditor (bill holder) a certain amount of money in a certain place and within the established time limits or, by order of the creditor, to transfer funds to a third party. A distinctive feature of a promissory note is that the debtor is always the person who issued the bill, i.e. drawer. The holder of the bill can use it in settlements with his counterparties, transferring his debt to the drawer. Bill of exchange (draft) - this is an instruction (order) of the creditor (drawer), obliging the debtor (drawee) to pay the amount indicated in the bill within the specified period to a third party (remittent). The person who draws a bill of exchange is called the drawer or drawer. A feature of the issue and circulation of a bill of exchange is that it cannot serve as a simple means of payment. The remitter, receiving a bill, is not sure that the drawee indicated in it will pay. Therefore, initially it is necessary to make sure that the debtor agrees to pay the bill of exchange. To do this, the bill is sent to the drawee for acceptance. In practice, there are the following types of bills. Commodity (commercial) bill. With the help of a bill of exchange, the seller company provides the buyer with a commercial loan, accepting from him as payment for the goods a bill of exchange payable within a certain period of time. commercial bill performs two main functions. First, it is an unconditional debt obligation; secondly, it performs the function of a means of payment, since the owner of the bill can use it to pay with his suppliers for goods, works, services. financial bill - this security is based on a financial transaction that is not related to a commodity transaction. A financial bill mediates a financial transaction related to obtaining a loan. A loan agreement is not drawn up between the lender and the borrower, and the borrower sells a bill of exchange to the investor, thereby attracting financial resources. Friendly bill. These bills are issued to each other by persons for the same amount and for the same period. Friendly bills are not backed by any real transaction. The purpose of the release these bills is to provide assistance to one of the participants in the circulation of bills, experiencing financial difficulties. Having received a bill, the company can use it to pay suppliers for goods or pledge it in a bank in order to receive real money. Friendly bills have a very high degree of risk. "Bronze" bill. This bill is issued for the purpose of committing fraudulent transactions. The "bronze" bill does not mediate either a commercial transaction or a financial transaction. As a rule, at least one person involved in the circulation of bills is fictitious. The purpose of issuing a "bronze" bill is to obtain a bank loan secured by a bill or to pay with a bill for commodity transactions or financial obligations. 41. METHODS OF ORGANIZING EXCHANGE TRADING Depending on the degree of development of the stock market, the number of securities in circulation, incoming orders for purchase and sale, the number of participants in trading operations, the dynamics of price changes, various ways to trade in securities. There are two main ways of organizing securities trading: simple and double auctions, each of which has its own varieties. In the emerging stock market, when the number of buyers and sellers is small, as well as with a small number of securities offered for sale, trading is carried out on the principle of a simple auction. In developed stock markets, securities are traded on the principle of a double auction. Simple Auction is an organization of securities trading in which sellers and buyers conduct occasional transactions directly between themselves. It is characterized by the irregularity of transactions and the lack of a developed network of intermediaries in the implementation of trade. A simple auction, depending on supply and demand, can be organized as: - seller's auction. Assumes a limited number of sellers and a relatively large demand from buyers who compete with each other; - buyer's auction. There are a lot of sellers in the market with a limited number of buyers; - remote auction. The seller announces the sale of a certain number of securities within a limited period of time. Buyers submit bids for the acquisition of this asset, indicating the appropriate prices. Investors do not know information about the total number of applications submitted and the number of securities. The most widespread in world practice is the organization of trade in the form of a double auction, in which there is simultaneous competition from both sellers and buyers. Double auction can exist only if there are a large number of securities on the market with a high degree of liquidity, a significant number of stock market participants interested in conducting transactions with these securities, and also if there is a well-organized infrastructure of the stock market. In countries with a developed stock market, exchange and over-the-counter trading in securities takes place in the form of a double auction. The organization of trade in this case provides for the simultaneous receipt of applications for the purchase and sale of financial assets at certain prices. Trade organizers are faced with the task of maximizing the satisfaction of incoming orders at prices acceptable to bidders and ensuring the effective functioning of the market. Depending on the methods of satisfying the bids of the participants, the double auction is divided into salvo (on-call) and continuous. Salvo auction assumes that transactions are made not constantly, but with a certain frequency. Incoming applications for a specific period of time are accumulated, processed, and then satisfied. A continuous auction assumes that the prices for the purchase and sale of securities are registered simultaneously, which are reflected on an electronic scoreboard for viewing by participants in exchange trading. 42. OPERATING MECHANISM OF EXCHANGE TRADING When carrying out transactions for the purchase and sale of shares through exchange trading system the seller and the buyer almost never meet each other, but act through intermediaries who professionally ensure the execution of their orders. Client, wishing to sell securities, sends an application to his broker, located in a brokerage firm. The application may be submitted orally, by telephone, by computer connection, in writing or in any other way agreed between the client and the brokerage firm. brokerage firm is located at a very remote distance from the exchange, where only its representatives are located. Therefore, the firm transmits the customer's order to its agent, located on the trading floor of the exchange, by computer communication systems or by telephone. Having processed the received order, the company representative sends it to the broker for execution, who will look for the best ways to implement it. Similarly, an investor who wants to purchase securities acts by giving instructions to his broker. All persons working on the trading floor of the exchange can be divided into the following groups: - commission brokers; - floor brokers; - specialists; - registered traders. On the exchange, persons directly involved in the execution of customer orders are brokers. There are usually two types of stock brokers: "commission brokers" and "floor brokers". commission broker is an employee of a brokerage firm who works on the trading floor of the exchange and executes orders from clients. If there are few orders, then he himself is engaged in their implementation. If there are many applications or the commission broker is busy, then he resorts to the services of a floor broker. These brokers are not employed by any firm. They are self-employed and receive commissions for helping the brokerage house fulfill clients' orders. The broker, having received an order to buy (sell), goes to the place where a specialist in this type of securities works, and finds out the situation in terms of bid and offer prices, the number of offered and requested securities, and the price of the last transaction. He either learns this information from a specialist or reads it from an electronic scoreboard. Having assessed the situation, the broker can buy (sell) securities from a specialist or directly from another broker, if the proposed terms of the transaction satisfy both parties. Such a mechanism for executing a transaction is possible if the price indicated in the client's order coincides with the market price or is close to it. In this case, the request is executed immediately. If the broker receives an order in which the price differs significantly from the market, and, therefore, it is not possible to immediately execute it, then he leaves the order with a specialist so that the latter will execute this order when market conditions allow. This type of application is called "limit" (applications that are entered into the specialist's database). Applications will be implemented as favorable market conditions are created. 43. ISSUE OF SECURITIES Issue procedure emissive securities includes the following steps: - making a decision on the placement of issue-grade securities; - approval of the decision on the issue (additional issue) of emissive securities; - state registration of an issue (additional issue) of emissive securities; - placement of issuance securities; - state registration of a report on the results of an issue (additional issue) of emissive securities. Equity securities, the issue (additional issue) of which has not passed state registration in accordance with the requirements of the law, are not subject to placement. When a joint-stock company is established or legal entities are reorganized in the form of a merger, division, separation and transformation, the placement of equity securities is carried out before the state registration of their issue, and the state registration of the report on the results of the issue of equity securities is carried out simultaneously with the state registration of the issue of equity securities . State registration issue (additional issue) of emissive securities is accompanied by registration of their prospectus in case of placement of emissive securities by open subscription or by closed subscription among a circle of persons whose number exceeds 500. If the state registration of an issue (additional issue) of emissive securities is accompanied by the registration of a securities prospectus, each stage of the procedure for issuing securities is accompanied by disclosure of information. If the state registration of an issue (additional issue) of emissive securities was not accompanied by the registration of their prospectus, it may be registered subsequently. At the same time, registration of the prospectus of securities is carried out by the registering authority within 30 days from the date of receipt of the prospectus of securities and other documents required for its registration. State registration of issues (additional issues) of issue-grade securities is carried out by the federal executive body for the securities market or by another registering body specified by law. The state registration of an issue of emissive securities is carried out on the basis of the issuer's application. An application for state registration of an issue of emissive securities shall be accompanied by a decision on the issue of securities, documents confirming that the issuer complies with the requirements of the legislation of the Russian Federation that determine the procedure and conditions for making a decision on the placement of securities, approval of a decision on the issue of securities and other requirements that must be met. when issuing securities, and if the registration of the issue of securities must be accompanied by the registration of a prospectus of securities, a prospectus of securities. exhaustive list of such documents is determined by the regulatory legal acts of the federal executive body for the securities market. The registering body is obliged to carry out state registration of the issue of emissive securities or make a reasoned decision to refuse to register the issue within 30 days from the date of receipt of the documents. 44. UNDERWRITING Underwriting - the basic function of an investment company. Underwriting (in the meaning of the stock market) is the purchase or guarantee of the purchase of securities at their initial placement for sale to the public. Underwriter (in the meaning accepted in the stock market) - an investment institution or a group of them, serving and guaranteeing the initial placement of securities, purchasing them for subsequent resale to private investors. In this capacity, he assumes the risks associated with non-placement of securities. In this way, securities underwriting (a term accepted everywhere in international practice) is the main task, the main function of the investment company, as defined by Russian legislative acts (see above the analysis of the main subject of activity of the investment company). Russian regulations provide an opportunity for the development of internationally recognized types of underwriting. Underwriting "based on firm commitments". In this case, under the terms of the agreement with the issuer, the underwriter has firm obligations to buy back all or part of the issue at fixed prices. In the first case, even if a part of the issue turns out to be unclaimed by primary investors, the underwriter is obliged to purchase it, thereby accepting the financial risks of the placement of securities. If the moment of initial placement at fixed prices coincides with a sharp decrease in rates in the secondary market, then the underwriter is able to suffer huge exchange rate losses. Best effort underwriting. In this case, under the terms of the agreement with the issuer, the underwriter does not bear any obligation to buy back the non-distributed part of the issue. Thus, the financial risks associated with the non-placement of a part of the securities are fully borne by the issuer. The unsold part of the issue is returned to the issuer. The obligation of the underwriter is to make every possible, best effort to place securities, however, the underwriter does not bear financial responsibility for the final result. Stand-by underwriting. With this form of underwriting, the underwriter undertakes to buy out for subsequent placement a part of the issue that was intended for the exercise of subscription rights and remained not redeemed by the old shareholders or those who acquired subscription rights from them. Underwriting on the principles of "all or nothing". The underwriting agreement terminates if the underwriter fails to allocate the entire issue. Underwriting with and without advance payment by the issuer. Contractual underwriting. With this form of underwriting, the price conditions of the issue (the issuer's share issue price, the spread between the specified price and the price at which the syndicate issues the issue) are established on the basis of negotiations between the issuer and the sole manager of the syndicate. Competitive underwriting. With this type of underwriting, the preparation of the issue on a competitive basis is carried out by several underwriters (investment companies in Russian terminology), each of which forms its own price conditions, issue syndicates, etc. (of course, secretly from the other). The issuer selects an underwriter through a competition for underwriting bids, usually based on the best price and other conditions. 45. DEPOSITARY ACTIVITIES IN THE SECURITIES MARKET Depository activities is a set of measures for the provision of services related to the storage of securities certificates and / or accounting and transfer of rights to securities. Depository activities can only be carried out by legal entities on the basis of a license issued by the Federal Securities Commission. Client, using the services of a depositary is called depositor. A depo account is opened for him, on which the depositor's securities are accounted and records are made of all transactions made by the depositor with securities. The fact that the securities (the rights to securities) have been transferred for safekeeping to the depository shall be confirmed by the statement from the depo account. By itself, an extract of a security is not and cannot serve as a subject of purchase and sale. The relationship between the depository and the depositor is regulated by an agreement, which should reflect: - the subject of the contract; - contract time; - the procedure for the depositor to transfer securities for safekeeping, and if the securities are issued in non-documentary form, the procedure for the depositor to transfer information about the rights to securities; - the procedure for accounting for rights to securities and the procedure for re-registration of the transfer of rights to securities from one person to another; - the amount and procedure for paying for the services of the depositary; - the procedure for reporting by the depository to the depositor. The transfer of securities to a depository for storage does not mean the transfer of ownership of these securities. The main task of the depository is to ensure the safety of securities or rights to securities and to act solely in the interests of the depositor. The depositary shall not have the right to dispose of the securities, manage them or perform any transactions with them. Due to the fact that the securities kept by the depository are not its property, they cannot be levied on its obligations. In the course of its activities, the depository performs the following functions: - storage of securities certificates, if the securities are issued in documentary form; - registration of the encumbrance of the depositor's securities with any obligations (collateral, resource provision, etc.); - maintenance of depo accounts reflecting in them the number and type of securities of all operations carried out by the depositor; - transfer to the depositor of information received by the depository from the issuer and the registrar; - verification of securities certificates for authenticity; - collection and transportation of securities. The depositary may nominee functions, i.e., to hold securities in his own name, without being the owner of the securities. As a nominal holder, a depository may exercise the rights attached to a security only if it receives the appropriate authority from their real owner. Registration activity - activity on maintenance of registers of holders of securities. This activity is the collection, recording, processing, storage and presentation to registered persons and issuers of data from the registry system. The register is maintained only for registered securities in order to identify the owners of the securities. 