Concept and classification of securities
Concept and classification of securities are Briefly discussed in this section below. Concept and classification of securities is important part.
The first part of the new Civil Code of the Russian Federation defines a security as a document of the established form and requisites certifying property rights, the exercise or transfer of which is possible only upon its presentation. Thus, a security is a form of fixing market relations between market participants, which itself is the object of these relations, i.e. the conclusion of a transaction between its participants consists in the transfer or purchase and sale of a security in exchange for money or goods. The value of a security is in the rights that it gives to its owner.
Since money, and goods in modern conditions, are different forms of capital existence, the economic definition of a security can be expressed as follows:
A security is a form of existence of capital, different from its commodity, productive and monetary forms, which can be transferred instead of itself, circulate in the market as a commodity and generate income.
Its essence lies in the fact that the owner of capital does not have capital itself, but there are all rights to it, which are fixed in the form of a security. The security allows the ownership of capital to be separated from the capital itself and, accordingly, to incorporate the last market process in such forms as is necessary for the economy itself.
Summarizing the above, it can be argued that the attributes of a security are:
• property rights, loan relations, as well as some other rights and obligations;
• the ability to be an object of sale and purchase;
• transfer of the above-mentioned rights and obligations when buying and selling a security;
• the value of the security, which is estimated in monetary terms.
A security performs a number of socially significant functions:
• redistributes funds (capital) between: branches and spheres of the economy; territories and countries; groups and segments of the population; population and sectors of the economy; population and state, etc .;
• grants certain additional rights to owners in addition to the right to capital. For example, the right to participate in management, relevant information, priority in certain situations, etc .;
• ensures receipt of income from capital / or return of own capital, etc. Like any economic category, a security has the following characteristics:
• Time characteristics:
– the life of the security: when it is put into circulation, for what period of time or indefinitely;
– origin: whether the security originates from its primary basis (commodity, money) or from other securities.
• Spatial characteristics:
– form of existence: paper or, in legal terms, documentary form, or paperless, non-documentary form;
– nationality: domestic or foreign securities, i.e. foreign;
– territorial affiliation: in which region of the country this security was issued.
• Market characteristics:
– the type of asset underlying the security, or its initial basis (goods, money, total assets of the firm, etc.);
– the order of ownership: a security to bearer or to a specific person (legal entity, individual);
– form of issue: emission, i.e. issued in separate series, within which all securities are absolutely identical in their characteristics, or non-emission (individual);
– form of ownership and type of issuer, i.e. the one who launches a security on the market: the state, corporations, individuals;
– the nature of circulation: freely circulates on the market or there are restrictions;
– economic essence in terms of the type of rights that the security provides;
– risk level: high, low, etc .;
– availability of income: whether income is paid on a security or not;
– form of investment: money is invested in debt or to acquire property rights.
The transition from paper form of securities to paperless is associated, firstly, with the increase in the number of circulating securities, primarily of such well-known types as stocks and bonds. For other securities, the number of which is relatively small, the documentary form prevails.
Secondly, many of the rights assigned to the owner of a security can be exercised regardless of its form. For example, the payment of income on a security, its purchase and sale, etc. can be produced without the presence of her herself as a material carrier of these rights.
Thirdly, paperless security paper speeds up, simplifies and cheapens its circulation in terms of settlements, transfer from one owner to another, storage and accounting, taxation, etc.
Fourth, this is due to structural changes in the securities market (in particular, with an increase in the number of registered securities and a decrease in the share of bearer securities).
In the Civil Code of the Russian Federation, you can find a list of types of securities: government bond, bond, bill of exchange, check, certificates of deposit and savings certificates, bearer savings books, bills of lading, shares, privatization securities and other documents that are by laws on securities or in the established by them order referred to the number of securities.
Distinguish between the classification of valuable paper and the classification of types of valuable paper. Classification of securities is the division of securities into types according to certain characteristics that are inherent in them (Fig. 1.3).
Classification of securities
By origin: – primary; – secondary; – derivatives
By the form of issue: – emission; – non-emission
By the form of existence: – documentary (on paper); – uncertified (electronic)
By the method of legitimizing the owners: – bearer; – registered; – order
By the nature of financial liabilities: – equity; – debt
By belonging: – domestic; – foreign
By circulation period: – short-term (1 3 – years); – medium-term (3 7); – – long-term (7 10); – – indefinite (console)
By the level of risk: – risk-free; – with a low level; – with a high level; – with a very high level (speculative) “”
By way of use: – investment (capital); – non-investment
By forms of ownership: – state and municipal; – non-state
By the nature of circulation: – market; – with a limited range of circulation; – non-market (non-tradable)
On the guarantee of the level of profitability: – with a fixed income; – with fluctuating income; – unprofitable
Fig. 1.3 – Systematization of securities according to some criteria
Classification of types of securities is a grouping of securities of the same type; this is the division of securities into subspecies. In turn, subspecies can in some cases divide even further. Each subordinate classification is part of one or another higher classification.
Securities existing in modern world practice are divided into two large classes:
• Class I — basic securities;
• Class II — derivative securities.
Basic securities are securities, in which some proprietary rights to an asset, usually to goods, money, capital, property, various resources, etc.
Basic securities, in turn, can be divided into two subgroups: primary and secondary securities.
Primary securities are based on assets, which do not include the securities themselves (stocks, bonds, bills of exchange, mortgages, etc.).
Secondary securities are securities issued on the basis of primary securities; these are securities for the securities themselves: warrants for securities, depository receipts, etc.
A derivative security is a non-documentary form of expression of property rights (obligations) arising from a change in the price of the exchange-traded asset underlying the given security (this security can be represented as a security for any price asset: for the prices of goods (usually exchange-traded : grain, meat, oil, gold, etc.); for the prices of basic securities (usually for stock indices, for bonds); for the prices of the credit market (interest rates); for the prices of the foreign exchange market (exchange rates), etc. P.
Derivative securities include: futures contracts (commodity, currency, interest rate, index, etc.) and freely tradable options.
Investment (capital) securities are securities that are an object for capital investment (stocks, bonds, futures contracts, etc.).
Non-investment securities are securities that service cash settlements in commodity or other markets (bills of exchange, checks, bills of lading).
The possession of a security can be registered or bearer. The bearer security does not fix the name of its owner, and its circulation is carried out by a simple transfer from one person to another. A registered security contains the name of its owner and, in addition, is registered in a special register.
If a registered security is transferred to another person by making a transfer inscription (endorsement) on it, then it is called an order security.
Government securities are usually of various types of bonds. Non-government securities are securities that are put into circulation by corporations (companies, banks, organizations) and even individuals.
The main types of securities are market securities, i.e. can be freely bought and sold in the market. But in some cases, the circulation of securities can be limited, and the security can be sold only to the one who issued it, and then after a specified period. Such securities are non-marketable.
From the point of view of profitability, securities, as a rule, are profitable, but they can also be non-profitable when the size of the owner’s income is not stipulated when issuing a security.
The division of securities into debt and owner shares basically reflects two possible ways of using funds: to acquire an asset either for ownership or for temporary use. If securities are issued for a limited period with the subsequent return of the invested money, then they are debt securities. These are bonds, bank certificates, promissory notes, etc. Ownership securities give ownership of the corresponding assets. These are shares, warrants, bills of lading, etc.
By the level of risk, the types of securities are arranged on the basis of the principle: the higher the yield, the higher the risk, and the higher the security of the security, the lower the risk.
Equity securities are usually issued in large series, in large quantities, and within each series, all securities are absolutely identical. These are usually stocks and bonds. Non-equity securities are issued individually or in small series.
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