Trading in the securities market is currently relevant. Of course, it is regulated, regulated by more than one normative act. There are national and international documents. But who is the organizer of trading in the securities market? What powers do these individuals have? How do laws govern their activities? What are the requirements for them? We will discuss these and other important issues in this material.
The essence of the concept
The organizer of trading on the securities market is a legal entity that provides a range of services that directly facilitate the conclusion of transactions between participants in such a market.
Of course, these legal entities are not uniform. The following types of trade organizers on the securities market are legislatively distinguished:
- Organizers of exchange trading (accordingly, the exchange will directly play such a role).
- OTC bidders.
Legislation Definition
What is said about the organizers of trading on the securities market in the Federal Law? Regulatory provisions are in the Federal Law "On Securities".
According to the Federal Law, such organizers are considered professional participants in the securities markets that provide services that directly contribute to the conclusion of civil transactions, whose object is securities.
The most attention in this Federal Law is given to the description and characteristics of the stock exchange.
Legal requirements
The Federal Law "On Securities" also defines requirements for such bidders:
- The organizer can be both physical and legal entities.
- Such an organization can be created in almost any civil law form.
- The organizer can apply any technology for organizing his activities.
- The organizer can establish business cooperation not only with professional participants in the securities market, but also with other persons interested in such transactions.
- An auction organizer may combine this vector of activity with any other activity on securities markets. But besides maintaining the registry. That is, he is not forbidden to act as a broker, depository, dealer, manager of the clearing system, etc.
- There are no restrictions on the number of participants on the site.
- The minimum amount of equity for the organizer is not established by the Federal Law.
- Members of the organizer may have heterogeneous responsibilities and rights.
Obtaining a license
As for the voiced varieties of activity, they begin to deal with them only after obtaining a license. There are four types of licensing documents themselves: two for exchange organizers, two for over-the-counter ones.
The first group of licenses gives the right to organize tenders, where the subject of the transaction is government securities. The second group of licenses gives the right to organize the sale of commercial securities.
For organizers of trading on the securities market in the Russian Federation, the period of validity of such permits is 10 years. But there is an exception. If the organizer, in addition, is simultaneously engaged in a different type of activity, then the validity period of the license in his case is reduced to three years.
Prescribing requirements set by the organizers
In the Russian Federation, the activities of trade organizers in the securities market are regulated by a special Federal Securities Commission. It is according to its decisions that the legal entity-organizers compile and register lists of bidding rules. Of course, these requirements are hereinafter binding upon you.
Here, the organizer of trading on the exchange, the securities market must indicate the following:
- Lists of securities, which in his case are objects of transactions.
- Requirements for future bidders. Rules for their conduct of business, as well as a list of sanctions that will be applied to sellers and buyers in case of violation of the rules.
- Market pricing mechanism. Sets of measures that should prevent the fact of price manipulation by participants.
- Rules and procedures for the intervention of the organizer representatives in the bidding. A list of conditions that justify such an intervention. Situations in which trading can be stopped.
- Actions that the organizer has the right to take in case of emergency.
- Mechanisms for reconciliation of certain provisions under contracts by bidders, organizer, clearing and depository services.
- The procedure and methods for fulfilling obligations under contracts concluded in the market accountable to the organizer.
- Rules for compensation for losses from non-fulfillment (or incomplete, improper fulfillment) of obligations by the parties to the transaction.
Legal requirements
We found that the organizer of trade in the securities market is a legal entity whose activities directly contribute to the conclusion of transactions for the sale of securities. These persons are authorized to establish rules for participants in transactions concluded in their space.
But at the same time, the legislation imposes certain requirements on the organizers themselves:
- The heads of the organizer's divisions, executive directors, as well as the heads of the committees and employees are required to undergo mandatory certification. Only she gives them the right to organize bidding.
- None of the above personnel should be a shareholder of the company participating in the auction.
- None of the organizer's employees (like himself) should be employed in an organization participating in tenders in its space.
Now we will get acquainted specifically with certain types of organizers.
Stock Exchange
As you remember, she is called the organizer of trading in the securities market. Stock exchanges generate their income by withholding a certain percentage of the amounts of transactions concluded in their subordinate spaces. They are also legally allowed to collect various types of contributions, payments, fees from participants in transactions, one way or another, aimed at paying for bidding services.
A separate type of stock exchange profit is fines. They are charged from participants for violation of the applicable trading rules, the provisions of the internal exchange charter.
The main objectives of the exchange
In the list of organizers of trading in the securities market, the first places are occupied by a variety of stock exchanges. At the same time, they are united by fairly similar common tasks:
- Provision of a platform on which tenders are carried out.
- Determining the equilibrium value of securities.
- Accumulation of free cash and further redistribution of property rights.
- Ensuring the principle of openness of the sale of securities.
- Creating a working mechanism for the quick resolution of disputes arising on the trading floor, with the least negative consequences for participants.
- Development of a code of ethics, a standard of good business conduct for participants.
Exchange Requirements
The rules of the stock exchange must comply with the following list of requirements:
- This set of rules should provide the same conditions for all bidders. Moreover, starting with the entry of applications for participation in operations. Exchanges must ensure that this documentation is kept for three years.
- The conclusion of the whole mass of sales contracts should occur only within the framework of the organizer's trade structure.
- The trading rules must prescribe the mechanism of interaction between sellers and buyers of securities with the depository and / or settlement system. Moreover, in this context, the organizer himself must provide a settlement system for already executed contracts. He retains the right to choose: to carry out this process independently or to involve special clearing, depository or settlement institutions in its execution.
- The stock exchange is legally required to disclose the necessary data on securities to direct bidders. There should also be mechanisms and conditions for the provision of such information to the category of persons that does not participate in the auction.
OTC Trading
We now turn to the OTC organizers of trading in the securities market. Most over-the-counter platforms are used only for targeted transactions. Here the organizer acts as an intermediary. This state of affairs is typical of the initial sale of shares.
A less common case in practice: OTC trading is limited to transactions between one large investment organization and several private investors. The second name of this form is an investment store.
Organizers of such over-the-counter trading must comply with the requirements for stock exchanges. Another common feature: OTC organizers have the same sources of income as those on stock exchanges. This is a deduction of a percentage of transactions made on the trading floor, certain fixed payments, as well as fines for violation of the rules established for participants.
OTC Transactions Rules
At such sites, the sale and purchase of securities is also subject to certain rules. They are compiled directly by the organizer, based on two principles:
- In this trading system, only the quotes of participants are used. In particular, each market participant agrees to complete a transaction only on the conditions specified in the quote.
- The rules should contain a description of the mechanism for checking data on contracts, which is carried out through the trading system.
The activities of auction organizers on the securities market are regulated by certain legislative provisions. The requirements for them differ from the form of activity - in the field of exchange and over-the-counter trading. There are general provisions that are mandatory for the entire mass of organizers.