46. DEPOSITARY AND CLEARING INFRASTRUCTURE OF THE SECURITIES MARKET The formation of the stock market in Russia led to the emergence of specialized organizations that provide all transaction procedures and constitute the infrastructure of the securities market. These organizations include (elements of RZB infrastructure): - trading system; - settlement system; - register system; - depositaries. A securities transaction is a complex procedure and takes place in several stages: - conclusion of the transaction (drawing up the contract); - reconciliation of the parameters of the concluded transaction; - clearing; - transaction execution (payment and transfer of securities). Trading system - this is a set of technical, technological and organizational means that make it possible to conclude a transaction agreement, verify the transaction parameters, and carry out clearing. That is, with the help of a trading system, the first three stages of a transaction with securities are completed. The fourth stage covers the activities of the settlement system and the depository. Stage 1. Make a deal. The sale and purchase agreement can be drawn up directly between investors or through an intermediary (broker - commission agreement, dealer - commission agreement). Usually, it takes several days for the transaction to be fully completed from the moment it is concluded. Stage 2. Reconciliation of the parameters of the concluded transaction. This stage is necessary for the participants of the transaction to clarify its parameters, to agree on differences in the understanding of the transaction (lasts 1 day). Transactions that have passed this stage are fixed. Stage 3. Clearing. The clearing stage includes four sub-stages: 1) analysis of verification documents (documents are checked for their authenticity and correctness of filling); 2) calculations (the amounts of money to be paid and the number of securities to be delivered are calculated); 3) offsetting. At this clearing sub-stage, for each individual trade, the seller calculates the number of securities that he must deliver and the amount of money that he must receive, in addition to fees and taxes. For the buyer, for each transaction, the number of securities that he must receive and the amount of money that he must pay (plus taxes and fees) are calculated. Netting allows you to significantly reduce the volume of document flow and the number of payments based on the results of the auction. Offsets there are: - bilateral - imply pairwise (for each pair of participants) comparison of mutual claims and subtraction of these claims until a net balance of debt of one counterparty to another is obtained; - multilateral (netting) - at the same time, all its obligations are deducted from all the requirements of the participant and a net balance is obtained, which is called the "position"; 4) preparation of settlement documents. Stage 4. Deal execution (payment and transfer of securities). This stage is performed by the settlement system and depository. It is made on the day fixed in advance in the sales contract and depends on the rules fixed in the given market. If the transaction is executed in the shortest possible time, then it is called "spot" ("cash"). If the term for the execution of the transaction is large, then it is called "forward" ("urgent"). The method of execution of the transaction is determined by the principle of delivery against payment. This process is controlled by the settlement system and the exchange itself. 47. SYSTEM OF REGULATION OF THE SECURITIES MARKET The purpose of state regulation of RZB is to ensure the reliability and growth of securities, the development of its model, which, taking into account the existing conditions, would most contribute to economic growth. The achievement of this goal contributes to the solution of the following tasks: - creation and maintenance of effective functioning of mechanisms for attracting investments in the private sector of the Russian economy; - creation of conditions for the functioning of the deficit of government securities; - provision of conditions and creation of reliable mechanisms for investing the funds of the population; - development of the legislative framework for the work of the RCB; - creation of a system of information on the state of the securities market and ensuring its openness for investors; - ensuring investors' confidence in RZB; - Creation of a civilized market and its integration into the global financial market. In Russia to state regulatory authorities RCB include: - Federal Commission for the Securities Market (FCSM); - Ministry of Finance, Central Bank; - Antimonopoly Committee; - State Tax Inspectorate, etc. Objects of regulation: - issuers of securities; - professional intermediaries; - investors; - self-regulatory organizations of professional participants. The Federal Commission for the Securities Market (FCSM) is the federal executive body for exercising state control in the area of SM over the activities of professional SM participants. Functions of the FCSM - ensuring the dynamic development of the RZB in accordance with the national interests of Russia. Self-regulatory organization - a voluntary association of professional participants of the RZB, acting in accordance with the law on the principles of a non-profit organization. Established by professional participants for the purpose of: - providing conditions for professional activity; - their observance of professional ethics at the securities market; - protecting the interests of securities holders and other clients who are members of a self-regulatory organization; - formation of rules and standards for conducting operations with securities, ensuring activities on the securities market. Considering transactions with securities in relation to the observance by RZB participants of antimonopoly legislation, special attention should be paid to the procedure for acquiring shares in the authorized capital of a commercial organization. The law provides for obtaining the prior consent of the antimonopoly authorities if, as a result of the transaction, the acquirer receives, together with the shares already at his disposal or at the disposal of a group of persons, the right to dispose of more than 20% of the shares in the authorized capital of the economic agency. For this purpose, the obligation to obtain the consent of the antimonopoly authority is assigned to the acquirer; the shares to be acquired must have voting rights; antimonopoly legislation does not contain an exhaustive list of grounds for obtaining the right to dispose of voting shares; in the antimonopoly legislation, they operate with the concept of a "group of persons" - control arises from a group of persons, including a legal or natural person, if they have the opportunity to directly or indirectly dispose of 50% of the votes; control also takes place if a person has the right to appoint more than 50% of the composition of the executive body or the board of directors of the JSC. 48. INVESTMENT ACTIVITIES OF CREDIT AND FINANCIAL INSTITUTIONS IN RZB Investment - investments in industry, agriculture and other sectors of the economy within the country and abroad in order to make a profit. Goals conducting investment operations: - expansion and diversification of the income base of the bank and JSC; - increasing financial stability and reducing the overall risk by expanding the general type of activity; - ensuring the presence of the bank in the most dynamic markets (primarily in the organized stock market and its various segments), maintaining a market niche; - expansion of the client and resource base, types of services provided to clients through the creation of subsidiary financial institutions; - strengthening influence on clients (through the control of their securities). Investment transactions may vary on time: - short-term speculation and arbitrage transactions (the term may be limited to one day); - short-term investments (up to one year, are predominantly speculative); - medium-term (up to 5 years) and long-term (over 5 years) investments. By purpose of investment allocate the following investments. Direct investment are carried out for the purpose of direct management of the investee through a controlling stake or in another form of controlling participation. Portfolio investment are carried out in the form of the purchase of securities belonging to various issuers and not providing controlling participation and direct management of the investee. The purpose of such investments (as opposed to direct ones) is to receive profits from the growth in the market value of the portfolio, from the stable cash flows (dividends, interest) created by them while diversifying risks. Investment activity represents the activity of investing and implementing a set of practical actions for the implementation of investments. Bank investment operations - these are investments of cash and other reserves of the bank in securities, real estate, authorized funds of enterprises and other investment objects, the market value of which is able to grow and bring income to the bank in the form of interest, dividends, profit from resale. The process of making investment decisions by a commercial bank in the securities market is the formation of a securities portfolio (planning, analysis and regulation of the composition of the securities portfolio, portfolio management in order to achieve the goals set for the portfolio while maintaining the required level of its liquidity, risk and minimizing costs). Portfolio investment consists of the following stages: - choice and formulation of own strategy; - definition of investment policy; - comprehensive market analysis; - formation of a starting portfolio. Bank investment portfolio (investment portfolio) - a set of funds invested in securities of third-party legal entities acquired by the bank. The criteria for determining the structure of the bank's investment portfolio are the profitability and riskiness of operations, the need to regulate the liquidity of the balance sheet and diversify assets. The main task portfolio investment - to improve investment conditions by giving the aggregate of securities investment characteristics that are not achievable from the standpoint of a single security and are possible only with their combination. 49. Russian SECURITIES MARKET The first stage (1990 - 1st half of 1991): fashion for stock exchanges, explosive creation of stock exchanges. At this time, more than 700 commodity exchanges were established, through which the sale of products at free auction prices immediately began. Exchanges were created by merchants, city authorities, ministries, on the basis of the Gossnab network, etc. The future network of wholesale trading companies was formed in the shell of the exchanges. At the same time, due to the lack of goods, tangible benefits, and knowledge, only two stock exchanges were created (in Moscow), which were able to start working only in the second half of 1991. Only the first words were spoken about derivatives markets. The second stage (2nd half of 1991 - autumn 1992): the beginning of the displacement of real goods and the formation of exchange stock turnover. The third stage (1993-1994): creation of the first modern exchange system. Opening futures markets. As part of the survival policy adopted by most commodity exchanges, the real commodity was replaced by the stock turnover: - vouchers (since autumn 1992); loans and financial resources - in 1993 they accounted for approximately 70% of the financial turnover of Russian stock exchanges; brokerage places; bearer securities; - surrogates of securities (for example, MMM tickets, housing options, "diamond" and "gold" contracts - futures commodity contracts issued by the issuer on a mass basis and concluded not for the purpose of speculation or hedging, but to raise funds in the issuer's turnover); - later - bills servicing the commodity turnover; deposit certificates. In addition, the stock exchanges undertook to service privatization transactions (holding voucher auctions in their region for the shares of privatized enterprises). The number of stock exchanges continued to increase - up to 63 by the end of 1994. The formation of the system of regional currency exchanges according to the formula "1 + 7" (MICEX + 7 regional exchanges) was completed. The fourth stage (1-995): Consolidation and specialization. Creation of modern trading, depository and settlement systems. Diversification of exchange products From the very beginning it was clear that several hundred or even dozens of commodity and stock exchanges in one country was a kind of anecdote. By the end of 1996, the number of commodity exchanges had dwindled by over 60%, with most of the remaining exchanges struggling to sustain little trading activity. By the end of 1997, only 7 stock exchanges were able to raise the necessary minimum capital and received a license (that is, their number decreased by 90% compared to 1996). In 1995-1997 technical complexes and networks of remote terminals of exchanges were put into operation, capable of supporting large, regionally distributed liquid markets (including on a national scale). In 1995, the Russian trading system (interregional computer market) was introduced. Although the RTS does not have the status of a stock exchange, but in essence and according to the intention of its creators, it is nothing more than a computer exchange. The "exchange character" of such trading systems has long been recognized abroad, and it is no coincidence that a relative of the RTS - the American computer market NASDAQ - is almost always included in the US stock exchanges (as the second most important (after the New York) stock exchange). 50. HISTORY OF THE MARKET The emergence of the securities market and the first stock exchanges dates back to the XNUMXth-XNUMXth centuries, characterized by the initial accumulation of capital and the emergence of joint-stock companies. the first exchange on which securities were traded, is considered to be an exchange established in Antwerp in 1531. Commodity transactions were also carried out on this exchange. However, this exchange did not last long, closing at the end of the XNUMXth century. The oldest stock exchange in the world which is still active today is the Amsterdam Stock Exchange, established in 1611. This exchange was universal, that is, transactions were concluded on it related to both the supply of goods and securities. Initially, only shares of the Dutch United East India Company were sold on it, then bonds of the Dutch government and bonds issued by city administrations to finance municipal expenses, as well as shares of foreign joint-stock companies, began to be sold. By the middle of the XVIII century. 44 types of securities were traded on the Amsterdam Stock Exchange. In the second half of the XVIII century. began to develop the securities market in the UK, which was due to the need to raise capital for large companies organized in the form of joint-stock companies. The first specialized stock exchange was opened in London in 1773. Later, the securities market developed rapidly due to the emergence of industrial production and the need to accumulate significant financial resources for the implementation of large-scale projects, when the funds of the individual owner were not enough. The emergence of Russian securities dates back to the second half of the 1769th century, namely to XNUMX, when the first issue of the Russian State Loan was placed in Amsterdam. For forty years the government attracted financial resources to replenish the treasury only through external loans. In the domestic Russian market, the first government securities were put into circulation only at the beginning of the 1809th century. (in XNUMX). However, only ten percent of the state debt was covered by internal loans, the rest was made up of external loans. The largest exchange where transactions with securities were conducted was St. Petersburg. The formation of stock exchanges pursues the following objectives: - creation of a specialized place equipped with the necessary technical means for conducting regular trading operations; - assessing the quality of issuers' securities and admitting only highly reliable securities to exchange trading; - conducting quotations of securities and establishing an equilibrium price; - creation of an organized securities market, in which the actions of participants are regulated by the rules and standards established by the stock exchange; - providing guarantees for the execution of transactions in securities, the supply of securities and mutual settlements; - ensuring information openness and transparency of the stock market for all participants. 51. DETERMINATION OF SHARE RETURN Share return is determined by two factors: the receipt of a part of the distributed profit of the JSC (dividend) and the ability to sell paper on the stock exchange at a price greater than the purchase price. Dividend is the share of earnings per share. Dividends are expressed either in absolute monetary units or as a percentage. The dividend rate characterizes the percentage of profit from the nominal price of the share. The formula for the annual interest rate of the dividend (i) is: i \u100d (D / R nom) xXNUMX, where D is the absolute level of the dividend in monetary units; Р nom - the nominal price of the share. The dividend is not the only source of stock return. An important factor that increases its value is the owner's expectation that the exchange rate will increase. By selling the share at the new price, its holder will receive additional profit. The market price of a share, or its course, is the price at which the paper is sold on the securities market. The share price is directly proportional to the dividend rate and inversely proportional to the discount rate of bank interest: i x P nom = d x P rate, where i is the dividend rate per share,%; d is the discount rate of bank interest; Rcourse is the market price of a share. The left side of equality is the absolute level of the dividend, the right side is the amount of payments for the money placed in the bank. It follows from equality: Rcourse = (i xRnom) / L In reality, it is impossible to know exactly the future dividend in advance. The uncertainty is also connected with the fact that it is impossible to predict the proportion in which the profit will be divided into two parts - remaining at the disposal of the JSC and distributed among the shareholders. Therefore, the main indicator of the activity of a joint-stock company in terms of the impact on the share price is not a dividend, but profit per share, or return on equity (Pa): Pa = Pch / W, where Pch - the amount of net profit, including undistributed; N is the number of issued shares. When choosing a financial asset, an investor needs to take into account two points: a safe level of profitability and a payment for risk, which together form the minimum (required) level of profitability. The interest rate of government bonds is usually taken as a safe level of profitability. The level of risk is estimated by the value of the beta coefficient, which determines the relationship between general market profits for all shares on the exchange as a whole and profits for specific shares. The relationship between the required level of profitability (K) and the components discussed above, taking into account the degree of risk, is expressed by the formula: K = I + b (/ ru - I), where I is a safe level of return; b- beta coefficient corresponding to any stock; 1ru - the general market average level of profitability at present, at which b = 1. The actual value of the share is determined taking into account the required level of profitability and the amount of income received. Knowing the actual value of the security, you can compare it with the market value and draw a conclusion about the appropriateness of the acquisition. The calculation of the actual value of the share (Ca) is carried out according to the formula: Ca = D: K, where D is the amount of dividends. 52. CLASSIFICATION OF MUITIFs Mutual Funds are of two types: - open fund - this is a fund, the management company (MC) of which assumes the obligation to redeem investment shares within the period established by the rules of the fund, not exceeding 15 working days from the date of presentation of the request; - interval fund - the management company assumes the obligation to redeem shares at the request of investors within the period established by the rules of the fund, but at least once a year. Investments in an open fund are more liquid, you can sell your share on any working day and fix the profit. This gives the investor a certain freedom of action. However, short-term fluctuations in the market and the share price may provoke the shareholder into imprudent actions. Therefore, when investing in mutual funds, one should not focus on short-term changes in the value of the share; portfolio managers will take all necessary steps to balance the securities portfolio. In addition, the early redemption of units only increases your costs for the payment of various kinds of rewards. When using the services of an interval fund, an investor must clearly define for how long he is ready to place his money. For example, if you do not need the money within six months, you can choose a fund that repays and issues shares 2 times a year. Thus, after six months, you can freely redeem investment units. The intervals for the redemption and issuance of investment units last about 2 weeks, during which time everyone can purchase or redeem units. The number of such intervals is determined by the Management Company and reflected in the rules of the fund (most often the intervals open 2-4 times a year). In addition, there are certain differences in the structure of assets of open and interval funds. Securities of one issuer in an open mutual fund can account for no more than 20% of all assets, and in an interval one - no more than 30%. Government securities in both types of mutual funds should not exceed 35%. Securities that do not have recognized quotations (not listed on the stock exchange) are not allowed in the interval fund and not more than 10% in the open fund. Securities foreign countries and companies can be no more than 20% in each mutual fund. Real estate and rights to it cannot be part of the assets in an open mutual fund, but in an interval one it can be 65% (or less). As for the money itself - a necessary liquid instrument in case it suddenly becomes necessary to make large payments to customers - then their share in each mutual fund should be 25%. The above data are legal requirements for the portfolio structure. Such restrictions are set to prevent the MC from leaving the fund's portfolio unbalanced. For example, a management company cannot invest all the money in the shares of one company, since the Federal Commission on the Securities Market sets a limit for securities of one issuer of no more than 20% of the value of the fund's assets. It should be noted that there are no significant differences in the yield of open and interval funds. 