The concept of «securities» is inextricably linked to trade on the international currency market. It is one of the most popular basic assets in the world, and the ability to work with it often depends on the trader’s wealth.
There are several formulations of the term «securities». Each emphasizes a key feature of the security.
• A security is a document that has legal force, often with respect to finance or property.
• A security is a basic asset in the form of a form of capital. It can be exchanged for goods instead of money and used on the market for profit.
• A security is a document that confirms any rights of the bearer.
The convenience of securities lies in their universality. For example, if a security is used in the form of a certain capital or commodity, the physical availability of the commodity is simply unnecessary. It can be bought or sold simply by using the security as its immediate substitute. Thus, the security is itself a commodity. Securities can also be used as evidence of investment in an enterprise.
The creation of securities requires issuance, that is, issuance and distribution. The issuer is a company that, for example, benefits from attracting new funds. Often the issuer becomes the State, wishing to achieve similar objectives. The issuance of securities may also be carried out by a legal or natural person, as well as by certain authorities.
Here is a list of the main purposes used for issuing securities:
• To increase the existing capital of a company or equity company.
• To attract the primary capital of a new company or a joint-stock company.
• For new investments or loans.
• In the reorganization of an enterprise into a joint-stock company.
• If you need to change the scope of the rights of securities owners.
Some countries have special laws that control all aspects of securities management, from issuance to all market transactions.
It should be noted that all types of documents that indicate the transfer of any capital or money cannot be considered securities. For example, a cash cheque cannot be considered a security.
Securities differ both in appearance and in purpose. They may have very different purposes, but all types of securities are the same at a key point: they are designed to make a profit for the holder in the future.
Main types of securities:
Unit paper - a document on share participation in the creation of a charter capital and the right to a share of profit.
Debt paper (credit) is a deposit or loan document in a bank that confirms the investor’s right to repayment and interest on it. Such securities include:
• promissory notes
• bank certificates (all types)
Derivatives - a contract of right to acquire or sell any securities. Such securities are:
Stock securities - are used for trading in the stock market and for investment investments. They are long-term or indefinite. Such securities include:
Commercial paper - used in the market, actively traded and traded is generally short-term. Such securities include:
• letters of credit
• promissory notes
Market securities can be resold.
Non-market securities are sold only once.
Typically, the most popular securities in the world are shares of all types. They are used worldwide, regardless of their differences.
As already mentioned, not every document related to finance can be considered a security. In order to obtain official status, a document must have a set of statutory grounds.
Characteristics of securities:
• Compliance with standards. All documents comply with the defined securities standards: form, security, information.
• Negotiability. The document may be a form of goods or a means of payment.
• Accessibility. A document can be used in markets. It can be bought, sold, and any deal made with it will be perfectly legal.
• Liquidity. If a document is a basic asset, it must have liquidity to sell quickly.
• Need for execution. The paper noted that after a certain period of time, the debt or credit borrowed must be repaid. Unlike a debt receipt, the document must contain other characteristics of the security.
• Seriality. Typically, if the security is an equity. Such papers must be produced in batches and can be purchased in any quantity.
• Mention of risk and potential loss when investing in assets.
• Regulation and full state recognition.
It should also be made clear that securities must be recognized by the State in which they are distributed.
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