The securities market is a comprehensive system of relations between individuals and legal entities, which is based on operations related to the issue, redemption and circulation of securities. Securities are a means of raising capital.
The main functions of the securities market, as well as any other market, are divided into two large groups: general market and specific. The general market functions of the securities market determine the similarity of this market with other markets. And the specific functions of the securities market, on the contrary, distinguish this market from others.
Specific functions of the securities market:
- redistributive (the securities market plays an important role in the redistribution of money between different spheres and sectors; this function also includes the transfer of money to a productive form, financing of the state budget);
- hedging (additional insurance of financial risks).
General market functions of the securities market:
- price (the market plays an important role in folding market prices);
- commercial (income from a variety of operations performed on the market);
- informational (information on various objects of trade appears on the market, and later this information is communicated to other participants in the commodity market and has a significant impact on them);
- regulatory (there are certain “rules of the game” in the market, dispute resolution practice, governing and control bodies).
The securities market consists of several “mini markets”: the stock market, the bond market, the government short-term bond market (GKO), the state savings loan market (OGSZ), the federal loan bond market (OFZ), the foreign currency loan bond market, the treasury bond market, financial institutions market, gold certificate market, stock exchanges, stock departments of commodity exchanges.
In addition, primary and secondary securities markets are distinguished . In the primary securities market , the sale of "newly issued" securities is booming. The secondary market has two components: exchange and over-the-counter trading. Exchange trading takes place on stock exchanges, and over-the-counter trading is street trading. OTC trading is widely used in the West, while the first option prevails in Russia.
The main objective of the securities market is the accumulation of financial resources and their redistribution through various transactions between market participants. At the same time, all these operations require securities, i.e. The securities market is an intermediary between investors and issuers of securities.
In the market there are various types of operations with securities. All operations are carried out by several large groups of market participants. Firstly, these are operators who carry out securities purchase and sale transactions. Secondly, these are the organizers who are responsible for the quality work of the trading floors. Thirdly, these are banks, depositories, clearing organizations, etc., which carry out accounting for mutual obligations. Fourth, these are registrars who make entries in shareholders registers about owners of the Central Bank.
A security begins its journey in the Primary market, where it is initially placed. The first investor to buy a security has the right to resell, exchange, etc. The dealer who bought the paper sells it at the market price.
Subsequently, the paper falls into the secondary market, where all subsequent operations take place. In this market, there is a redistribution of resources among investors. Here, operations are carried out by dealers and brokers. Dealers work for themselves, and brokers fulfill customer orders. Clearing companies are responsible for accounting for mutual operations between them. Banks transfer money, securities are transferred from the seller to the buyer by depositories. Registrars record ownership of new customers in the registers. This is the simplest scheme of operations that usually occurs in the securities market.