53. MARKET PARTICIPANTS The main participants of the exchange market. 1. Speculator. Speculators are participants in the derivatives market whose goal is to make a profit due to the difference in the rates of financial instruments that may arise over time. Thus, a speculator who expects a futures price buys a futures contract in the hope of selling it more expensive in the future and vice versa. The success of a speculator depends on how skillfully he predicts the price trends for the relevant assets. He can open positions both for a long period of time and for a short one, for example, for a trading session. In the first case, it focuses on long-term price trends, in the second - on price dynamics over a short period of time. Speculators who seek to profit from the slightest price fluctuations during a trading session are called in professional jargon scalpers. Speculators are essential participants in the derivatives market because, firstly, they increase the liquidity of futures contracts, allowing the trader to open a position or make an offset transaction, and, secondly, they take the risk of price changes that other market participants - hedgers pass on to them. 2. Hedger. Hedgers participate in derivatives trading in order to set in advance the price level at which they plan to make a deal with a real commodity or financial asset in the future, or to insure already purchased assets in the spot market on the derivatives market. I will give the following example. A manufacturer of a product plans to purchase another batch of raw materials in 6 months, but he fears price increases during this period. This presents a serious problem for him, since he has already agreed on a price for his product. In order to fix for itself the current level of prices for raw materials, the manufacturer buys a futures contract for this asset with execution in 6 months. If after this period of time the underlying asset rises in price, its losses associated with the sale of goods will be offset by an increase in the price of the futures contract it bought. If, on the contrary, raw materials become cheaper, the futures contract will bring a loss, which, however, will be compensated by a corresponding decrease in purchase prices in the spot market. There are an infinite number of hedging strategies - from the simplest, like the example above, to the very complex, requiring careful analysis and a lot of experience. 3. Arbitrator. An arbitrageur is a person who makes a profit through the simultaneous purchase and sale of the same asset in different markets if they have different prices, or related assets in case of violation of parity between them. An example would be buying (selling) an asset in the spot market and selling (buying) the corresponding futures contract. In general, an arbitrage operation is an operation that allows the investor to receive profit without any risk and does not require any investment from him. The implementation of arbitrage operations leads to the alignment of deviations in prices for the same assets in different markets and the emergence of parity relations between related assets. 54. DETERMINING THE YIELD OF A BONDS Bond - a debt obligation of the issuer who issued the security to pay the bondholder the face value of the paper within the agreed period and regularly (annually, quarterly or semi-annually) - fixed or floating interest. Bond yield is determined by two factors: remuneration for the loan provided to the issuer (coupon payments) and the difference between the redemption and purchase price of the paper. Coupon payments are made annually or periodically by intra-annual payments and are expressed in absolute value or as a percentage: Dyear = (; X Pnom)/100. coupon yield depends on the term of the loan. The relationship is reversed: the more distant the maturity, the higher the interest should usually be, and, conversely, if the bond is issued for a relatively short period, then the interest can be relatively small. Another factor Influencing the level of yield on bonds is the difference between the redemption and purchase price of the paper, which determines the amount of capital gain or loss over the entire term of the loan. If redemption is at par and the bond is purchased at a discount, then the investor has a capital gain (CA): DK = P nom - P disk, DK> 0, where Рnom is the nominal price of the bond, or the redemption price, and Рdisk is the purchase price. In this case, the yield of the bond is higher than indicated on the coupon. Buying a bond at a price above par (with a premium), the owner, redeeming the paper, suffers a loss: - DK = P nom - P prem, DK <0. A bond with a premium has a lower yield than indicated on the coupon. If the bond is purchased at par, the investor has neither capital gain nor loss, and the bond has a yield equal to the coupon. The amount of coupon payments and the annual increase (loss) of capital determines the value of the total annual yield on the bond (СD year): СD year = Dyear + DC. The ratio of total annual income to the purchase price of a bond determines its annual total return (/CD): iCD year \u100d (CD year / R pr) X XNUMX, where Р pr is the purchase price of the bond. Bond represents a security that confirms the obligation of the issuer to reimburse the owner of the security for its face value within the established period with the payment of a fixed percentage, unless otherwise provided by the terms of the issue. Bonds can be issued by the state, joint-stock companies, private firms. Bonds of state internal loans have a lower degree of risk. They provide a 100% return on investment guarantee, i.e. the degree of risk here is zero. However, they are usually less profitable than corporate paper. 55. STATE REGULATION OF THE SECURITIES MARKET IN RUSSIA The main goal of state regulation of the securities market is to ensure reliability and growth of securities, development of its model, which, taking into account the existing conditions in the country, would most contribute to economic growth. The achievement of this goal is facilitated by the solution of the following tasks: creating and ensuring the effective functioning of mechanisms for attracting investment in the private sector of the Russian economy; creation of conditions for the functioning of the deficit of government securities; provision of conditions and creation of reliable mechanisms for investing the funds of the population; development of the legislative framework for the work of the RZB; creation of a system of information on the state of the securities market and ensuring its openness to investors; ensuring investor confidence in RZB; creation of a civilized market and its integration into the global financial market. In Russia to state regulatory bodies of RZB relate: - Federal Commission for the Securities Market (FCSM); - Ministry of Finance; - Central Bank; - Antimonopoly Committee; - State Tax Inspectorate. Objects of regulation: - issuers of securities; - professional intermediaries; - investors; - self-regulatory organizations of professional participants. Federal Commission for the RZB (FCSM) is the federal executive body for conducting state control in the field of securities market over the activities of professional participants in the securities market. Function of the FCSM: ensuring the dynamic development of the RZB in accordance with the national interests of Russia. The implementation of this function is ensured on the basis of: development of the main directions of development of the securities market; coordinating the activities of federal executive bodies on the development of the securities market; supporting critical infrastructure projects; holding seminars, conferences to improve the professional skills of specialists; creation and development of a system of normative acts on professional activities at the securities market, participation in the development of the legislative framework of the securities market; approval of standards for the issue of securities and the procedure for their registration; development and approval of uniform rules for the implementation of professional activities with securities; approval of uniform requirements for the procedure for maintaining the register of registered securities; definition of standards for the activities of various funds; issuance, cancellation and suspension of the general license to carry out professional activities at the securities market; performing the main functions of licensing and supervising the activities of market entities, suppressing illegal activities at the securities market. Self-regulatory organization is a voluntary association of professional RZB participants, acting in accordance with the law and functioning on the principles of a non-profit organization. Considering transactions with securities in relation to the observance by RZB participants of antimonopoly legislation, special attention should be paid to the procedure for acquiring shares in the authorized capital of a commercial organization. The law provides for obtaining the prior consent of the antimonopoly authorities if, as a result of the transaction, the acquirer acquires, together with the shares already at his disposal or at the disposal of a group of persons, the right to dispose of more than 20% of the shares in the authorized capital of the economic agency. 56. IMPACT OF THE ASIAN CRISIS AND DEFAULT ON THE RUSSIAN FINANCIAL MARKETS Broke out on October 28, 1997 stock market crash in the US and the November turmoil in the stock markets of Southeast Asia had an extremely negative impact on the domestic market. Foreign investors (non-residents) began to get rid of securities. As a result of such actions, the stock market experienced three most acute situations during the month (from the end of October to the end of November). The most popular stock index fell first by 29%, then by 21%, and finally by another 10%. For the entire period of its existence, the domestic stock market has not experienced such violent upheavals. Among government securities, the most powerful blow of the crisis hit foreign exchange obligations (securities whose denomination is expressed in foreign currency - domestic foreign currency bonds and Eurobonds), where the share of non-residents is especially high. The market for foreign exchange obligations from the end of October to the beginning of December was simply paralyzed. The quotations of ruble-denominated government securities plummeted. GKOs and OFZs were particularly affected: the yield of some issues jumped 2,5-3 times compared to the pre-crisis level. The foreign exchange market reacted extremely sharply to the crisis in the sphere of securities. On October 29, the dollar exchange rate on the MICEX immediately rose by 54 points, and the demand for the currency amounted to $163 million. There have been no such "achievements" since mid-1995. True, the efforts of the Central Bank managed to repel the first blow to the foreign exchange market (by the beginning of November the situation had stabilized). However, soon the demand for the currency began to grow again. Non-residents, selling Russian securities for rubles, naturally tried to convert these ruble funds into hard currency. Further, the situation became even more aggravated. Domestic investors also began to leave the stock market, which had been pumped up by non-residents, transferring funds from government securities to foreign currency. The sales rate of cash dollars exceeded 6000 rubles. The Central Bank, being unable to keep the dollar exchange rate within the existing currency corridor, forced to expand these limits. In order to overcome the crisis in the financial market, the Central Bank took a number of measures: - the refinancing rate was increased from 21% per annum to 28%, and the norms of required reserves of commercial banks in foreign currency - by 1,5 times; - made large-scale foreign exchange interventions; - Intensive attraction of funds for deposits with the Central Bank (up to 3-4 trillion rubles per day) has begun; - Steps have been taken to maintain demand for government securities. The Central Bank and (under its pressure) Sberbank began buying up GKO-OFZs, banks - primary dealers in the GKO-OFZ market were obliged to operate with a large number of these securities, the conditions for granting loans secured by government securities improved; - for violations of the terms of delivery of government securities, the Central Bank stopped transactions with a number of foreign banks, and for failure to fulfill their obligations to maintain quotations of government bonds, some large Russian banks were deprived of the status of a primary dealer in the GKO-OFZ market. As a result of foreign exchange interventions and the purchase of government securities by the Central Bank, gold and foreign exchange reserves decreased from $25 billion to $18 billion. 57. THE LARGEST STOCK EXCHANGE IN THE WORLD The main link in the US stock exchange system is the New York Stock Exchange. It traces its history back to 1792, when 24 brokers signed the first brokerage agreement and thus created the first organized securities market in New York. New York Stock Exchange is neither a government agency nor a company. Since 1972, the exchange has been a non-profit corporation with over 1300 members. Only individuals can be members of the exchange, but if a member of the exchange is a co-owner of the company, then the entire company is a member of the exchange. Places on the exchange are sold to persons who meet strictly defined formal requirements. Approximately 1/3 of the seats on the stock exchange are leased. In general, the contingent of members of the exchange is characterized by stability, which contributes to the high status of the exchange as one of the elite institutions in the United States. Securities that meet a number of requirements are traded on the stock exchange. Listing requirements on the New York Stock Exchange are considered among the most stringent in the world: - the company must have no more than 2000 shareholders and 1 million shares outstanding; - the market value of the placed shares must be at least USD 16 million; - the company's profit before taxes for the last financial year must be at least USD 2,5 million and for each of the previous two - at least USD 2 million. characteristic feature british stock exchange system is its high degree of concentration. There are 22 exchanges in the UK. The UK's main stock exchange is London International Stock Exchange. London's convenient geographic location (working during the Asian and US markets) is also important for maintaining its dominant position in the European market. Its members are divided into the following groups. brokerage firms, whose main function is the execution of investors' orders for the purchase and sale of securities, although they also make transactions at their own expense. Market makers - Exchange members who quote certain securities during the working day. Money Brokers stock exchange, having the right to lend money and securities to other members of the exchange. On this exchange, trading is carried out in four markets: - domestic shares; - foreign shares; - British government bonds, as well as domestic and foreign fixed-interest bonds; - sale options. main stock exchange Germany is Frankfurt Stock Exchange. It is the largest stock exchange in continental Europe. The main Japanese stock exchange is Tokyo Stock Exchange. It has two types of members: real members and "saitori" members. Full members may enter into the following transactions with securities: - purchase and sale of securities at their own expense; - purchase and sale of securities on behalf of and at the expense of clients; - consortium transactions in case of new issues of securities; - placement of new issues with a guarantee of acceptance of unsold securities. The members of the "saitori" act as intermediaries between the full members, carrying out their instructions and not acting on their own account. Their main task is to determine the rate of securities, and each of these members works with a certain type of securities. 58. TYPES OF EXCHANGE Signs of the classification of exchanges: type of exchange goods; the principle of organization (the role of the state); legal status (exchange status); form of participation of visitors in exchange trading; nomenclature of goods that are the object of exchange trading; place and role in world trade; field of activity; types of transactions; Nature of activity. 1. By type of exchange commodity: commodity exchanges; commodity-raw materials; currency; stock; labor exchanges. Stock exchanges are busy with securities. The emergence of stock exchanges is associated with the emergence of joint-stock companies. The stock exchange is a permanently regulated securities market. For the organization and maintenance of foreign currency, special currency exchanges are created. Currency exchanges are controlled by the state and the Central Bank of the Russian Federation. 2. According to the principle of organization: public law; private law. public law (state) exchange. In the Russian Federation, stock exchanges are of a public law nature. Any entrepreneur entered in the trade register and carrying a certain trade turnover can be a member of such an exchange. Private law exchanges: England and USA. They have a more closed character, access only to a narrow circle of persons who are part of the exchange corporation. 3. By legal status: established exchanges were registered mainly as joint-stock companies and limited liability partnerships. The founders of the exchanges were attracted by the fact that the exchange in the form of a partnership could be registered with local authorities. 4. According to the form of participation of visitors in the auction: open exchanges; closed. Closed exchanges: regular buyers acting as exchange intermediaries; availability of a specialized system of bodies for collecting and pre-exchange processing of orders. Modern foreign exchanges are mostly closed. Open exchanges: permanent exchange intermediaries; visitors; historically open exchanges (it is not necessary to use the services of intermediaries); an open exchange of a mixed type (exchange intermediaries work with sellers and buyers: Brokers (work on behalf and at the expense of the client) and dealers (work on their own behalf and bear the costs themselves). 5. According to the range of goods: universal exchanges; specialized. 6. According to the place and role of the stock exchange in world trade: international; national. international exchange - a special type of permanent wholesale market, covering several states, in which purchase and sale transactions are made for certain exchange commodities. International exchanges serve specific global commodity and stock markets. Representatives of business circles from different countries can participate. Characteristic: ensuring the free transfer of profits, received. by exchanges. transactions; conclusion of speculative (arbitrage) transactions (this transaction provides an opportunity to make a profit on the difference in quoted prices). International exchanges: commodity; stock; currency. National exchanges: take into account the peculiarities of the development of production, circulation, consumption, material resources of a given country; currency, tax, trade regimes of this state-va prevent the conduct of arbitrage transactions and participation in exchange trading of individuals and firms, not yavl. residents of the country. For the object of sale: exchanges of real goods; futures exchanges; optional; mixed. 59. INTERNATIONAL CURRENCY MARKET Foreign exchange market - this is a set of conversion operations for the purchase and sale of foreign currency as a security on specific conditions (amount, exchange rate, period) with a value date, which are carried out between participants in the foreign exchange market. With regard to conversion operations in English, the stable term Foreign Exchange Operations is adopted, abbreviated FOREXor FX. It should be noted that FOREX is not a market in the usual sense. It does not have a single center. Trading on the FOREX market is carried out by telephone and through computer network terminals. In reality, the foreign exchange market, as well as the securities market, is never in a state of equilibrium. His state can be defined as a constant search for an elusive balance. The fact that the FOREX currency market is subject to significant fluctuations causes mixed reactions among people. For professional traders, this is a potential source of income, while for money managers or investment funds, it is more of a source of risk and uncertainty about future returns. Among the main factors affecting the exchange rates, it is worth noting the following: - balance of mutual payments; - the state of the economy; - forecasts based on technical analysis; - political and psychological factors. All of the above conditions can cause sudden and sometimes dramatic market turns if something unexpectedly and significantly changes in them. Sometimes just the expectation of economic changes can have more influence on market changes than the events themselves. The FOREX market is very attractive for investors. In recent years, professional investors have significantly increased the level of their participation in the FOREX currency market. The number of private investors is also constantly increasing. Briefly describe the features of the market: - liquidity. The market operates with huge amounts of money. At the same time, money itself acts as a commodity. The cost of one transaction is many times higher than similar indicators in any securities market. (This feature of the market is the most attractive for investors, as it provides complete freedom in the instant opening or closing of any position.); - availability. Attractive is the opportunity to trade 24 hours a day for 5 business days. Participants of the FOREX market do not need to wait for the market to open (as it happens on other sites), and, therefore, there is an opportunity to respond in time to any development of events; - flexible system of organization of trade; - flexible pay-per-trade strategy. There are traditionally no commission costs in the FOREX market, except for the natural market difference - the spread - between the bid and offer prices; - unambiguity of quotes. Due to the high liquidity of the market, almost unlimited volume can be sold at a single market price. (This avoids the volatility problem that exists with futures and other equity investments, where only a limited number of contracts can be traded at one time and at a given price.) 60. FIXED EXCHANGE RATE REGIME At dawn formation of the world monetary system currencies were exchanged according to their metal content, so determining the exchange rate was not difficult. Different metals were used for minting coins, however, gold or silver served as a measure of determining exchange rates. Internationally, gold was recognized as a form of world and national money in 1867, which meant the introduction of a system of fixed exchange rates or the gold standard system. The gold standard meant that each currency contained a certain amount of gold, and since exchange rates were based on the gold content, then it was a gold parity. The gold standard system for a long time ensured the stability of most currencies and contributed to the development of the world economy. National currencies were freely exchanged at a fixed rate for gold, the amount of which was limited. If the amount of money inside the country increased, then prices began to rise, which caused a deficit in the trade balance, an outflow of gold from the country, and this led to a reduction in money in circulation, falling prices and restoring equilibrium. The need to switch to a new monetary system arose in connection with the global currency crisis caused by the Second World War. The US economy, unlike the economies of other leading countries, was on the rise. Only America could provide enough food, clothing, fuel for everyone: both the winners and the vanquished. The weakened European economy was unable to withstand the US currency expansion. The principles of the new system were enshrined at the monetary and financial conference in Bretton Woods, at the same time the International Monetary Fund. Three main principles of the new monetary system were identified: 1) a gold exchange standard was initially introduced, which was based on two currencies - the US dollar and the British pound sterling, but subsequently, due to the weakening of the pound and the strengthening of the dollar, in reality, the standard turned into a gold-dollar one; 2) to give the dollar the status of the main reserve currency, the US Treasury continued to exchange dollars for gold to foreign central banks and government agencies at the official rate of 1934 - 35 dollars per troy ounce (troy ounce = 31,10348 grams); 3) the deviation from the established parity was strictly regulated by a narrow corridor (± 1%). The duty of the central banks was to maintain the existing corridor by conducting foreign exchange interventions, devaluation of currencies over 10% was allowed only with the permission of the IMF. Thus, in fact, this system also turned out to be a system of fixed exchange rates. By the 70s. gold reserves were redistributed in favor of Europe. In the same period, international liquidity problems arose, as gold production increased by 50%, and world exports more than 2,5 times. Gold is no longer enough to maintain the gold parity of the dollar. At the same time, confidence in the dollar as a reserve currency began to decline due to the huge deficit in the US balance of payments, moreover, with the emergence of new financial centers in Western Europe and Japan, the United States lost its absolute dominance in world finance. 61. FREE EXCHANGE RATE REGIME The Bretton Woods monetary system finally ceased to exist on March 16, 1973, when an international conference in Paris subordinated exchange rates to the laws of the market. The structure of the modern monetary system was finally discussed at the IMF conference in January 1976 in Kingston (Jamaica). The basis of the new system was free choice exchange rate regime (floating, fixed, mixed) and multi-currency standard. The multi-currency standard assumes the possibility of choosing the form of international liquidity. According to the IMF classification, a country can choose one of three types of exchange rate: - fixed; - floating; - mixed. The bulk of the work on the FOREX market falls on currencies that are in free float (floating rates), that is, the exchange rate is determined by the balance of supply / demand for this currency. Of course, swimming takes place under the control of the Central Bank, whose main task is to ensure the stability of the national currency. The "free floating" of currencies was officially allowed, the IMF was ordered to strengthen control over the state of the world economy, steps began to be taken to reduce the role of gold as a global means of payment. The countries - members of the IMF refused to establish the official price of gold and began to buy and sell it only at the market price, the mandatory settlements in gold with the IMF were cancelled. One sixth of the participating countries' contributions to the IMF in the form of gold was returned to these countries and replaced with a contribution in national currency. Another sixth was auctioned, and the funds went to a special fund for underdeveloped countries. The new system of organizing the world currency market was called the Jamaican system, or the system of floating (sometimes called regulated) free exchange rates. Floating rates attracted professional traders, which further increased exchange rate fluctuations and made the foreign exchange market even more attractive, since the greater the volatility, the greater the potential income. So new professions appeared - a currency speculator (trader) and a currency arbitrageur. Arbitration falls into two categories: spatial и temporal. Spatial arbitrage involves conducting speculative transactions at one point in time with different counterparties. Profit is obtained from the difference in exchange rates. For example, a dealer immediately bought pounds from a London bank at the rate of 1,7235 and sold them to a Dresden bank at 1,7237. However, with the advent of modern means of communication, this type of arbitration is losing its significance. Temporary arbitrage involves a gap in time for transactions to open and close a position at a changed rate. This type of arbitration in international practice is called trading. Thus, January 8, 1976 can be considered the date of birth of the modern world currency market. Due to the fact that restrictions on changes in exchange rates were removed, the exchange rate has become a highly profitable financial instrument, i.e. the price of one currency in relation to another has become a highly profitable financial instrument. 62. CURRENCY QUOTATION. CROSS COURSE exchange rate called the price of monetary units (currency) of one country, expressed in monetary units (currency) of another country. Determining the exchange rate is called their quote. Full quote includes determining the buying and selling rates, according to which banks buy and sell the quoted currency. The main type of currency quotation is a direct one, in which the rate of quoted currency A to quote currency B (rate A / B) is expressed as the value of a unit of currency A (in some cases, the value of 10, 100 or 1000 units) in units of currency B. With direct quotation of foreign currency the cost of its unit (10, 100 or 1000 units) is expressed in units of the national currency. With a direct quotation of currency A to currency B, the amount in currency A is equivalent to the amount in currency B equal to РВ = PAR / NA where RA is the amount in currency A; NA - the number of quoted units of currency A (NA is equal to 1 or a multiple of 10); R is the rate (price of NA units) of currency A, expressed in units of currency B. The amount in currency B is equivalent to the amount in currency A, equal to RA \uXNUMXd (PB? NA) / R When a currency is quoted directly, its buying rate is less than its selling rate. Another type of currency quotation is indirect, in which the exchange rate of quoted currency A to quote currency B is expressed as the cost of a unit of currency B in units of currency A. In case of indirect quotation of foreign currency the value of a unit of national currency is expressed in units of foreign currency. For example, the ratio between the US dollar and the pound sterling is usually set as a certain amount of dollars for 1 pound sterling. Therefore, for the exchange rate of the US dollar against the pound sterling in London, this means an indirect quotation of a foreign currency. Indirect quotation is used for the exchange rate of the US dollar against the European currency euro, the British pound sterling. With indirect quotation, the buying rate of the quoted currency is greater than the selling rate, therefore, in order to comply with the single principle "the buying rate is less than the selling rate", the exchange rate a / v with an indirect quotation of currency A, it is considered as a rate of B / A with a direct quotation of currency B. Cross rates. Typically, only a few major foreign currencies are directly listed on the currency exchanges or over the counter in each country on the basis of supply and demand. The ratio (exchange rate) between currencies that are not traded is determined by calculation on the basis of their rates against the third currency. Estimated exchange rates, obtained in this way are called their cross rates. Given the known rates of two quoted currencies A and B with respect to the same quote third currency Cix, the ratio between them (the rate of currency A to currency B) is calculated as a cross rate according to the expression R(A/B)= R(A/C)NB R(A/B)/ R(B/C) NA where NA is the number of quoted units of currency A; NB is the number of quoted units of currency B. Given the known rates of buying and selling currencies A and B in relation to the same currency C, the buying and selling rates of currency A against currency B are calculated as follows: 63. SWAP Swap - this is an agreement between two counterparties on the exchange of payments in the future in accordance with the conditions specified in the contract. Interest swap consists of exchanging fixed rate debt for floating rate debt. The persons participating in the swap exchange only interest payments, but not face values. Payments are made in a single currency. Under the terms of the swap, the parties undertake to exchange payments over a number of years. Typically, the duration of the swap ranges from 2 to 15 years. One party pays amounts that are calculated on the basis of a fixed interest rate on the face value fixed in the contract, and the other party pays amounts according to a floating percentage of this face value. As floating rate swaps often use a rate LIBOR(London Interbank Offer Rate). The person who makes the fixed payments on the swap is commonly referred to as swap buyer. A person making floating payments, - swap seller. The other most common type of swap is currency swap, representing the exchange of face value and fixed interest in one currency for face value and fixed interest in another currency. Sometimes a real exchange of face value may not occur. Making a currency swap may be due to various reasons, for example, currency restrictions on currency conversion, the desire to eliminate currency risks, or the desire to issue bonds in the currency of another country in conditions where the foreign issuer is not well known in this country, and therefore the market for this currency is not directly available to him. In modern conditions, commodity swaps have been developed. Their essence is reduced to the exchange of fixed payments for floating ones, the value of which is tied to the price of a certain product. Their construction is similar to an interest rate swap, where fixed payments are exchanged for floating ones. Since a swap is an agreement on the exchange of payments, in the contract the parties can agree on any exchange procedure convenient for them, as a result, various swap modifications: - a basis swap involves the exchange of amounts that are calculated on the basis of various floating interest rates, such as the three-month LIBOR rate and the treasury bill rate; - an amortized swap involves denomination over time; - an increasing swap implies an increase in the nominal value over time; - a deferred or forward swap contains a condition that the parties will exchange interest payments starting from some date in the future; - a circular swap involves the exchange of fixed interest payments in one currency for floating payments in another currency; - an extendable swap gives one party the right (option) to extend the duration of the swap beyond a specified period; - a terminated swap gives one party an option to shorten the duration of the swap; - in an index swap, payment amounts are tied to the values of an index, such as a consumer price index, stock or bond index; - in a zero-coupon swap, fixed interest payments increase at compound interest during the duration of the swap, and the entire amount is paid at the end of the swap. 64. FACTORS AFFECTING THE EXCHANGE RATE Supply and demand curves. Exchange rates tend to change. This, in turn, is determined by a change in the supply and demand of a particular currency in the world market, which leads to a change in the price (rate) of one currency in relation to others. Interest rates. The most important of them is the profitability of deposits in a particular currency. The rates on deposits in commercial banks depend on the rates of central banks, and in this case it is obvious that it is more profitable to invest capital in deposits denominated in the currency that has a higher income on deposits, since the return on such an investment will be higher. Ceteris paribus, an increase in the interest rate in one country will lead to an increase in demand for the currency of this country against the main world currencies, i.e., capital will begin to flow, suppose, from dollars to euros to a new equilibrium value of the exchange rate. This picture is valid only for countries with a stable political and economic situation (with a constant level of economic and political risks, in other words). The state of the economy. In addition to interest rates, the exchange rate is influenced by the state of the economy of the countries that issue the currency. An improvement in the economic situation in reality leads to an increase in the exchange rate of the national currency. Purchasing power parity. On long-term time intervals, other things being equal, the exchange rate should reflect purchasing power parity. In other words, there must be a state of affairs in which the conversion of one currency into another would not cause changes in purchasing power. This is obvious, since otherwise everyone would have rushed to convert their savings into the currency that would have this purchasing power more. That is, if a certain standard set (basket) of consumer goods and services costs $100 in the United States, and the same set costs 500 rubles in Russia, then the exchange rate should be equal to 5 rubles. per dollar. The difficulty is that the concept of purchasing power parity is not very accurate. It depends on the structure of the basket, on the conditions for the production of goods and services (the cost is different and it is not always possible to accurately match one type of goods in one country with a similar type of goods in another). In this way, there is no single and optimal way to determine the price of the basket, and therefore the concept of exchange rates calculated on this basis is not an exact value, but some range. However, exchange rate fluctuations occur precisely around a certain level of parity. Without the concept of purchasing power parity, the very definition of exchange rates would be based on a highly arbitrary basis. Cash flows. If approached from a general standpoint, then the combined effect of all factors affecting exchange rates leads to the emergence of cash flows from country to country, which is accompanied by the conversion of one currency into another. The sum of all these flows gives country's balance of payments and if it is negative, then there is an outflow of capital, and this, as a rule, lowers the rate of the national currency; if the balance is positive, then there is an inflow of capital and an appreciation of the currency. 65. RELATIONSHIPS BETWEEN THE CURRENCY AND STOCK MARKET The state of the stock market always has a significant impact on the exchange rate of the national currency. In order to assess the general state of the stock market of a particular country, it is necessary to get acquainted with the concept of "stock index". On each stock market of the world, a number of indicators are calculated (each exchange has its own), which are called stock indices. These indicators are intended to assess the general state of the stock market of a particular country. As a rule, they are calculated on the basis of the value of shares included in the so-called calculation base of the index. In addition, major stock indices are also successfully used as independent indicators of future changes in the exchange rate of the national currency. Values of stock indices are, as a rule, directly dependent on the prices of shares included in the calculation base of the corresponding index. In this regard, we can say, for example, that the growth of the Dow Jones index indicates a "good" state of the economy of the United States of America, which entails the strengthening of the strength of the American currency. It is obvious that the reverse situation is also true, i.e., a decrease in the main stock index necessarily leads to a weakening of the national currency. It is necessary to distinguish between two fundamentally different situations: - the rapid growth of shares leads to the growth of stock indices, which, in turn, "drag" the national currency; - the rapid growth in the foreign exchange market contributes to the strengthening of the stock market and, as a result, the strengthening of stock indices. Accordingly, the dynamics of one of these components can predict the movement of the other. To analyze the market of the international currency market FOREX through stock indices, you can apply the entire arsenal of technical analysis both to the study of the dynamics of exchange rates and to forecasting changes in indices. In principle, there is no difference in which object to apply all the accumulated and well-studied baggage of technical and probabilistic analysis. Of particular note is the fact that the presence base currency - the US dollar (more than 80% of transactions in the FOREX currency market are made in this currency) - allows you to study in sufficient detail only the Dow Jones index (or any other of the main stock indices of the United States of America, or their combination). However, historically, special attention has been paid to the Dow Jones index. Thus, the approaches that are used in forecasting the dynamics of the exchange rates of the main national currencies by analyzing changes in the stock markets, namely, by studying the main stock indices, are outlined. Stock market analysis and, in particular, stock indices is a serious addition to the analysis of other financial markets. However, as practice shows, novice traders very rarely pay attention to the securities market. Nevertheless, it is worth giving a worthy place to such an analysis in your work on financial markets. 66. FEATURES OF MARGIN TRADING First of all, it is necessary to answer the question: what is margin trading? Margin trading - this is the implementation of operations that exceed a certain number of times (20,25,30,50,100) the size of the actual deposit accepted by the company as compensation for its probable losses when conducting operations in the financial market on the order of the client. In other words, margin trading comes down to the following scheme: an investor, by placing collateral capital, gets the opportunity to manage targeted loans allocated against this collateral, and the opportunity to guarantee (insure) probable losses on open positions with your deposit. At the same time, probable losses cannot exceed the security deposit (or some predetermined part of it). Margin trading is most common in the FOREX market, but it is also often found in the securities market. To increase the volume of transactions in the FOREX market, investors with amounts less than $1 million (a standard lot for trading in this market) actively use the mechanism of margin trading. Margin trading was first introduced for currency trading in 1986. In this case, in order to complete the transaction, only a small percentage of the total amount of the contract, the so-called "security deposit" (or margin). Since then, the participation of small and medium-sized investors in many financial markets has become possible thanks to intermediary activities dealing companies. In many countries, including Russia, medium and small investors have access to the global foreign exchange market, using amounts from $2000 in their transactions. A dealing company provides its customers with a credit line, or the so-called "multi-currency leverage" (credit leverage), several times the amount of the security deposit. Often, the investor's own capital is only 1-3% of the amount of transactions made by him. The system of working through a dealing (brokerage) company with the provision of leverage is called "margin trading". Margin trading is attractive due to its availability. Investing in securities of foreign countries in order to obtain a fixed income is of little interest to the common man. For shares, the yield is higher, but the amount of dividends directly depends on the successful operation of a particular enterprise and the preferences of its shareholders. More interesting is the purchase of shares with the aim of playing to increase their rate, but this requires larger investments. Margin trading does not have these restrictions: you can buy and sell depending on your desire and expectations, and for transactions there will be enough funds in the amount of only 1-3% of the transaction amount. However, do not forget that along with the increase in possible income when using margin trading, the size of the probable loss also grows. In the world market, situations are extremely rare when exchange rates change by two or more percent relative to each other, so it is almost impossible for an investor to lose his collateral capital with a reasonable game. 67. PRINCIPLES FOR FORMING INVESTMENT PORTFOLIO When forming an investment portfolio should be guided by the following considerations: - security of investments (invulnerability of investments from shocks in the investment capital market); - stability of income; - Liquidity of investments e. their ability to participate in the immediate acquisition of goods (works, services) or quickly and without loss in price to turn into cash. None of the investment values has all the properties listed above. Therefore, a compromise is inevitable. If the security is reliable, then the return will be low, because those who prefer reliability will bid high and beat the return. The main goal in the formation of the portfolio is to achieve the most optimal combination of risk and return for the investor. In other words, an appropriate set of investment instruments is designed to reduce the investor's risk to a minimum and at the same time increase his income to a maximum. The main question in portfolio management - how to determine the proportions between securities with different properties. So, the main principles of building a classic conservative (low-risk) portfolio are: the principle of conservatism, the principle of diversification and the principle of sufficient liquidity. The principle of conservatism. The ratio between highly reliable and risky shares is maintained in such a way that possible losses from the risky share are overwhelmingly covered by income from safe assets. The investment risk, therefore, does not consist in losing part of the principal amount, but only in obtaining an insufficiently high income. The principle of diversification. Investment diversification is the main principle of portfolio investment. The idea behind this principle is well illustrated by the old English saying, "Don't put all your eggs in one basket." In our language, this sounds like "do not invest all your money in one paper, no matter how profitable this investment may seem to you." Only such restraint will avoid catastrophic damage in the event of a mistake. The principle of sufficient liquidity. It consists in maintaining the share of fast-moving assets in the portfolio at a level sufficient to conduct unexpected high-yield deals and satisfy clients' cash needs. Practice shows that it is more profitable to keep a certain part of the funds in more liquid (even if less profitable) securities, but to be able to quickly respond to changes in market conditions and individual profitable offers. Portfolio investment returns represent the gross return on the entire set of securities included in a given portfolio, adjusted for risk. There is a problem of quantitative correspondence between profit and risk, which must be resolved promptly in order to constantly improve the structure of already formed portfolios and form new ones in accordance with the wishes of investors. It must be said that this problem is one of those for the solution of which it is possible to quickly find a general solution scheme, but which are practically not solved to the end. 68. FACTORS REDUCING THE PROFITABILITY OF OPERATIONS WITH SECURITIES When analyzing the profitability of stock transactions, it is necessary to take into account not only nominal yield, but also its real meaning. The real yield differs from the nominal one in that its calculation takes into account all the costs incurred by the investor in carrying out this operation. Costs, in turn can be divided into direct и indirect. Direct costs include commissions to the broker and other cash payments. Indirect costs include lost profits from non-use of funds during the time when they are transferred to the current account or from the current account. Accordingly, the shorter the term to maturity of a stock instrument, the stronger the negative impact of costs on the real return on investment. Commissions set as a percentage of the amount of transactions for one trading day; one-time costs for the installation of the necessary equipment and connection to the distribution network are not considered insignificant. Broker commission payment leads to the fact that a stock instrument or, more simply, an investment object, costs the investor more than it actually costs at the moment. Additionally, when selling your assets the investor must also pay commissions to his broker, and this time they will be more than when buying, due to the increase in the value of the asset. As a result, it may turn out that, it would seem, a large profit received in a few days, almost all will go to pay commissions. That is why it is not only useful, but also necessary, to calculate real indicators of profitability - such as the return on investments, taking into account adjustments for commission costs. The second significant factor in reducing real returns when investing in financial assets are temporary lags. They can be divided into two main groups: - external lags; - internal lags. К external lags include temporary delays in the transfer of funds to this segment of the stock market and delays in withdrawals. All these time costs exist, as it were, outside the market and affect only operations related to the movement of funds from one segment of the stock market to another. К internal lags include time costs for the redistribution of funds within one segment of the stock market. This may include various types of delays in payments, as well as delays in the registration of ownership. In real work, internal costs can be neglected due to their insignificance. Influence of inflation. You also have to take inflation into account. It is always useful to know how much capital has increased as a result of management and how much of this increase is an inflationary component. As a result of inflation, the purchasing value of an asset at the time of its purchase and at the time of its subsequent sale at a profit or loss is not the same value. To bring the purchasing power of the proceeds, it is necessary to discount the proceeds in accordance with the inflation rate. The next factor in a significant decrease in the real return on investment is the taxation of profits. 69. CURRENCY INTERVENTION Currency intervention - operations of the government (usually represented by the central bank) in the foreign exchange market, the purpose of which is to influence the exchange rate of the national or foreign currency by artificially creating demand or supply of currency. To do this, the central bank buys the currency, the rate of which is declining, or, conversely, sells from its reserves the currency, the rate of which is considered too high. Typically, foreign exchange intervention is carried out in order to counteract unwanted changes in the exchange rate. Foreign exchange intervention is a significant one-time purposeful impact of the country's central bank on the foreign exchange market and the exchange rate, carried out by selling or purchasing large quantities of foreign currency by the bank. Currency intervention is carried out to regulate the exchange rate of foreign currencies in the interests of the state. The success of foreign exchange interventions depends on their intensity, as well as on the confidence of the population and foreign exchange market participants in the official monetary authorities. The method of influencing the exchange rate in order to lower or increase it by massive buying and selling of foreign currencies - the so-called "motto policy" carried out in the form of foreign exchange interventions of the Central Bank. During the intervention, the Central Bank buys foreign currency when its supply is excessive, as a result of which the exchange rate is at a low level and sells it when the supply is insufficient, thereby the Central Bank contributes to balancing supply and demand and limits the fluctuations of the national currency. Interventions are not effective in conditions of currency crises and an unstable financial situation. Currency interventions are also used to transfer non-convertible currency to the regime internal convertibility, for this purpose, foreign currency is sold on the foreign exchange market to companies and individuals for national currency. This usually requires outside help. In the XNUMXs, Russia took advantage of the International Monetary Fund, which assists countries in creating a stabilization monetary fund to support the national currency. In the conditions of the Russian economy, the main factor in the observed inflation, as the analysis showed, is the purchase by the Bank of Russia of foreign currency proceeds from export operations. This leads to an excess money supply in the economy. The inflationary effect of foreign exchange interventions could be avoided by using such an instrument of monetary regulation as open market operations, namely, through the prompt sale by the Bank of Russia of government securities to commercial banks. As a result, the additional money supply received as a result of foreign exchange interventions is promptly withdrawn and, accordingly, there is no inflationary effect. Impact of foreign exchange interventions meanwhile, the inflation rate in Russia is explained not so much by the inability to sterilize the money supply, but by the inability to properly transform it in the form of interventions in the real sector of the economy. 70. METHODS OF ANALYSIS OF THE SECURITIES MARKET Methods of RCB research subdivided into technical, fundamental и analysis of internal information. Among the methods of technical analysis at the industry level of research, the most important are the following: - analysis of dynamics of average prices of securities; - analysis of sectoral exchange indices; - method of expert assessments; - econometric modeling. Objects of analysis are the following parameters of the securities market in the sectoral context: - business activity is characterized by the number of transactions with securities in a given sector of the market, the average volume of one transaction, the ratio of the nominal and market value of securities, trends in their dynamics, unsatisfied with supply and demand; - market conditions are measured by the ratio of supply and demand, the level and trends of securities quotations, the amplitude of their fluctuations. Sources of information are the registration of transactions, quotes of stock prices, brokerage reporting, data from special studies. Analysis of the dynamics of average prices is carried out on the basis of a representative sample of enterprises in the industry under study. Its goals are to identify the cyclical fluctuations of the sectoral market, assess sustainability and general development trends. The following methods can be used to identify the cyclical nature of market conditions: - graphic; - mechanical smoothing based on the moving average principle; - statistical models. Analysis sectoral exchange indices are widely used in foreign practice to assess and forecast the market situation. In Russia, this method has not yet found application, but in the future it is possible to use both Dow Jones-type indices popular on the world stock market, NASDAQ sectoral indices, Financial Times sectoral indices, and independently calculated special indices of the Russian securities market. Methodology for calculating stock indices can be based on the calculation of simple averages of the movement of stock prices of enterprises - representatives of this industry, as well as on the calculation of weighted averages, where the weights are most often indicators of the basic market value of shares. To assess the state and development forecasts of sectoral securities markets, the method of expert assessments based on formalized procedures such as the Delphi method or the derivation of rating indicators can be used. In countries with developed securities markets, the method of econometric modeling of the market situation based on multifactorial regression models is often used. However, in the conditions of unstable and undeveloped RZB in Russia, its use is hardly expedient so far. Fundamental methods for studying the attractiveness of areas of investment activity can be based both on the results of sectoral technical analysis in the form of their theoretical interpretation, and they can also have independent significance. Fundamental analysis includes the study of the content side of the activities of industries and the prospects for their development, scientific and technical level, competitiveness, financial condition, etc. Given the specifics of the formation of the RZB in Russia, the uncertainty of macroeconomic and sectoral factors of its development, preference should be given to a qualitative analysis of the economic situation in various industries. 71. FUNDAMENTAL ANALYSIS Fundamental, or, as they sometimes say, factor analysis relies on an object-oriented approach. This approach is based on an attempt to determine the quantitative indicators of the future development of the company or any underlying assets. Based on the forecast of these indicators, the investor makes a decision on investing capital. Fundamental analysis requires certain available information, on the basis of which some equation of the final (basic) factor is built. Such an analysis ideally involves a comprehensive consideration of all significant economic, political and other factors that may affect asset prices. These factors can be prices of other assets, sales volume, dividends, income, debts, interest rates, unemployment rate, inflation, political risk, etc. The indicators used in fundamental analysis can be divided into three groups: - forecasting market indicators using statistical and econometric methods; - market analysis of assets; - the financial analysis. It should be noted that if the results of the first group are absolute and do not need any improvement, then many indicators of the last two groups have practically zero value without comparing them with a group of similar indicators, for example, for a group of similar companies, or with the same indicator in another period of time . Under market analysis of assets understand the analysis of criteria by which the profitability and risk of investments in securities market assets, their behavior relative to each other, liquidity and reaction to environmental changes are evaluated. Based on these criteria for the behavior of individual assets or a portfolio consisting of them, decisions are made about investments or speculation in the stock market. Financial analysis is based on consideration of the financial indicators of the base of financial assets and their comparison with the market valuation of these assets. Financial performance - these are performance indicators of enterprises - issuers of financial assets, based on accounting data and probabilistic estimates of future factors of economic life. Financial analysis is based on information about the issuer's real performance, its capital structure and work stability. Thus, the structure of fundamental analysis is as follows: information expressed in quantitative terms; rules for its processing; forecast value of the underlying asset. Fundamental analysts buy assets that, in their opinion, are undervalued by the stock market relative to the comparative indicators of real sector enterprises or relative to the average market indicators. The main thing to remember is that fundamentalists study the reasons that drive the market and, based on their analysis, make investment decisions. That's why fundamental investments - usually long-term strategic investments in assets. But this requires the absence of any uncertainty about future events and the availability of the most complete and up-to-date information. Failure to comply with any of these requirements sharply reduces the quality of the results of fundamental analysis. 72. TECHNICAL ANALYSIS Technical Analysis is based on the consideration of market movement charts, more precisely, its two components: price movements and movements in trading volumes over a certain period of time. In the futures and currency markets, the analysis affects the third component - the volume of open positions. Nevertheless, the main object of analysis is the price, since the study of price movements is convenient and information about this is publicly available. Methods of technical analysis fundamentally different from the fundamental methods. Technical analysts view a stock (or other stock asset) as a product of the free market, whose price is determined by the interaction of supply and demand. Technical analysis looks at price, volume, or a combination of factors to gauge market behavior based on the premise that the market is the best indicator of what asset prices will do in the future. The prices of stocks or other instruments move according to certain tendencies (trends), and the art of identifying these trends and when they change is the art of technical analysis. Technical analysis assumes that the price of a stock reflects all the information about that stock. What causes this asset to rise in price? For a technical analyst, the answer is absolutely simple - an asset rises in price because the demand for it is higher than its supply. In other words, investors are willing to pay higher prices for owning the asset. Why? This question does not concern the analyst at all, everything is taken for granted. For any methods of technical analysis, it does not matter what assets underlie it. It is just as applicable to the analysis of coffee prices as it is to the analysis of the behavior of the dollar in international financial markets. The analyst does not need to be a specialist in coffee or the dollar, he is not interested in rumors, yield information, other people's opinions - all the necessary information is already included in the price of this asset. All the analyst needs to know is the open, close, highest and lowest prices and trading volume for the minimum period considered, which can be either five-minute intervals or monthly periods. To analyze the market of derivative financial instruments, another indicator is considered, such as the volume of open positions. The specificity of technical analysis puts forward certain requirements for the possibilities of its application. It: - a highly competitive market that provides perfect liquidity of assets, i.e. at any time you can both buy and sell an asset at a market price; - the absence of a subject capable of single-handedly significantly influencing the market and establishing any barriers to competition on it. Thus, we figured out the main differences in approaches to analysis. Fundamental analysis in a general sense deals with the causal relationship of economic events with events in the stock or commodity market, and technical - only by the effect of their impact, initially based on the fact that all significant events for the market are already included in the prices of assets and explores only the principles of the development of market factors. 73. SUPPORT AND RESISTANCE LEVELS It doesn't matter what exchange-traded instruments you intend to trade in the future (or which instruments you trade at the moment); no matter what theory of the market you adhere to, sooner or later you will still need to get acquainted with the concept of "power level". Under power levels it is customary to mean the values in the vicinity of which prices are consolidated. If we accept the concept of directed evolution of the market, then such a definition becomes justified. At the same time, the longer the price stays in the vicinity of the power level, the more significant it is considered. If the price has repeatedly approached the power level from above, then it is commonly called support, otherwise (multiple approach from below) resistance. Among other things, it is necessary to indicate what is distinguished two types of power levels: - horizontal power level; - inclined power level. The power level can be either support or resistance (depending on the situation), the price is above or below it. Moreover, after breaking through the power level, the price, as a rule, returns to it again after some time. The higher the power level, the greater the likelihood of an early future return to the breakdown line. It is especially worth pointing out that many traders build their trading systems precisely on such situations. There is no definite rule for constructing power levels for various markets. In practice, most market participants conduct the indicated levels by eye, and, by and large, it all depends on how a particular trader sees the situation at the current moment. You should know that round price values often act as horizontal levels. This is purely a psychological effect. People are guided in market movements by round numbers, so it is easier to remember the points by which the movement is tracked. Breaking through the level - always an unpleasant moment for the trader. The fact that the level is broken must be understood as early as possible, otherwise big losses are inevitable. The simplest, but quite effective criterion for breaking through the level is the presence of two closing prices behind the level. In the securities market, they often still use the value of the price going beyond the level by a certain value. At any point in time, it is impossible to say for sure whether the level will be broken or not. Level Stability Criteria very vague and of a qualitative nature. For some reason, there is an opinion that the more times the price touched the level, the more durable it is. In fact, this is not so, but vice versa - the more often the price touches the level, the more likely it is that the next time the price touches it, it will be broken. On the charts of the intraday scale, the breakdown of the level occurs most often after 3-5 touches. In favor of the fact that the level can be very strong, says the coincidence of two or more levels at one point or the coincidence of the level and the Fibonacci line. It is better to draw levels through the areas of maximum density of bars (or candles). Passing through the maximum and minimum values is also necessary. When trading using levels, it is better to trade only on a rebound from the level. The probability of a price rebound is still greater than a breakdown of the level. 74. TYPES OF CHARTS AND THE RULES OF THEIR CONSTRUCTION Technical analysts are often called chartists (from the English. Chart - "graph"). Thus, one of the key characteristics of technical analysis appears - this is the analysis of charts. In fact, it is simply easier for a person to analyze graphic information than textual or digital information. Currently, the main types of charts used in technical analysis are the following: - line graph; - bar graph; - point-and-digit chart; - Japanese candles; - market profile; - bar chart; - the ratio of supply and demand. Many of the presented are somewhat exotic. The most popular are line and candlestick charts. line graph is a solid line connecting the closing prices. Many traders believe that the closing prices of the market are the most significant for analysis. For this reason, line graphs can be used. In general, indeed, closing prices are among the most important, but only for daily, weekly and monthly charts. This is mainly due to the fact that the value of investment portfolios and simply open positions is determined by closing prices. Bar chart. Many traders use bar charts, which, in contrast to line charts, reflect much more fully what happened to the price during the analyzed period of time. Bars (columns) include, in addition to closing prices, the maximum and minimum prices observed during this period of time. The bar is a column, on the sides of which the opening and closing prices of the period are marked as small branches, and the maximum and minimum points of the column correspond to the maximum and minimum prices for this period. Point and Numeric Charts sometimes also called "tic-tac-toe" charts. Unlike all of the listed charts, from Japanese candlestick charts, etc., there is no time axis on the point-number charts. The growth of quotes on the chart is reflected by the appearance of a new cross, and the fall is reflected by zero. The number of points of price change in one cross or zero sets the chart's bit length. The point and figure chart is very good for drawing support and resistance lines, as it takes into account only price movements and is not tied to a time scale. Histograms are used primarily for plotting volume graphs. Market Profile is a registered trademark of the Chicago Stock Exchange. This type of chart expands the possibilities of analyzing intraday dynamics by combining price indicators with volume and time data. The same scale reflects data on the price and the amount of time that the object was at this level. There is no time scale on this graph. Just a day is divided into 48 equal intervals of 30 minutes. In the stock market, it has recently become possible to see another type of charts - supply and demand charts. On the graph of the ratio of supply and demand at a specific point in time, the dynamics of this ratio over time is visible. If it moves up, it means that demand exceeds supply, and vice versa. 75. TREND REVERSAL PATTERNS One of the empirical methods of market research is the study of the figures that form the price chart. It should immediately be noted that the process of identifying figures is partly subjective. Therefore, to make trading decisions, you do not need to look for figures. They should be clearly visible without much effort. In the presence of a strong, pronounced trend, one should be careful about the figures that give a signal against the trend. The larger the size of the figure, the greater will be the movement due to this figure. The figures are divided into two groups: - trend reversal figures; - trend continuation figures. Trend reversal patterns. According to most experts, this is the most productive class of figures. As a rule, they are well identified and give a high percentage of forecast execution. This group of figures includes: - double top/double bottom; - triple top/triple bottom; - head and shoulders; - rhombus; - bowl. Double top/bottom. The first top/bottom gives us a horizontal level that can be drawn through that point. With a secondary approach of the price to this level, in the absence of other perturbing factors, the price should bounce off this level in full accordance with the classical principles of level-price interaction. This will result in a second top/bottom. If the same thing is repeated for the third time, then this figure will already be called triple top/bottom. A classic sell (double top) or buy (double bottom) signal would be a breakdown of the low that was reached between the tops (the high between the two bottoms). The double top gives the most reliable signals and is quite common. This is one of the most important figures in technical analysis. Head and shoulders. The figure is quite rare and difficult to identify. Sometimes it is considered as a more general figure, of which the triple top is a special case. In fact, it is a triple top, the middle of which is noticeably higher than the extreme ones. The middle peak is called the "head", and those lower - "shoulders". The line that can be drawn from the minimum points between the "head" and "shoulders" is called the "neck line". A signal to open a position is a breakout of the neck line after the completion of the formation of the right shoulder. If a breakdown has occurred, then it is believed that the price should go approximately the same distance as the maximum point of the "head" is from the neck line. Very rarely, literally several times a year, you can see a distinct, clearly distinguishable figure. More often these figures are indistinct and become distinguishable when everything has already formed and it is too late to open a position. Rhombus an even rarer figure. Many believe that this is a very deceptive figure, since with a little imagination it can always be seen. In fact, a well-marked rhombus is difficult to confuse with anything. Bowl. In fact, this is the same bottom (or top), but somewhat stretched, so you may not immediately notice it, since it becomes clearly visible after it has formed, so it does not carry useful information as a figure: a trader needs to know what will happen, but not what it was. 76. CONTINUATION PATTERNS Trend continuation patterns are characterized by the fact that the price exits the figure in the same direction in which it entered the figure. It is generally accepted that continuation patterns take less time to form than reversal patterns; and work better on small and medium trends, while reversal patterns work better on major trends. All these differences are actually somewhat arbitrary. Moreover, there are situations when reversal patterns can work as continuation patterns and vice versa. Continuation patterns are considered to be a little more difficult to work with, they generate false signals more often and are often not as well identified as reversal patterns. Main continuation figures: - triangle; - flag; - pennant (wedge). Triangles are divided into symmetrical (equilateral), ascending, descending, expanding. All triangles, with the exception of the divergent one, are converging price fluctuations (rather long-term). As a rule, triangles consist of five waves, the fifth wave ends with breaking through the borders of the triangle along the trend. After the breakout, the price goes from half to three quarters of the value of the widest place in the triangle. If the breakdown does not occur, then this may mean the degeneration of the triangle and the inability to predict the further development of events. As a rule, descending triangle more common in a falling market, and rising - in a growing one. An ascending triangle is one whose upper border is almost parallel to the abscissa axis, and the lower one tends rather steeply upwards. Descending - the lower limit is parallel to the x-axis, and the upper one tends downward. For ascending and descending triangles, it is believed that they give the most reliable results if they form on the daily charts. Expanding Triangle - quite a rare formation. It looks like an expanded triangle. Flag. All trend continuation patterns are essentially breaks in the current trend, after which it resumes. In this sense, the flag is the most striking figure. It is a continuation figure that appears during sharp and powerful movements, and is a short pause before a new strong movement. Before the pattern is formed, a strong, almost vertical movement must occur, then a small pattern is formed, usually directed sideways or even against the previous movement. This is the flag. And then there is another strong movement in the same direction. The figure itself is usually a parallelogram. Pennant (or wedge) is one of the variants of this figure. It differs from the flag only in that instead of a rectangular formation, the price draws a small triangle. For the pennant, all the rules that apply to the flag apply. There is another continuation figure - rectangle. This is the most easily recognizable figure. In fact, this is a state of the market in a flat, i.e. the price moves between two parallel levels after a previous increase or decrease. The criterion for opening a position is the breakdown of the border of the rectangle. It is believed that after the breakout, the price travels a distance at least equal to the vertical size of the rectangle. 77. TREND One of the tenets of technical analysis is that prices always have a direction, i.e. they go with trends. This is the most important property of the securities market, as, indeed, of all financial markets. It is clear that trend is simply the direction of price movement. The price can rise (trend up), fall (trend down) or change in some narrow range (sideways). The most common definition of a trend sounds like this: the market is in a trending state when the price forms a sequence of highs (peaks), each of which is higher than the previous one, and lows, each of which is also higher than the previous one (trend up), or a sequence of highs, when each high is lower than the previous one and each low also lower than the previous one (trend down). This definition does not indicate the time interval of the chart on which the trend is being looked at, i.e. trends exist on charts with any time period, but the most important are trends on daily, weekly and monthly charts. These trends are based on the most stable and long-term economic and financial processes that determine the mood of large strategic investors, which in turn determines the direction of global financial flows. Can highlight two main economic reasons for the presence of trends: - changes in the economic situation of the country; - the difference in interest rates of central banks. Economic processes are very inertial, and therefore the duration of the life of trends can be months and years. In addition, the market economy is cyclical. In the phase of increasing business activity, the economy is most attractive for investment, which increases the demand for the national currency, and its rate grows. In the phase of recession or stagnation, the attractiveness of investments in this economy falls, which leads to a reduction in investments and a depreciation of the national currency, stocks and other securities. Thus, we get long periods of growth or fall in the prices of stocks, bonds, national currency, etc. Amount of interest rates The country's central bank determines the yield on deposits in commercial banks and government securities. Ceteris paribus, capital will begin to flow into the financial instruments of the country whose yield is higher, which will lead to an increase in the rate of these financial instruments. Changes in interest rates occur, as a rule, monotonously, that is, there is a series of successive increases or decreases in the rate. This leads to steady capital outflows from an economy where rates are falling in an economy where rates are higher or rising. The above general reasons for the occurrence of trends do little to make practical trading decisions, but from the point of view of a trader, the existence of trends is an extremely important point. This allows you to receive significant profits with a minimum number of market entries, which is essential, since each entry into the market (opening a position) is accompanied by a certain risk. Having opened a position along the trend, you can keep it open for a long period, ideally - the entire period of the trend's life (although in practice, few people manage to do this) - and get big profits. 78. "JAPANESE CANDLES" "Japanese Candles" as a type of displaying market information, as well as an independent field of technical analysis, appeared in the XNUMXth century in Japan. Graphically, they are very similar to bar charts, although the latter arose much later. The cardinal difference between "Japanese candlesticks" and bar charts is the presence of a rectangle formed in the price interval between the opening and closing quotes. This rectangle is called the body of the candle. It is black or white, depending on the ratio of opening and closing prices. If the body of the candle is black, then this means that prices have decreased during the trading period (the closing price is lower than the opening price). If the body of the candle is white, then prices have increased during the trading period (the closing price is higher than the opening price). Price movement above the body of the candle forms the upper shadow, and below the body - the lower shadow. Over its long history, this type of chart has turned out to be the most developed, which allows it to be used as an independent method of technical analysis. The analysis of "Japanese candles" can be built on the following three principles: - body strength; - the power of the shadow; - the power of denial. Body strength evaluates the length of the body. So, the longer the body, the stronger the desire of the market to go in the chosen direction. For a white candle - go up, for a black one - down. Shadow strength measures the length of shadows. The long shadow reflects the discrepancy between the desire and the ability of the market to go in the chosen direction. Thus, a long upper shadow indicates the weakness of the "bulls" to consolidate the market at new price levels despite a temporary victory over the "bears". On the other hand, a long lower shadow signals the inability of the "bears" to consolidate the results of their previous movement. The power of negation lies in the following simple rule, the analogue of which can be found in sports: if the market does not go in the direction expected according to the strength of the body or the strength of the shadow, then the more confidently it will go in the opposite direction. Almost all classic combinations of "Japanese candlesticks" that give reversal signals are based on the power of denial. Sometimes it even seems that the power of denial is one of the most powerful on the market. The combination of these principles makes it possible to independently derive more than one law of the analysis of "Japanese candles". The main types of candles: - regular candlestick - a candlestick that has both shadows and a body, all of which are not outstanding in size; - "capture by the belt" - if it is a white candle, then it does not have a lower shadow at all, if it is black - an upper one. The longer the body and the smaller the shadow, the more significant the "bullish" / "bearish" character of the candle. One of the varieties is when there is not a single shadow at all; - "hammer" or "hanging man" - is often a harbinger of a trend reversal. The upper shadow of this candle is absent or very short, the lower shadow should be at least twice as long as the body. The longer the lower shadow and the shorter the upper one, the higher the reversal potential of the candle. Doji. Doji open and close prices are equal or nearly equal. Means the inability of "bulls" or "bears" to take over the market. If it appears on a strong trend, it gives a reversal signal. 79. FIBONACCCI LEVELS In his studies, the medieval mathematician Leonardo Fibonacci brought out series of natural numbers which later became the subject of research by modern technical analysts. This series of numbers had a whole set features: - each number of the series is the sum of the previous two; - the desire of the ratio of the current number to the previous number to the value of 1,618034; - the desire of the ratio of the current number to the next number to the value of 0,618034; - striving for the ratio of the current number to the next one through one from the current number to the value of 0,381966. By the way, the square of the number 0,618034 is also equal to 0,381966, and the sum of these two numbers is 1. As we can see, all the above patterns revolve around the so-called "golden section", which is often found in nature, and there is no other series of numbers , which would display it in the same way. It is for this reason that the Fibonacci number series is chosen to create mass. ways to analyze and predict prices, the most famous of which are the following: - Fibonacci fan lines; - Fibonacci arcs; - Fibonacci correction levels; - Fibonacci time periods. Fibonacci fan lines are three lines built on the basis of the AB line pending on the price chart. The AB line is drawn from the key points of the chart, its turning points - price highs and lows. For the best use of Fibonacci lines, it is recommended to draw the indicated AB line when the bullish trend reverses from high to low; and when the "bearish" trend reverses - from the minimum to the maximum. Fibonacci lines show strong resistance and support levels. In a bear market, these are usually resistance lines; and on the "bullish" - support lines. Moreover, you can see that these lines continue their action much longer than the trend on the basis of which they were built. There is one significant drawback of Fibonacci lines: they give clear and good signals for the past market, which cannot be said about the future. It should also be noted the subjectivism inherent in Fibonacci lines, because there is no unambiguous law of the market, which says that the price will definitely find its support or resistance on one of the lines, in nature. Fibonacci Arcs are constructed similarly to fan lines. Initially, an AB line is drawn between two key points on the price chart - an important high and low. In this case, the first arcs usually show support levels, and the second - resistance levels. Correction levels are constructed similarly to fan lines and arcs. In this case, an AB line is also drawn between two key points on the price chart, at the levels of which ten horizontal lines are drawn. On a bullish trend, it is recommended to build an AB line from the minimum price to the maximum price (from bottom to top), and on a bearish trend, from the maximum to the minimum price (from top to bottom). Fibonacci periods are a series of vertical lines corresponding to the Fibonacci number series. These lines symbolize key moments in the course dynamics. It can be either a trend reversal, or an acceleration, or just a temporary strong movement. 80. COMPUTER INDICATORS In addition to graphical methods of market analysis, analysis methods have been developed using the so-called "technical indicators". Indicators represent some mathematical processing of the price. As a result, we have an indicator chart, the analysis of which allows us to draw conclusions about the further direction of price movement. The use of such techniques has provided enormous additional opportunities for trading, but by no means eliminated the influence of the human factor, since decisions are still made by a person. A lot of indicators have been invented, at the moment there are about 150. Most successful traders use a limited set of tools, usually no more than 4-5 indicators, which each trader chooses at his own discretion. Indicators can be divided into two large groups: - trendy; - oscillators. All indicators somehow belong to the above two groups or combine the properties of both. Trend indicators are used in the analysis of trending markets and are not effective when there is no trend. oscillators, on the contrary, they work poorly in trending markets and work well when there is no trend. Trend indicators show us the direction of the trend. I emphasize that they indicate the direction of the trend BEFORE and FOR the moment. This does not mean at all that the situation will not change in the next moment. The price does not follow the indicator, but the indicator follows the price. However, this type of technical analysis tool greatly facilitates the ability to predict price behavior. The main trend indicator is the moving average. Moving averages are a widely used technical analysis tool that smooths out fluctuations in the price chart under study by averaging. The main purpose of moving averages is to identify trends. A significant disadvantage of moving averages is the delay of averaged values in relation to the current price. Oscillators are used, as a rule, in non-trend areas of the market. With a pronounced trend, only trend signals should be taken into account (for example, in an uptrend, only buy signals). The main signal of indicators is divergence. Divergence - this is a situation when the direction of price movement and computer indicators do not coincide. Divergence is considered a strong sign of a trend reversal. A distinction is made between bearish and bullish divergence. It is useful to draw trend lines, support and resistance lines on oscillator charts. And if you can see the classic figures of technical analysis here, then they can be more important than on the price chart. The shorter the period of the oscillator, the signals appear more often and lag less. Accordingly, the proportion of false signals is high. When using oscillators with a long period, the number of signals decreases, the lag increases, but reliability increases. In practice, the joint use of several indicators, as a rule, trend indicators and oscillators, has been widely used; for example, the same moving average and RSI (relative strength index). 81. RISK IN THE SECURITIES MARKET: MAIN TYPES All human activity is associated with risk, and the securities market is no exception. Moreover, the speed of change in financial markets, the kaleidoscopic change of news and the volatility of market prices bring so much risk that the very concept of "market" is sometimes associated with risk. From an economic point of view, one can single out the risks of an ordinary person, capital and a speculator (trader). The risks of the common man - loss of money, inflation, uncontrollable expenses, etc. Capital risks - losses produced in the process of production or storage, falling prices, rising costs, inflation, rising interest and tax rates, the actions of public authorities. Speculator risks - price volatility, bankruptcy of a brokerage company, exchange or bank, lack of information and lack of funds. The main types of risk in the securities market. Price (commodity) risk - the risk of price changes. This type of risk is the most famous and significant for most traders and investors. Currency risk - the risk of changes in the foreign exchange rate. It acquires its significance when there is an investment in foreign assets. Interest risk - the risk of changes in interest rates. It is especially significant for borrowed resources, stock instruments, although it affects the economy as a whole. Liquidity risk - the possibility of partial losses in the performance of obligations. Occurs when it is necessary to make a deal, for example, to buy or sell a share, but this cannot be done without a significant change in price. Partnership risk - the possibility of losses due to full or partial non-fulfillment by the counterparty of its obligations. Operational risk - usually associated with fraud during a trading operation. Sometimes it can manifest itself in poor-quality accounting reports. basis risk - the risk of the basis not fully matching the hedged instrument. For example, when the liquidity of one of the instruments is insufficient, but it needs to be hedged, then other assets are sometimes used in this capacity. However, due to the incomplete matching of the first and second instruments, the risk is not fully covered and the so-called "basic risk" arises. Model Risk - the risk that the model on the basis of which investment decisions are made is incorrect. This risk is inherent in investors using mathematical models and mechanical trading systems. However, by and large, model risk is inherent in everyone who makes assumptions about what is happening in the securities market and makes investment decisions. Equity (collateral) risk - changes in the value of share capital or collateral affecting creditworthiness. For example, due to the fall in the value of shares and the capitalization of a joint-stock company, an increasing need for new funds (either borrowed or from the placement of new shares), as well as a decrease in the desire of creditors to issue new loans to a troubled enterprise, may simultaneously appear. Volatility risk - risk affecting option traders. An increase in volatility has a negative impact on option sellers, while a decrease in volatility has a negative effect on option buyers. 82. FINANCIAL RISK financial risk - any change in the financial result, its difference from expectations or average values. The above definition of financial risk deliberately refers to the financial result, and not to income, as one might initially expect. We are talking about the financial result, because no one can guarantee a profit in every financial transaction, even when it comes to acquiring government bonds. Thus, any investor should be interested not only in the risk of not receiving profits (although there is also the risk of exceeding profits, but everyone agrees to this risk, so we ignore it), but also the risk of receiving losses in excess of pre-planned or expected. The latter case usually occurs as a result of slippage in the execution price of a stop-loss order (price risk characteristic of those who trade on the stock market "inside" the day - during one trading session). For this reason, it is recommended to work only with liquid instruments, where the risk of price slippage and their gaps is minimal. For long term investors the risk of losses exceeding those initially expected may arise from political risks, the risk of default, currency risk and other types of uncontrolled or poorly controlled indirect risks associated with the possibility of losing money. By the way, intraday traders are also exposed to such risks, although for them, due to the nature of their activities, these are insignificant risks. The concept of financial risk is closely related to probability theory. Moreover, often the risk corresponds to the probability of obtaining the corresponding financial result - the risk of receiving a loss is equal to the probability of its occurrence, just as the risk of receiving a loss in excess of expectations corresponds to the probability of this event occurring. However, this contradicts the definition of risk, where the probability corresponds to the expectations of obtaining a certain financial result, and the risk, on the contrary, assesses the possibility of the actual result deviating from the expected one. Thus, risk is inversely proportional to probability: Risk = 1 - Probability. This correspondence is caused by the same source of price risk and probability - price volatility. Price volatility can be measured using variance and standard deviation, which is equally applicable to the concepts of risk and probability. Relationship between volatility and financial risk is directly proportional - an increase in price volatility leads to an increase in risk. But price volatility largely dependent on market liquidity. The relationship between these two indicators is non-linear. On the one hand, the more liquid the instrument, the less potential volatility, and vice versa. This is due to the more abrupt transitions from one price level to another, which are typical for markets with a small number of participants and dependent on a few large transactions or interests. On the other hand, volatility reaches its maximum in highly liquid markets, where the number of participants is huge, which gives rise to constant price dynamics. 83. HOW TO TRADE RISK One of the main postulates of financial theory says that people act rationally, and rational economic entities are not prone to risk. However financial risk practice often refutes this thesis. Moreover, the very existence of financial markets is due to the human propensity for risk. A well-known view of what is happening in the markets says that people trade in goods of production and consumption, as well as risk. Risk buyers are usually speculators who are not interested in the physical acquisition of the purchased asset and receive the appropriate payment in return for the given obligations and, accordingly, the assumed risk of fulfilling them. Risk sellers are the owners of physical assets who are interested in price stability and are ready to pay for this stability. It should be noted here that those goods and services that remain under-consumed, i.e., production surpluses, are primarily subject to price risk. This is due to their long shelf life from the moment of production. In other words, the longer the production cycle and shelf life, the higher the price risk and the more significant it is reflected in the price of the goods. Everyone seeks to get rid of the risk by shifting (reselling) it to other market participants. In the end, all risks flow onto the shoulders of market makers, who receive a certain reward for this. A classic example of this process is the activities of insurance companies. If one of them cannot "digest" the risk (for example, when launching an expensive spacecraft), then it turns to the reinsurance company, thus attracting other insurance companies to insurance and sharing the risk (and insurance premium) with them. The most common way of risk trading and risk protection is hedging, i.e. trading in derivative financial instruments - derivatives (futures, options, forward contracts and swaps). By acquiring one of these contracts, which stipulate a price in the future, we are now insuring ourselves against price risk. Possible buying and selling risk. If you are selling risk, then you are removing risk. Naturally, you have to pay for the fact that you are without risk or with less risk when selling risk. Conversely, by buying someone else's risk, you are rewarded for taking the risk yourself. So, for example, an insurance company, taking all your risks, takes an insurance premium, and you, getting rid of your risks, pay this premium to the insurance company. In this way, risk market is the only market where the seller pays the buyer. Trading risk (at least selling risk) is one way to protect against risk. The minimum level of risk that can be achieved in the formation of a portfolio is called systematic risk. This risk is associated with political, social and macroeconomic processes that affect the entire market as a whole. Systematic risk depends on the characteristics of the behavior of a particular security and the company issuing the paper. 84. PROTECTION AGAINST RISK So the risk is inevitable. However, you can get rid of it, minimize it, and therefore protect yourself. There are three ways to protect against risks: - insurance; - management of assets and liabilities; - hedging. Insurance only insured risks, such as natural disasters, are amenable, and it is produced by specialized insurance companies. Asset and liability management is to balance assets and liabilities in such a way as to exclude the volatility of the difference between them (net worth). Asset and liability management aims to create such a balance between assets and liabilities so that a negative change in one of them is offset by a corresponding change in the other part of the balance sheet. Asset and liability management is mainly used to protect against interest rate and currency risk. Hedging often used in conjunction with asset and liability management, and is a very similar way to protect against risk. Hedge - a position that is used as a temporary replacement for a position in another asset (liability). As the hedging instruments most commonly used forwards, futures, options and swaps. However, we cannot always control the risk. There are times when the so-called "uncontrolled risk" arises. First of all, these are gaps (gaps) of market prices. Such risk manifests itself more often in illiquid markets, when the higher the liquidity, the lower the risk of losing control over the price and, accordingly, the risk of its unexpected change. This risk is measured quite simply: the closer the order execution prices are to the order prices, the lower the risk. During the announcement of fundamental data (macroeconomic news, data on individual companies, etc.), the risk of losing control is higher, so intraday traders are advised not to hold open positions before the announcement of important economic news. Risk and emotion are an inseparable pair. So, getting an unexpectedly good financial result, that is, better than originally expected, leads to positive emotions. Conversely, receiving an unexpectedly bad financial result leads to negative emotions. The time factor also affects the emotional state of a person. So, if the financial result was obtained faster or slower, then this also generates emotions. A faster positive result leads to positive emotions and vice versa. Opposite emotions will arise in case of a slower financial result than planned. Emotions, equally positive and negative, interfere with rational work in the securities market, negative - to a greater extent. Psychological attitude to risk It is expressed in the fact that in some situations traders do not have an inclination to take risks, while in others they prefer risk. The peculiarity of the human psyche is such that if he wins, then he is not inclined to take risks; and if he suffers losses, he is inclined to take risks. This all reflects the complexity and pressure that the psychology of a trader puts on his preferences, including in such an important issue as the attitude to risk. 85. BASIC RISK MANAGEMENT PRINCIPLES For risk management characterized by the following principles: - observance of a reasonable margin; - weekly monitoring of trading activity; - use of hedging of spot and futures transactions in the exchange options market. This will increase your costs, but increase reliability. Often it is better not to earn than to lose. Keeping a reasonable margin. The possible conclusion of ten unsuccessful deals in a row should not knock you out of the saddle either financially or psychologically. In material terms, to maintain stability in this situation, the correct calculation of the amount of margin for open positions will help you. The specific amount of margin for open positions is at the intersection of your greed and caution. The general rule for calculating collateral for open positions is that there must be a reserve for use in non-standard situations, as well as for the continuation of normal operations. The algorithm of actions here is: 1) determine the amount that you are willing to allocate to work for a sufficiently long period; 2) determine the amount with which you are ready to part in case of an unsuccessful trade. This amount should not be significant for you, otherwise the burden of financial responsibility will inevitably manifest itself through increased emotionality about any, even the most insignificant transaction; 3) determine the number of losing trades that you allow to make in a row and set the maximum allowable loss on one trade. Ultimately, the general conclusions that can be drawn from all these calculations, for small deposits, the only possible option for working is intraday trading, in which you need to be content with relatively small profits. But it is worth knowing that long-term positions have two very important advantages over intraday trading, realized in a greater probability of earning. The first is less influence of chances. The second is the lower relative cost of making a deal. For weekly monitoring trading activity, three most important coefficients are calculated: - coefficient of profitable trades; - break-even ratio; - a general indicator of the trader's activity. Win rate determines your analytical abilities and should not fall below 65%. A lower value of the coefficient will practically be a guarantee of ruin. The formula for calculating this indicator is: the number of profitable transactions for the billing period (week) divided by the total number of transactions for the same period. Break even ratio is designed to show how effective your risk management system is and whether you are losing more than you are earning. The value of the coefficient must be greater than zero, calculated by the formula: SP / KP - (SU - SxKU) / KU, where KU - the number of unprofitable trades for the period; SP - the amount of profit for this period; SU - the amount of losses; С - spread (or commission). The general indicator of a trader's activity is the resultant of the first two indicators. 86. TAXATION IN THE SECURITIES MARKET The formation of gross and taxable profit, the cost of sales is affected by results of operations with securities. So, the gross profit of the enterprise includes dividends on shares, interest on bonds and income on other securities belonging to it. However, when taxed, the amount of these incomes is excluded from taxable income, since the tax for enterprises in the amount of 15% and for banks in the amount of 18% must be withheld at the source of income (the issuer). It should be borne in mind that dividends and interest are paid out of net profit and they are taxed two, and sometimes three times: the first time - the supply of 24% to taxable profit; the second time - at a rate of 6% (when transferring a dividend to the shareholder); the third time will be taxed as income of an individual, since this profit falls into personal income. Income subject to taxation received by individuals in the form of interest and dividends on shares and other securities (except for savings certificates). Taxation is made at the source of payment of these incomes to shareholders. Only income received from government securities, and not from government securities, is not taxed. Therefore, not all income from government securities can be exempt from taxation. Income from a security It is customary to consider the income provided for by the terms of its issuance. When taxing individuals under the law "On Income Tax on Individuals", the total income does not include: - winnings on bonds of state loans of the former USSR, the Russian Federation, republics within the Russian Federation, other republics of the former USSR and the amounts received in redemption of such bonds; - interest and winnings on government treasury bills, bonds and other government securities of the former USSR, the Russian Federation and constituent entities of the Federation, as well as bonds and securities issued by local governments. There are differences between payers of tax on dividends: - withholding tax from shareholders who are not employees of this joint-stock company is carried out if the amount of income does not exceed 12 million rubles; - when paying dividends to citizens who are not working (pensioners) and do not have other sources of income, the calculation of income tax should be carried out taking into account the reduction in taxable income (the amount of accrued dividends) by the amount of the minimum wage established by law and currently in force; - when calculating income tax from shareholders - employees of the company - the amount of the dividend due to them is added to the amount of income received from the beginning of the year at the main place of work, and the tax is calculated on the basis of the total income at the appropriate rate. If part of the shares is owned by the state (municipalities), the dividend is transferred to the relevant budget and no tax is levied in this case. RZB is also regulated by legislation regulating the collection of value added tax (VAT). VAT is levied on operations related to the production and storage of forms of securities. Securities imported into Russia are exempt from VAT. In addition, turnovers on transactions related to the purchase and sale, exchange and gift of securities are exempt from VAT. 87. FORMATION OF A SECURITIES PORTFOLIO Investments in securities of different types, different maturity and different liquidity, managed as a whole, form a portfolio of securities. Any investment portfolio is a certain set of stocks, bonds and other securities with varying degrees of risk, collateral, and profitability. Developing an investment financial policy, Companies may have different goals. In general, they are: - receiving interest; - preservation of capital; - Ensuring capital gains. Depending on the goals, a certain package of securities is selected. For example, if one wants to earn interest, one acquires an "aggressive" portfolio (low-liquid, high-risk securities of young enterprises). And if things go well, then there will be high interest rates. For example, if the goal is to preserve and increase capital, then the portfolio will consist of highly liquid securities issued by well-known investors with low risk, with medium or low payout percentages. it conservative portfolio valuable papers. Profitable portfolio focused on earning income, the amount of which would correspond to the degree of risk acceptable to the investor. Growth portfolio - stocks with a rapidly growing market value. Its goal is to increase capital, so the investor does not focus on the current payment of dividends. Portfolio of risky investments - securities mainly of young enterprises of the "aggressive type", which have chosen a strategy of rapid expansion based on new technologies and the release of new products. Balanced portfolio - securities with a rapidly growing market value, highly profitable. There may also be high-risk securities. Thus, the goals of increasing capital, generating income, and general risks are balanced. Specialized Portfolio - securities are combined not according to a common target attribute, but according to more specific ones, for example: - regional and industry portfolios; - portfolios of foreign securities. Portfolio type may change depending on market conditions and objectives. Portfolio monitoring. The set of methods and technical capabilities applied to the portfolio represents a management method that can be characterized as "active" и "passive". The first and one of the most expensive, time-consuming elements of management is monitoring, which is a continuous detailed analysis of the stock market, its development trends, stock market sectors, investment qualities of securities. Thus, the ultimate goal of monitoring is to select securities that have investment properties appropriate for this type of portfolio. Monitoring is the basis of both active and passive management. Active model management involves careful monitoring and immediate acquisition of instruments that meet the investment objectives of the portfolio, as well as a rapid change in the composition of stock instruments included in the portfolio. Passive management involves the creation of well-diversified portfolios with a predetermined level of risk, designed for the long term. Such an approach is possible with sufficient efficiency of the market saturated with good quality securities. 88. PSYCHOLOGY OF EXCHANGE TRADING The psychology of human behavior is the key to understanding what is happening in the financial markets. All ordinary, everyday feelings and aspirations appear in tough market battles like a chemical solution on a litmus test. The sensations inherent in all of us in the market - fear, greed, hope, etc. - in the fast rhythm of stock trading sometimes have a decisive influence on the behavior of a trader. Weak and self-confident, greedy and slow - all these people are doomed to become victims of the market. The influence of the market crowd can transform a losing trader into a winner, and a successful trader into a loser. However, the latter happens much more frequently. Knowing your own abilities and preferences, positive and negative qualities can help avoid ruin. If you add to this the ability to adequately assess the psychological state of the market crowd, then you are guaranteed success. The main emotions in the market are fear, greed, and hope. Greed is a driving force because it drives us to make transactions. The actual manifestation of greed will be the motivation to make deals. Can be distinguished two types of motivation: - rational motivation expressed in cold prudence when making decisions on concluding transactions; - irrational motivation expressed in the passion of the player and is present in almost every trader; however, some control their excitement, while others are slaves of emotions and are practically doomed to lose. The next emotion that prompts a trader to conclude transactions is hope for profit. However, when hope prevails over calculation, you run the risk of overestimating your own capabilities when analyzing the situation. Hope must be subordinate to both calculation and greed. Hope determines the behavior of a trader mainly in two cases: - at the time of entering the market. Only the hope of making a profit can make a person take a specific action in the financial market; - at the moment of receiving losses, when there is hope for a change in the situation for the better. Until the moment the transaction is concluded, the hope for profit will be adequate to greed. When receiving losses, hope grows along with the loss, and then, when a critical point is reached, a person suffers disappointment, which subsequently gives rise to a feeling of self-doubt. Fear arises when you take losses. Some are paralyzed by fear, they cannot stop in time and lose everything. Others, fear makes them move, do something, but often people in this state make mutually exclusive or generally stupid transactions, which also usually only accelerates ruin. In any case, at a critical moment, it is better to do something than to sit back and watch how dreams of a wonderful future evaporate along with a change in quotes. At the same time, counter the convulsive actions of a nervous choleric with reasonable and systematic steps to get out of the crisis, do not panic. The most important thing is that the feeling of fear does not affect your mind and your actions. It is best to act according to the plan you have drawn up before opening a position (respectively, before fear arises). 89. EXCHANGE TERMINOLOGY Exchange terminology or exchange jargon - a set of professional terms that can be heard while working on the stock exchange or come across some of them in the specialized literature. The main ones are listed below: ASA (from the English. ask - "offer, request") - an application (sometimes the best application) for sale. RUN BEFORE THE ENGINE means "buy shortly before the start of growth" or "sell before the start of the fall", that is, be smarter than the market. BID - an order (sometimes the best order) to buy. HANG OUT - stay in the "corridor" of prices for some time. In most cases, this verb is used to describe a sluggish market dominated by a horizontal or zero trend. Sometimes the word is also used in a situation where a powerful trend is replaced by a brief lull. TAKE ANYWHERE - buy at the price offered by sellers. BOOM (from the English stock exchange slang boom - "a sharp increase in trading volume") - a sharp increase in trading volume, usually accompanied by an increase in prices. BULL (in a broad sense) - any buyer. TOP BAR - the upper limit of price changes during the trading session. ENTER THE MARKET - start an operation, open a position. WOLF - a self-confident, rarely losing player who always has his own opinion about the prospects of the market. GET INTO PURCHASE - open a long position on futures. GO ON SALE - open a short position on futures. SECOND TIER - the collective name of the shares of small and medium-sized Russian privatized enterprises. Playing on shares of the "second tier" is dangerous because they periodically become illiquid. In addition, this group of shares is characterized by unpredictable and significant price fluctuations. EXIT FOR MONEY - sell all securities. HARE - a player who makes a large number of transactions within a short period of time. Synonym SCALPER. LONG (from English long position - "long position") - long positions. BEAR (in a broad sense) - any seller. OFFER (from English to offer - "offer") - the same as ASK. STAND UP - hold the position during the unfavorable price movement and wait for the favorable market conditions in the end. PIPS (from English pips) - the minimum size of the contract price change. ROUTES (from English option put - "put option") - "put" options. SIT ON THE SAW - means "buy high and then sell low" or "sell low and then buy high". TON - one thousand shares or bonds. EXIT THE MARKET - complete the operation, close the position. DUCK - unverified, often false information. DROWN IN VARIATION MARGIN - win big on futures. PHYSICIST - a client of a brokerage firm (individual). FUTURE - futures. This word is used exclusively in the plural. For example, if a player has been trading futures for a long time, then they can say about him: "SITTED ON THE FUTURES". SHORT (from the English. short position - "short position") - to open short positions. PIT - 1) local minimum prices; 2) part of the trading floor of the exchange, where brokers and traders make deals. YARD - one billion rubles. 90. PENDING ORDERS, ORDERS FOR OPENING (CLOSING) TRANSACTIONS Interaction between client and broker based upon drawing up by the buyer (seller) of an application (order) for a specific operation, which the broker must fulfill. The types of orders are very diverse. There are three main types of orders. Market order means that the investor trusts the broker to buy (sell) a certain number of securities at the price that has prevailed on the market at the moment (market price). Market order the most common. Execution of market orders is carried out quite quickly, the term of their execution is from several seconds to several hours for large lots of securities. Limit order means that the client specified in the order the maximum value of the price at which he agrees to purchase (sell) securities. In this type of purchase order, the broker is instructed to purchase securities at a specific price or below that price, and in a sell order, to sell the securities at a specified price or as high as possible. To issue limit orders Investors are looking for short-term investments. They buy securities for a certain period of time in order to resell them at a higher price in the future. Therefore, the purchase price level is important to them. The execution of a limit order can take quite a long period of time, especially if the limit price deviates significantly from the market price. One of the varieties of limit orders is setting a price limit when executing market orders, in order to insure against excessive price cuts when selling or rising prices when buying securities. stop order provides for the client to set limit (threshold) prices, upon reaching which the broker is obliged to sell (buy) securities. Stop orders are used to protect the client from possible losses due to changes in market conditions. Stop orders fall into two categories: stop loss (an order to close the trade when a certain unfavorable price is reached in order to stop the growth of losses) and take profit (stop profit) - an order to close a transaction at a certain price in order to lock in profits. One of the most important parameters of the application is the due date. Depending on the execution conditions specified in the orders, the following types of applications are distinguished by time: - day order valid for one trading day. It is subject to execution on the day on which the application was received. An order that does not specify a deadline is considered a day order. If during the day this application could not be executed, then it will be automatically canceled; - open order shall remain in effect until its execution. Some brokers limit such orders to 30-90 days, but usually it is valid either until it is filled or until it is canceled by the client; - opening order provides that the application will be satisfied at the moment the exchange starts its work; - closing order is satisfied in the period close to the end of the trading session. Author: Prikhodko A.V.
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